Back in June of 2025, we wrote an article entitled, The Hottest Party on Wall Street is One You Might Not Want an Invite To. The party referenced was Private Credit. Fast forward only a few short months and it now appears that someone knocked over the punchbowl.

As a refresher, one of the allures of this hot, new, must-have investment product conjured up by Wall Street was Private Credit investments are non-correlated to the stock market. Turns out, that actually might not be the case. There has been a recent panic running through publicly traded software companies from AI competition as it has found its way into the private credit markets. As a result, these publicly traded sponsors of Private Credit funds, Blue Owl, Blackstone, Starwood, BlackRock, KKR, Apollo Global, Ares, etc. are all trading down since the beginning of the year, some more than 20% -30%. There now is a panic among many of the "investors" in the Private Credit funds sponsored by these companies to want out.  A headline from March, 6, 2026: "BlackRock limits withdrawals yet again.”

Another problem with these investments, as we pointed out back in our June article, is that they are also "gated"; that is, you can only get some of your money out at any point in time and usually that is only once a quarter, if you're lucky and typically only 5%-10% at a time. Additionally, there are the high initial as well as ongoing management fees. A 1099 issued for your taxes at your full income tax-rate and reinvestments that are listed at an "estimated value" which typically results in lowering your cost basis which, if held in a non-qualified account i.e. non-retirement account, can potentially increases your capital gains tax. Lastly, in addition to all the other fees, there can be performance fees paid to the fund manager.  The effect of these fees is that not all of the positive returns, if any, ends up in the pockets of the investors.  We can't make this stuff up.

Buried deep down in the prospectus that neither the investors nor the people who sold this to them read, the fine print says, if I may paraphrase, "we can decide how much to give you back of your money if any at all." Clearly many investors are wanting out and we believe that clearly these investors should never have been sold these to begin with, but Wall Street told them they needed to have them as part of their portfolio. These products may be fine for institutional investors but we believe they should not be part of a retail investor's portfolio let alone wind up in your 401k plan as some of the aforementioned sponsors desire.

Most private credit funds are designed for a 5-8 year holding period and having been in this business for over 38 years, rest assured, most retail investors (outside our clients) do not hold their investments that long. Maybe this is the reason they want to dump these products into your 401k plan so that you can't, or at least will hesitate, to sell them.  Recently, the sponsors of these products have been attempting to calm the waters by professing that all is well and their private credit holdings are in good shape. As Rob Copeland and Maureen Farrell wrote in the New York Times online a few months back, "Because private credit firms don't have to regularly reveal their loans to regulators, they can create their own rules for how to "mark," or value, their portfolios." See, it's easy to assure your investors that all is well when you make the rules.

My partner, Gary Wozny, and our firm, LCM Capital Management, have been telling anyone who will listen that retail investors do not buy these products that Wall Street creates, they are only sold to them. As a reminder, anytime an investment that has been designed for and used only by institutional or ultra-high net-worth investors, i.e. people who can hold or lose and it not materially affect their financial well-being, and  is being made available to the everyday investor, you should run and if you just cannot help yourself, then you better well know what exactly you are buying. Sadly, based upon what is happening presently with the increased number of redemptions being requested, most investors had no idea what they signed up for in the first place.

There is a better way.