What the Private Credit Selloff Means for Your Portfolio
For the better part of the last few years, private credit was the trade everyone wanted to be in. High yields, institutional credibility, and the rise of online alternative investment platforms made it easier than ever for investors to allocate into these funds. Some did so with guidance. Many did so without it.
More recently, we have started to see conditions in the space shift.
Blue Owl Capital, one of the largest private credit managers in the country, reported that investors attempted to pull $5.4 billion from two of its flagship funds in a single quarter. Redemption requests reached 22% of its $36 billion Credit Income fund and 41% of its technology-focused vehicle. The firm capped withdrawals at 5% per quarter. Most investors who wanted out are still in.
Blue Owl is not the story. It is the symptom. Ares, Apollo, and BlackRock’s HPS have all reported elevated redemption pressure across their non-traded private credit vehicles in recent months. The pattern is the same: investors want liquidity, and the fund structures were not built to provide it.
We have been cautious on private credit for some time. Our concern was not just about rates or duration. It was about saturation. When too much capital floods into an asset class, deal quality erodes. Terms get looser. The yields being marketed stop reflecting the actual risk being taken. The illiquidity premium that made private credit attractive in the first place begins to shrink, but the illiquidity itself does not. That asymmetry has been building for a while. It is now showing up in the headlines.
That does not mean private investments have no place in a portfolio. They can play a role when used appropriately and sized correctly. But they require a clear understanding of the risks—particularly around liquidity, valuation transparency, and downside scenarios—which are often underappreciated when flows are strong and performance appears stable.
What we do not yet know is how far the fallout goes. Redemption queues, forced holding periods, and concentrated sector exposure across private credit funds are all worth monitoring closely. There may be more pressure ahead.
Kyle Cain, our Chief Investment Officer, has been tracking conditions in this space closely. His view is that in periods of uncertainty, the ability to reposition, raise cash, or respond to changing conditions has real value. That value rarely shows up in a fund’s marketed yield. It becomes apparent when markets move and you need flexibility you no longer have.
This is also where experienced guidance matters. Access to private investments has expanded rapidly, but understanding when, how, and whether to allocate to them requires disciplined underwriting and ongoing oversight. Investors should be working with knowledgeable advisors who can evaluate both the opportunity set and the associated risks—especially when it comes to the latest trends.
At Freedom Family Office, we incorporate both public and private investments where appropriate, with a focus on balancing return potential, liquidity needs, and risk management. This is especially relevant for clients navigating a liquidity event, a concentrated position, or meaningful tax exposure, where the ability to move when it counts is not a preference. It is a requirement.
If you have questions about how these developments may impact your investments or overall portfolio, it is worth taking a closer look at your exposure, liquidity profile, and whether the original investment thesis still holds.
Listen to the latest episode of Smart Money Smarter Moves featuring our CIO Kyle Cain, hosted by Sameer Sawaqed here: https://open.spotify.com/episode/43OaweorETBeyoxb2PYYVa?si=GS6JJLX4RgOvvEh6GqvEMw