Episode summary
Inside a Short Seller’s Private Credit Investigation | Laks Ganipathi
Monetary Matters
· · Hosts: George Noble, Jack Farley · Guests: Laks Ganapathi
Summary
Laks Ganapathi argues that private credit has shifted from an institutional product into a hidden risk inside retail portfolios, especially through wealth channels offering illiquid funds with low minimums. She says the core problem is not just liquidity but weak underwriting, opaque mark-to-market practices, and a structure that can resemble “exit liquidity” for earlier investors when redemptions pick up. She points to gating at BlackRock’s HPS Corporate Lending Fund as a sign that the stress is real, and says the industry’s reported default figures may understate the damage because many loans are being kept current through extend-and-pretend tactics or PIK conversions.
Her team is building a loan-book database across roughly 150 private credit funds to look for repeated tranches, shared collateral, and hidden overlaps. Ganapathi says the trail leads from direct lending into insurers and affiliated reinsurers, including cases tied to Atlantic Coast Life and 777 Partners, where she describes double-pledged collateral and delayed regulatory action. She says the biggest danger is systemic, not isolated, because the same web links large managers, insurers, and offshore reinsurers.
On sector risk, she says data center debt is the most concerning, followed by direct lending, and she is skeptical of the common explanation that AI alone is hurting software books. In her view, many markdowns in funds like Blue Owl’s OBDC are in healthcare, education, and consumer exposures rather than software, which suggests the stress is broader than the market narrative implies.
Key takeaways
- Laks Ganapathi says private credit is becoming a retail problem because wealthy channels are placing illiquid loans into retirees’ and annuity holders’ money.
- She argues that reported default rates may be understating true stress because extend-and-pretend and payment-in-kind structures can keep loans looking current.
- Ganapathi says the biggest concern is systemic entanglement between private credit funds, insurers, and offshore reinsurers in Bermuda and the Cayman Islands.
- She says the worst exposures are in data center debt first, then direct lending, not just software.
- On Blue Owl’s OBDC, she says the markdowns are mainly in healthcare, education, and consumer rather than the software narrative management emphasized.
Notable quotes
“private credit as an asset class is going to survive. It's going to survive this mess. It's going to be a tremendous blood bath”
“I was extremely naive to believe that the wealth managers have the responsibility to advise their clients in a way that justifies their investment”
“We think most of the private equity firms are zombie companies as in they are in deep red or they should not be in business and nobody knows which is which”
“There is a cancer right the cancer cells are spreading faster across you can do the chemo and everything but it's spreading everywhere at a faster rate”
“What I can tell you is that it's all in the private credit funds”
How the episode opens
There is a cancer right the cancer cells are spreading faster across you can do the chemo and everything but it's spreading everywhere at a faster rate and yes Apollo Aine Black Rockck Blackstone they all have problems. This episode is brought to you by Seraya Partners, who manages the return to tangibles ETF, Lens, ticker lens ns, the Sermaya thematic ETF built for a return to tangibles. Learn more at surmiaf.com, and see the show notes for disclosures.
Let's get into it. My guest today is Lock Gonapathy, founder of Unicus Research and Manurva Investment Management, a short biased fund. Michael Bur has joined as a senior adviser and her views are her own.
Locks, welcome to Monetary Matters.
Thank you, Jack. Good to be back. — You've been doing a lot of work on private credit. — Yes. — What drew you to the field of private credit and what's the source of your concern here? How worried are you and why?
It's important to understand the private credit and non-bank financial institutions. They started to thrive after 2008 when there were so much regulations and enforcement and they've been growing quietly under the radar in the shadows as I would like to say it. But over the past since 2020, it has kind of gotten into mainstream when private credit started to penetrate into consumer lending and commercial real estate lending and that field is like little bit beyond the their usual lending to small businesses and such.
So we have been observing private credit since 2008 but we started to focus keenly into the nitty-gritty of the loan book analysis of the private credit since 2021 2022. One of the reasons is because equity side was not telling us the story that we wanted to know.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private credit redemptions
- insurer reinsurance risk
- short selling private credit
- extend-and-pretend auto loans
- data center debt cycle
Companies and tickers mentioned
- OWL
- OBDC
- Sarmaya Partners
- Unicus Research
- Minerva Investment Management
- Blue Owl Capital
- Blue Owl Capital Corporation
- 777 Partners
- Atlantic Coast Life
- Golden Gate Capital
- CyrusOne
- Stargate
- Vantage Data Centers
Watch the episode
Watch “Inside a Short Seller’s Private Credit Investigation | Laks Ganipathi” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Monetary Matters, this episode and its artwork belong to Jack Farley. Octagon is not affiliated with the show; this page is an independent summary.
