Private Credit: When Fund Liquidity and Asset Duration Fall Out of Alignment
Updated: 3 hours ago
Business times article: https://www.businesstimes.com.sg/companies-markets/banking-finance/private-credit-keeps-us14-billion-trapped-bid-outlast-storm
A follow up to our earlier post on the misalignment between investor expectations, asset duration and liquidity terms.
A recent Bloomberg report noted that more than US$14.5 billion of investor capital remains queued across over a dozen private credit funds, compared with US$8.6 billion successfully redeemed. Roughly $1.70 locked up for every $1 reclaimed.
𝗕𝘂𝘁 𝘁𝗵𝗶𝘀 𝗶𝘀𝗻'𝘁 𝗿𝗲𝗮𝗹𝗹𝘆 𝗮 "𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁 𝗽𝗿𝗼𝗯𝗹𝗲𝗺" – 𝗶𝘁'𝘀 𝗮 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗮𝗹 𝗺𝗶𝘀𝗺𝗮𝘁𝗰𝗵, 𝗮𝗻𝗱 𝗼𝗻𝗲 𝗹𝗮𝗿𝗴𝗲𝗹𝘆 𝗿𝗼𝗼𝘁𝗲𝗱 𝗶𝗻 𝗨𝗦 𝗿𝗲𝘁𝗮𝗶𝗹-𝗼𝗿𝗶𝗲𝗻𝘁𝗲𝗱 𝘃𝗲𝗵𝗶𝗰𝗹𝗲𝘀 (𝗕𝗗𝗖𝘀 𝗮𝗻𝗱 𝗻𝗼𝗻-𝘁𝗿𝗮𝗱𝗲𝗱 𝗶𝗻𝘁𝗲𝗿𝘃𝗮𝗹 𝗳𝘂𝗻𝗱𝘀) 𝗼𝗳𝗳𝗲𝗿𝗶𝗻𝗴 𝗽𝗲𝗿𝗶𝗼𝗱𝗶𝗰 𝗹𝗶𝗾𝘂𝗶𝗱𝗶𝘁𝘆 𝗮𝗴𝗮𝗶𝗻𝘀𝘁 𝗶𝗻𝗵𝗲𝗿𝗲𝗻𝘁𝗹𝘆 𝗶𝗹𝗹𝗶𝗾𝘂𝗶𝗱 𝗮𝘀𝘀𝗲𝘁𝘀. These structures work until redemption requests rise sharply. Funds are then forced to cap withdrawals, as several large managers have done this quarter.
𝗧𝗵𝗶𝘀 𝗿𝗮𝗶𝘀𝗲𝘀 𝗮 𝗯𝗿𝗼𝗮𝗱𝗲𝗿 𝗶𝘀𝘀𝘂𝗲 𝗮𝗿𝗼𝘂𝗻𝗱 𝗺𝗮𝗻𝗮𝗴𝗲𝗿, 𝗼𝗿 𝗿𝗮𝘁𝗵𝗲𝗿, 𝗳𝘂𝗻𝗱 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 𝘀𝗲𝗹𝗲𝗰𝘁𝗶𝗼𝗻.
In recent years, many large global platforms have raised substantial capital into private credit, through retail wealth channels seeking access to institutional-style strategies. Large global platforms can offer sourcing reach, resources and market access. However, greater fund scale may also create pressure to deploy capital, broaden portfolios and prioritise asset gathering over credit discipline.
𝗦𝗰𝗮𝗹𝗲 𝗶𝘀 𝗻𝗼𝘁, 𝗯𝘆 𝗶𝘁𝘀𝗲𝗹𝗳, 𝗮 𝗽𝗿𝗼𝘅𝘆 𝗳𝗼𝗿 𝗽𝗿𝘂𝗱𝗲𝗻𝗰𝗲.
What matters is alignment: between vehicle liquidity and loan tenor, deployment pace and underwriting discipline, investor expectations and portfolio transparency, and manager incentives and long-term capital preservation.
At Tahan Capital Management Pte Ltd, we believe private credit strategies should be built around this alignment, supported by appropriate structures, robust risk controls and a clear understanding of how capital can be protected under stress.
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𝘛𝘩𝘦 𝘪𝘯𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯 𝘱𝘳𝘰𝘷𝘪𝘥𝘦𝘥 𝘪𝘯 𝘵𝘩𝘪𝘴 𝘱𝘰𝘴𝘵 𝘪𝘴 𝘧𝘰𝘳 𝘪𝘯𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯𝘢𝘭 𝘱𝘶𝘳𝘱𝘰𝘴𝘦𝘴 𝘰𝘯𝘭𝘺 𝘢𝘯𝘥 𝘴𝘩𝘰𝘶𝘭𝘥 𝘯𝘰𝘵 𝘣𝘦 𝘤𝘰𝘯𝘴𝘵𝘳𝘶𝘦𝘥 𝘢𝘴 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭, 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵, 𝘰𝘳 𝘱𝘳𝘰𝘧𝘦𝘴𝘴𝘪𝘰𝘯𝘢𝘭 𝘢𝘥𝘷𝘪𝘤𝘦. 𝘈𝘭𝘸𝘢𝘺𝘴 𝘤𝘰𝘯𝘥𝘶𝘤𝘵 𝘺𝘰𝘶𝘳 𝘰𝘸𝘯 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩 𝘢𝘯𝘥 𝘤𝘰𝘯𝘴𝘶𝘭𝘵 𝘸𝘪𝘵𝘩 𝘢 𝘲𝘶𝘢𝘭𝘪𝘧𝘪𝘦𝘥 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘢𝘥𝘷𝘪𝘴𝘰𝘳 𝘣𝘦𝘧𝘰𝘳𝘦 𝘮𝘢𝘬𝘪𝘯𝘨 𝘢𝘯𝘺 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘥𝘦𝘤𝘪𝘴𝘪𝘰𝘯𝘴. 𝘗𝘢𝘴𝘵 𝘱𝘦𝘳𝘧𝘰𝘳𝘮𝘢𝘯𝘤𝘦 𝘪𝘴 𝘯𝘰𝘵 𝘪𝘯𝘥𝘪𝘤𝘢𝘵𝘪𝘷𝘦 𝘰𝘧 𝘧𝘶𝘵𝘶𝘳𝘦 𝘳𝘦𝘴𝘶𝘭𝘵𝘴.
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