Private capital’s stress test

One IPO scoop to start: Loveholidays, the online travel agent tipped to be the London Stock Exchange’s first major listing of 2026, is preparing to delay its flotation amid market turmoil and travel chaos caused by Iran’s retaliation after US and Israeli strikes.

And another thing: The United Arab Emirates has sought to project a return to normality after days of Iranian missile and drone attacks, resuming flights and urging residents to get on with their lives.

In today’s newsletter

The big chill in private capital

It has been a rough stretch for the giants of private capital.

Shares in groups such as Blackstone, Apollo, Ares, KKR and Blue Owl that thrived in the years after the 2008 financial crisis have plunged as Wall Street grows worried about private credit.

Their stocks have slumped as much as a third or more over the past year with pressure mounting because of rising redemptions at large semi-liquid credit funds and fears of an uptick in corporate defaults. The threat of AI to software companies, which were at the epicentre of a dealmaking boom in private markets, has added fuel to the fire.

On Tuesday, the industry was hit anew when Blackstone’s $82bn private credit fund Bcred reported a rise in redemptions that forced the $1.3tn in assets investment group and its employees to invest $400mn in the fund in order to pay investors pulling their money. Investors pulled $1.7bn on a net basis from the fund, which accounted for 13 per cent of Blackstone’s management, advisory and performance fees last year.

Blackstone’s shares fell sharply at the open of Tuesday’s trading but recovered through the day. Blue Owl, which has been under the most severe pressure in recent months, had its stock briefly fall below its 2021 initial public offering price before recovering.

Top private capital executives such as Blackstone president Jonathan Gray, Ares chief executive Michael Arougheti and the leadership of Blue Owl have in recent days defended their portfolios, stating that investee companies continue to grow. They also say distress remains low and many market fears are temporal or overwrought.

The stock plunges are painful given employees are major shareholders in their groups or are even forking over cash to stabilise funds. KKR executives have bought over $10mn of its stock. Some executives including Blue Owl co-founders Marc Lipschultz and Doug Ostrover also have margin loans tied to the value of their falling shares.

But this could all be healthy for private markets.

Since the 2008 crisis, private capital groups have not had to weather recessions or prolonged market panics, meaning the resilience of the industry’s push into managing insurance assets or funds designed for “retail” investors hasn’t been fully tested.

Now comes a stress test where groups may have to explain their portfolios in greater detail or prove they can sell assets for what they claim they are worth. That could be cleansing for a private capital ecosystem that continues to stockpile unsold assets in ever more engineered and incestuous ways including continuation funds and collateralised fund obligations.

Market unease tends to wipe out excesses as well. Amid fervent flows into credit in recent years, spreads on junk-rated loans compressed to record-tight levels, even in sectors such as software that face increasingly obvious threats. But the slowing of inflows could foster more disciplined pricing.

Apollo CEO Marc Rowan on Tuesday said private markets face a looming “shake-out”.

“There’s always going to be underwriting mistakes,” he said at a Bloomberg conference. “But the question is, who’s a good risk manager and who’s not a good risk manager?”

Better to find out now than when private assets account for a bigger share of insurance company balance sheets or the portfolios of retirement savers.

Trump vs Big Law

When Donald Trump targeted law firms with potentially damaging executive orders in the early days of his second term, several Big Law behemoths, starting with Paul Weiss, chose to capitulate. Other law firms fought back.

On Monday evening, the Department of Justice made a move that looked embarrassing for those that had given in. It said it was walking away from a fight with four firms that successfully stood up to him — Jenner & Block, Perkins Coie, WilmerHale and Susman Godfrey.

The firms sounded triumphant. It appeared to be a vindication of their approach and a blow to capitulators Skadden, Kirkland & Ellis, Latham & Watkins, Simpson Thacher, A&O Shearman and Willkie Farr & Gallagher.

Hours later, things changed. On Tuesday, the DoJ sought to revive the battle, saying it did not in fact want to drop its appeals against lower courts’ rulings that backed the law firms.

Why the reversal? The government did not offer an explanation in its court filings. That left lawyers to speculate that Trump or those close to him were embarrassed by media coverage about the climbdown and decided that a second U-turn would be less humiliating.

As things stand, much is unclear. The government is due to file documents in the case this week, if it goes ahead.

Perhaps the firms that struck deals with Trump are feeling glad not to be embroiled in the chaos. But none of this makes it any more likely that they will look smart in the end.

Job moves

• Sources tell DD that Bank of America has hired Patrik Czornik as co-head of Emea TMT starting in May. He will join from JPMorgan Chase, where he is head of Emea telecoms.

• Paul Weiss has hired Jennifer Gasser as an M&A partner in Houston. She joins from Kirkland & Ellis.

• Citi has named veteran Peter Grinups as head of Nordics corporate banking.

• Sidley Austin has hired James Inness as a capital markets partner in London. He joins from Latham & Watkins.

Smart reads

Turbulent times Passengers ended up in hospital after a sudden steep drop on an international flight, The New Yorker reports, a sign of what’s to come as climate change generates more frequent and unpredictable turbulence.

War fakes You can’t believe everything you see on the internet — including photographs of the war breaking out in the Middle East, the FT reports. AI has made it easy to alter satellite images, showing destruction that never happened.

Well-informed It’s becoming the story of our times: the FT has identified unusually large and well-timed prediction market wagers on the US striking Iran. Some warn of insider trading, though the bigger concern is that the bets could reveal surprise attacks.

News round-up

All3Media and Banijay combine to create $8bn global TV powerhouse (FT)

Middle Eastern airlines start to fly stranded passengers out of Gulf (FT)

US media watchdog signals support for Paramount’s Warner Bros deal (FT)

Money laundering controls in professional services ‘perform poorly’, says UK watchdog (FT)

UBS told to tone down lobbying in row with Swiss government (FT)

OpenAI CEO Sam Altman defends Pentagon work to staff (WSJ)

Capital Group, KKR launch first PE fund for everyday investors (Bloomberg)