Fitch: nontraded BDC redemption requests ease to 9.8%, still near twice the 5% cap

Redemption requests at 13 of the 15 perpetual nontraded BDCs averaged 9.8% of shares in the third quarter, down from 10.3% in the second, according to Fitch Ratings data reported by InvestmentNews. That average is just under twice the 5% quarterly repurchase cap these funds use, so an easing quarter still leaves much of what shareholders ask for unfilled.

Fitch said repurchase activity began to ease, with requests below 5% of shares at six of the 15 BDCs and wide variation across the nine above that line. Nontraded BDCs don't trade on an exchange, so selling shares back to the manager or sponsor is nearly the only way advisers' clients can get liquidity. That window is capped at 5% per quarter.

Fitch's data names one clear outlier: Blue Owl Technology Income Corp, with redemption requests equal to 39% of its shares. Our October reporting put that request queue at 39% entering the quarter. The 5% cap and pro rata fills left OTIC filling roughly 13% of requested shares. Stanger's third-quarter tally, as we reported, left $8.2 billion of redemption requests unfilled across nontraded NAV BDCs.

Mark Goldberg, a former broker-dealer chief who founded Alternative Investments Market Intelligence, said redemptions at funds like these have historically run about 3% of shares a quarter. Current demand, he said, includes shareholders who are not yet in the backlog. "That investor demand may be cresting, as Fitch and others have noted, but it will take many quarters for the problem to be resolved," he said.

The cap turns every quarter above 5% into residual demand. At a 9.8% average against a 5% window, requests accumulate faster than the tender clears them. Queues stop growing only when quarterly demand settles below the cap, roughly half the third-quarter average.