Testing the Liquidity Illusion

Rising redemptions and fund-level gates are exposing the limits of semi-liquid structures, especially among retail investors.

By Jennifer Banzaca | May 4, 2026
PF CFO

Gates are no longer a footnote in private fund documents, they’re front and center.

After years of steady inflows and expanding access to retail investors, private equity credit funds and evergreen vehicles are hitting a stress point. A wave of redemption requests, coupled with market volatility and a handful of high-profile borrower defaults, has forced some of the industry’s largest managers to do what many investors assumed was unlikely: limit withdrawals.

A global investment bank found that in the first quarter of 2026 alone, investors sought to pull more than $10 billion from major private credit funds. Managers responded by activating gates, raising redemption caps or, in some cases, suspending withdrawals entirely.

Blue Owl Capital limited redemptions after investors requested more than $5 billion back across its funds. Blackstone faced $3.8 billion in withdrawal requests in its flagship BCRED vehicle, prompting the firm to temporarily increase its redemption cap and commit $400 million of its own capital to meet demand. BlackRock’s $26 billion HPS Corporate Lending Fund approved only about half of redemption requests after hitting its quarterly limit, while Apollo gated withdrawals after requests exceeded its thresholds.

None of these firms responded to requests for comment for this story.

What was once a structural safeguard is now shaping real investor outcomes, and forcing a broader reconsideration of liquidity in private markets.

From fine print to flashpoint

Gates have always been part of the design in evergreen and semi-liquid funds. But their sudden visibility marks a shift, not just in market conditions, but in who is invested.

“What you are seeing in the market now is the use of these gates, particularly in private credit. I think it reflects what’s actually happening,” says Barbara Niederkofler, a partner at Akin and co-chair of the firm’s funds practice.

The difference this time is the investor base. Institutional investors have long understood how these mechanisms work. Many newer entrants, especially in the high-net-worth channel, do not.

“Private wealth investors don’t necessarily know,” Niederkofler adds. “So it becomes more of an issue on the private wealth manager side.”

That gap matters. As private markets have expanded into retail channels, expectations around liquidity haven’t always kept pace with reality.

How gates work

Most evergreen and private credit funds offer periodic liquidity, typically allowing investors to redeem up to 5 percent of net asset value per quarter. When requests exceed that cap, redemptions are filled on a pro rata basis.

Niederkofler notes that one structure she sees frequently is a fund-level gate, typically around 5 percent of NAV.

Some funds use investor-level gates instead, staggering payouts over time. “You’ll receive 20-25 percent of your proceeds on a quarterly basis, effectively gating the investor automatically,” Niederkofler says.

These mechanisms are designed to protect investors, not frustrate them. Without gates, managers might be forced to sell assets into a weak market, locking in losses.

As David Goldstein, director of fund services at STP, puts it: “Gates don’t just protect the manager, they also protect other investors. Without them, forced asset sales could occur at unfavorable prices.”

Still, the experience can be jarring for investors who expected easier access to their capital.

“A fund might have a gate, but investors don’t really know what that means, they just want their money,” Niederkofler says.

Retail money meets market stress

The current environment is putting pressure on one of the industry’s core growth narratives: the expansion of private markets into retail channels.

Over the past decade, firms built products designed to offer a balance of private market returns with some degree of liquidity. But that balance is now being tested.

“This is just a ‘perfect storm’: with more retail investors, more hybrid structures and timing,” says Dorota Kowalski, senior director of fund accounting at Juniper Square.

The issue isn’t that the model is broken; it’s that many investors are still getting up to speed.

“There’s now an influx of investors who aren’t used to illiquid structures,” Kowalski says.

To illustrate this point, Adams Street Partners’ 2026 Advisor Outlook: Private Markets go Mainstream, found that many investors still don’t fully understand what they’re buying, with 4 percent of investors having no knowledge of private equity funds, and another 15 percent having only a basic understanding. Private credit shows a similar pattern, with 6 percent reporting no knowledge and 12 percent saying they only understand the basics.

So, when volatility hits, behavior changes quickly. Redemption requests rise. And when gates appear, confusion often follows.

“When they encounter things like gates for the first time, it can create confusion or even panic,” Kowalski says.

Goldstein points to a crowd psychology as a key factor: “When one fund announces a gate, investors in other funds start to worry, and they rush to redeem.”

It’s less about fundamentals, and more about sentiment.

Operational pressure builds

The spike in redemptions is exposing operational weak spots across the industry.

“Many operational systems aren’t built to handle high volumes of redemptions,” Kowalski says.

Some firms have leaned on balance sheet solutions, like Blackstone’s capital injection, to bridge the gap. Others are exploring alternatives, such as run-off structures that return capital over time as underlying assets mature, she explains.

Those approaches come with trade-offs, including added complexity and administrative burden. But, at the same time, the reputational stakes are rising.

“If you gate a major institutional investor, you risk losing that relationship permanently,” Goldstein says.

Even when gating is the right decision, it can strain investor trust.

Communication is key

As gates are becoming more common, communication is becoming more critical.

“Communication, and timing of that communication, are critical. Waiting too long only worsens investor relations,” Niederkofler says.

That challenge is amplified in retail channels, where managers often rely on intermediaries to reach end investors, she adds.

And this means that documentation alone isn’t enough, Kowalski notes. “GPs do provide documentation, but the sheer volume of new investors means not everyone fully understands what they’re signing up for.”

Firms are increasingly supplementing disclosures with education, such as webinars, direct outreach and clearer explanations of how liquidity features actually work, she adds.

A structural reset, not a structural break

Despite the headlines, sources who spoke with Private Funds CFO don’t see gating as a sign of systemic failure. Instead, it’s a natural consequence of offering liquidity in inherently illiquid markets.

To this point, in its 2026 Market Overview, Hamilton Lane said: “Some will gate. If there are too many that gate, all will gate. You will have to in order to protect your investors. This is not a prediction of what might happen, this is a statement of what will happen. It will be painful, unpleasant. It will also flush out marginal or poor players relatively quickly. Good managers today are preparing for that tomorrow.”

And the recent actions by Blue Owl, Blackstone, BlackRock and Apollo suggest that gates are becoming a standard tool, not an exception.

And in many cases, they’re doing exactly what they’re supposed to do: protecting investors and preserving long-term value.

As Niederkofler puts it: “If anything, the gates being used today are working and becoming more normalized.”

The bigger takeaway is simpler. Private markets haven’t changed, but the investor base has.

For advisers and investors alike, that means resetting expectations. These are still long-term investments. Liquidity is limited. And in times of stress, access to capital is never guaranteed.

Gates aren’t a flaw in the system. They’re a reminder of how it actually works.