Let's debunk some of those panic headlines because they are being spread like fucking Ebola and create a false narrative in markets.
recap of the repeated allegations:
software exposure threatened by ai
banks decrease loan values
funds limit redemptions
2008 sub prime cooking all over again.
Private credit market is enormous and dominates many sectors from services, industrial, the infamous tech and more. and it is a prime source of liquidity for the middle private market.
while the fear-mongering headlines take over your feed we're still seeing new loans being issued.
responsible decrease in debt raises from private equity companies.
institutionals load on loans at par value
If such allegations were true do you think stock market would be -3% from ATH? credit spread would be so tight? loan market would still be lively and priced so close to rates?
so obvisouly no one is going crazy here because those portfolios are very diversified and usually create fantastic opportunity for investors.
And now more specifically about limited redemptions:
read this carefully.
private credit companies operate under many liquidity mechanisms- this is prerequisite!
this is the idea here. make a illiquid assets accessible to the public. when redemptions hit the quarterly quota- those companies must limit their redemptions to protect current holders. and what they dont mention is that funds let investor redeem much more than their fixed capacity.
and here's the fun part: guess who's inducing all this panic? funds that are specialized at picking up loans at 50 cents from freaked out investors.
long story short- yes we're seeing redemptions of 15% of total assets but don't forget those portfolios are very very diversified and market is going through structural changes with ai distuption affecting so many sectors. so unless you believe in a citrini apocalyptic ai 0.0002% scenario- acknowledge that the media is very busy at keeping you worried more than you should.
*MORGAN STANLEY LIMITS REDEMPTIONS ON PRIVATE CREDIT FUND