They Asked For Their Money Back
In one quarter, investors asked for $20.8 billion back from private credit funds, and a lot of them got told no.
In the first quarter of this year, investors asked for $20.8 billion back from the big semi-liquid private credit funds.
Not because the funds blew up. Because the investors wanted their own money. They filled out the form, hit submit, and waited.
A lot of them are still waiting.
BCRED hit 7.9% in redemption requests against a 5% quarterly cap. Apollo’s vehicle ran around 11.2%. Ares around 11.6%. When the requests cross the cap, the fund does what the documents always said it could do. It gates. It pays out a slice, pro-rated, and tells everyone else to get in line for next quarter.
Picture that. You did the work. You read the deck. You wired the money. And the day you decided you wanted it back, a stranger you’ve never met got to decide how much of it you’d actually see.
The Reality: the yield was never the dangerous number on the page. The lockup was.
And here’s the part that should bother you more than the gates. To keep those headline yields looking healthy while borrowers struggle, some managers are leaning on something called PIK, paid-in-kind. Instead of a borrower paying interest in cash, the loan balance just grows by the interest owed. The income shows up on the statement. The cash does not. The number looks fine right up until the day you ask to convert it back into dollars.
So you’ve got two things happening at once. The exit got slower, and the “return” got softer. Investors felt the first one. They haven’t all felt the second one yet.
I spent 20 years as an engineer before I ran a dime of anyone’s money. When you design a building, you don’t get points for how good it looks on the day it opens. You get judged on what happens when something goes wrong. When the load shifts. When the system gets stressed. When everyone heads for the same exit at the same time. That’s the only test that counts.
A semi-liquid fund holding long-dated, illiquid loans and offering you a monthly door is a building with one narrow stairwell and a lobby full of people. It works beautifully until everyone walks toward the door on the same Tuesday.
🏠 Interested in starting or growing your real estate portfolio? Join a community of changemakers investing to build wealth and create impact.
Here’s the engineering principle I’d hand you before you sign anything. Match the duration of the exit to the duration of the asset. If the loans inside the fund take years to mature, your ability to leave should not be measured in months. The mismatch is not a feature. It is the risk, dressed up as convenience.
So before you wire money into anything that calls itself liquid, run two questions. First: when, exactly, can I get my money out, and is that backed by what the fund actually owns or by the next investor’s deposit? Second: who decides if I can’t? Me, or the manager, in the quarter I least want them to.
If the honest answer to question one is “it depends on conditions,” and the honest answer to question two is “the manager,” you don’t have a liquid investment. You have a long lockup wearing a liquidity costume. That distinction is worth real money, because the cost of learning it the hard way is the gap between the statement you were promised and the wire you actually receive.
Now let me show you the other side of the same principle, because I run money on it.
Liquidity isn’t what the brochure says. It’s what you can actually do on the day you want your money, and who has to say yes.
Most investors read the yield and skip the exit. You’re learning to read the exit first. That one habit will protect more of your money than any return on any deck ever will.
—Jon
P.S. This is how we think about duration and exits in our own lending. If you want to see how a short-duration structure actually maps to investor liquidity, reply ‘duration’ and I’ll walk you through it.
Or you can check out our live fund dashboard and see our track record for yourself