Private credit fund stress emerges, Aave founder discusses whether combining DeFi with RWA can become a new solution

As high interest rate environments persist, investor redemption demands increase, and loan assets face valuation pressures, several large asset management firms’ private credit funds have recently experienced liquidity stress. Aave founder Stani Kulechov published a lengthy article analyzing the potential risks of private credit, while also suggesting that combining crypto finance (DeFi) with real-world assets (RWA) might offer a more transparent and institutionalized operational model for these assets.

Private Credit Market Faces Redemption Pressure and Liquidity Risks

CNBC recently reported that the rapidly expanding private credit market has begun to face redemption pressures.

The report noted that Blackstone’s flagship private credit fund product BCRED received approximately $3.8 billion in redemption requests in Q1 2026, representing 7.9% of the fund’s net asset value. The firm stated it would meet all redemption demands. Meanwhile, BlackRock’s HPS corporate loan fund HLEND is also restricting withdrawals due to high redemption requests.

Blackstone COO Jon Gray stated, “Restrictions on investor capital flows in private credit are not good for the industry. However, this product design allows investors to utilize some liquidity to earn higher returns.”

High Interest Rates and AI Impact, Private Credit Faces Repricing

Aave founder Stani Kulechov posted on social media that private credit is currently at a delicate juncture, with two main factors driving the current market pressures.

First, the high interest rate environment over the past few years, with the Federal Reserve sharply raising rates since 2022, has pushed U.S. rates from near zero to over 5%. The increased borrowing costs have significantly burdened companies that borrowed during low-rate periods, creating greater financial stress.

Additionally, the impact of artificial intelligence (AI) on tech business models is also affecting some private credit investments. Many private credit funds have lent heavily to Software-as-a-Service (SaaS) companies, but AI technology could threaten these companies’ growth prospects, raising concerns among investors about future loan quality.

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Rise of Private Credit: Filling the Financing Gap Left by Banks

Kulechov pointed out that the rapid growth of the private credit industry is closely related to financial regulatory reforms following the 2008 financial crisis. As Basel III regulations tightened bank capital requirements, banks gradually exited certain higher-risk corporate loan markets, allowing private funds and asset managers to step in and fill the financing gap.

Currently, the global private credit market is estimated to be worth around $2 trillion. In U.S. middle-market leveraged buyouts (LBOs), approximately 80% to 90% of financing is provided by private credit funds. Major players include:

• Apollo, managing approximately $460 billion

• Blackstone, managing approximately $330 billion

• Ares, managing approximately $280 billion

• KKR, managing approximately $220 billion

• Carlyle, managing approximately $190 billion

• Blue Owl, managing approximately $170 billion

Although still much smaller than the global bond market, its rapid growth and recent redemption pressures have attracted significant investor attention.

DeFi and RWA: Aave Founder Proposes Crypto Finance as a Potential Solution

On the other hand, Kulechov also extended his discussion into the crypto finance space. He believes that the development of RWA within DeFi could provide new infrastructure for traditional private credit models. Compared to traditional funds, blockchain-based financial products can embed redemption rules, collateral ratios, and yield distribution terms directly into smart contracts, making asset operations more transparent and reducing managerial discretion.

However, he also warns that RWA could introduce new risks. If traditional financial institutions tokenize assets with poor liquidity or declining market demand and transfer them onto the chain, DeFi investors could become the “last buyers.”

Therefore, he emphasizes that when integrating DeFi with traditional finance, stricter disclosure, collateral verification, and governance mechanisms are necessary to prevent on-chain financial markets from becoming outlets for transferring traditional market risks.

This article, “Private Credit Fund Pressures Emerge, Aave Founder Discusses Whether DeFi Combined with RWA Could Be a New Solution,” first appeared on Chain News ABMedia.