Private credit faces a liquidity run
The guest argued that the private credit market is experiencing structural cracks due to a mismatch between highly illiquid underlying assets and promised quarterly liquidity.
The argument
The guest explained that retail financial advisors were incentivized to channel capital into private credit funds with promises of quarterly liquidity. However, with redemption demands reaching roughly 15% while fund gates limit withdrawals to 5%, a run on these business development companies is unfolding and spilling over to bank equities.
The thesis, stress-tested
✓ What validates it
- ✓An increase in the number of private credit funds enforcing or tightening redemption gates
- ✓Further downward revaluations of private equity holdings by major asset managers
▸ Risks discussed
- ▸Central bank rate cuts could alleviate pressure on underlying corporate borrowers
- ▸Private credit managers could successfully restructure debt without triggering wider defaults
Hear it yourself
"All that means for for people watching us right now is because they promised this group of people quarterly liquidity, the gates are typically 5%. And what we've seen across, like, seven different private credit players, the demand for the, liquidity is like 15%."
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