By Matt Wirz

A $140 million loss at BlackRock is reviving questions about the accuracy of financial disclosures to individual investors in the booming private-credit industry.

BlackRock's business-development company, BlackRock TCP Capital, surprised investors last week when it disclosed a 19% decline in the net asset value of the investments it owns. The fund, which reported total assets of $1.8 billion in September, blamed the write-downs on the poor performance of investments in the last quarter of 2025.

But the fund's managers had marked most of the same investments at or near cost in financial releases as recently as November, according to an analysis by The Wall Street Journal.

BlackRock's disclosure underscores the risks investors face inside the opaque private-credit world. It can be difficult to know what investments are worth at any given time, given that they hardly ever trade and instead are valued by fund managers using a mix of internal analysis and third-party pricing services. The way private funds mark their holdings determines the fees they charge clients.

Such questions are getting renewed attention because Wall Street and the Trump administration are pushing for similar products to be added to 401(k)s and retirement plans for ordinary investors.

"I just think the valuation process in these BDCs is broken," said Rod Dubitsky, a former investment banker turned independent financial analyst. "Many of these assets are marked at par despite the fact that they likely have some amount of distress...and that's how fees are maximized."

A spokesman for BlackRock declined to comment.

BDCs run by large private-fund managers like Apollo Global Management, Blackstone and KKR have boomed in recent years and now manage about half a trillion dollars. The funds typically make high-interest loans to midsize corporations with junk credit ratings, using income from the loans to pay big dividends to their investors. BDC managers raise the money they lend out by selling shares and by borrowing cash in bond and loan markets.

Some of the funds issue stock on public exchanges, allowing shareholders to sell at will, and have seen share prices drop significantly since the fall. Other "semiliquid" funds sell private shares to wealthy individuals, which BDC managers redeem in limited amounts every quarter. Redemption requests by investors in those funds jumped in the fourth quarter of 2025.

Many BDCs are still performing well and are attracting billions of dollars of new investments, indicating that the stumbles of the BlackRock fund and a few others may be isolated incidents.

BlackRock, which is better known for its mutual-fund and ETF business, bought a seat at the private-credit table in 2018 by acquiring Tennenbaum Capital Partners, a $9 billion debt specialist, and absorbing its BDC. The firm doubled down last year when it bought HPS Investment Partners, which manages $179 billion.

Signs of trouble in the BDC emerged in 2024 when nonperforming loans jumped to 14% from 4%. Amazon aggregators like SellerX and Razor and home-repair company Renovo Home Partners were among the borrowers in default.

Moody's Investors Service, one of the credit-rating firms that assessed the BDC's bonds, sounded the alarm in March by cutting them to a junk credit rating. BlackRock got a better rating from smaller ratings firm KBRA in late 2024, then fired Moody's after the downgrade.

The fund wrote off part of the nonperforming loans, taking control of the ailing companies. The resulting debt and equity stakes were mostly marked as performing assets.

It is common for BDCs to restructure their investments then reclassify them as performing before returning them to nonperforming. That temporarily boosts fees they collect and reduces the ratio of their debt to net assets, or leverage, a key risk measurement.

Last week, BlackRock disclosed the additional paper loss, at least two-thirds of which it attributed to several previously restructured investments. That included declines in the equity stakes, which can be more volatile.

BlackRock TCP's shares dropped about 11% to $5.20 after its recent write-down, 26% below the fund's new $7.07 per-share valuation of the investments it holds.

Meantime, the price of the BDC's bonds due in 2029 dropped to near-record lows as the yield investors demanded to own them jumped to 7.3% from 6.4%, according to data from MarketAxess.

"The market is saying we don't trust these valuations," Dubitsky said.

BlackRock waived one-third of its management fees from the BDC in 2025 as partial compensation to shareholders for the losses. It earned about $11 million of fees in the first nine months of the year. The firm collected $25 million in management fees and a $19 million performance fee in 2024.

Some analysts say the reclassifications are a concern across the industry.

BDCs reclassified more than $800 million of debt that had been marked as nonperforming in the third quarter of 2025, according to research by financial-data provider Octus.

"There is substantial evidence that suggests direct lenders -- through optimism and/or self-interest -- are camouflaging problem loans, postponing defaults and bankruptcies, leading to potential over-statement of loan valuations, portfolio yields, and fund returns," private fund manager Adams Street Partners said in a report published in April.

Write to Matt Wirz at matthieu.wirz@wsj.com

(END) Dow Jones Newswires

January 29, 2026 13:00 ET (18:00 GMT)

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