March 20 (Reuters) - Blackstone's flagship

private credit fund posted its first monthly loss in more than

three years in February, the fund's website showed on Friday,

amid surging investor worries over the sector's liquidity

strains.

The fund, BCRED, reported a total loss of 0.4% in February,

its first since September 2022, when it posted a loss of 1.3%.

The Morningstar LSTA index of publicly traded leveraged loans is

down 0.37% over the past three months.

Private credit funds have become a focal point of concern

due to weakening credit quality as a result of their high

exposure to vulnerable sectors such as software, as well as lack

of transparency.

Blackstone's $82 billion fund allows investors to take out a

portion of their holdings every quarter. This year it was hit by

a surge in withdrawals in the first quarter, as investors pulled

a bigger-than-usual $3.7 billion.

Shares of the world's largest alternative asset manager have

lost more than 28% of their value so far this year.

BCRED wrote down the value of a "select" number of loans

during the month, the Financial Times reported earlier in the

day, citing a letter to financial advisers. The report said

customer service software firm Medallia was among the companies.

"BCRED continues to deliver strong performance for its

investors, with a 9.5% annualized total return since inception

for Class I shares, a 360 bps premium to leveraged loans,"

Blackstone said, adding the fund has outperformed the leveraged

loan market by 100 basis points so far this year.

Investor jitters over the state of private credit funds have

spilled on to Wall Street, with some major U.S. banks tightening

lending to the industry even as funds cap withdrawals.

JPMorgan Chase ( JPM ) marked down the value of certain

loans to private credit players earlier this month, a move that

will reduce lending to the funds.

Wall Street giant Morgan Stanley ( MS ) and rival BlackRock were

among the firms that limited withdrawals from their funds after

a surge in redemption requests.

(Reporting by Utkarsh Shetti and in Bengaluru and Isla Binnie

in New York; Editing by Arun Koyyur)