Investors in private credit are attempting to withdraw their assets, but funds are restricting the outflow like someone kinking a hose until it just drips. Now, explains The Wall Street Journal’s Matt Wirz, Peter Rudegeair and Gina Heeb, funds that were relying on individual investors and potential 401(k) investors are watching that strategy fail in real time. They write:
Cliffwater sold its funds primarily to individual investors, a playbook that larger competitors like Apollo Global Management, BlackRock, Blackstone and Blue Owl adopted, making them all increasingly dependent on “retail” money for growth. They harbored hopes of getting an even bigger slice of individuals’ money, pushing to get access to 401(k)s.
The strategy started backfiring unexpectedly in recent months. Some bad loans from both private lenders and banks raised questions about other potential losses. As a herd mentality spread, investors raced to get out the door.
Action Line: Beware private equity and credit funds that show up in your 401(k) options, looking for a place to dump assets no longer wanted by institutional investors. There’s nothing inherently bad about the concept of private equity or credit, but retirees should perform due diligence regarding lock-ups of their funds and be wary of assets institutional investors are trying to dump. If your 401(k) doesn’t have the options you want, consider an IRA rollover for more freedom to choose what you want to own. When you need help with an IRA rollover, email me at ejsmith@yoursurvivalguy.com.
Read the entire series here.
