Episode summary
Wealth Management Invest: Private Credit, Liquidity Pressures and Market Signals with Chris Acito
Summary
The discussion centers on why private credit is getting renewed scrutiny and why the current stress looks as much like a liquidity test as a credit test. Chris Acito argues that many of the headlines conflate the two. In his view, the first issue is structural: the market has shifted from an institutional, drawdown model to a retail-accessible model built around interval funds and non-traded BDCs, where redemption rights are deliberately capped so managers are not forced to sell illiquid loans at a discount.
Acito says the recent redemption pressure reflects those design limits being tested for the first time, not necessarily a run on the asset class. He also says there are real credit questions, but not panic-level defaults: broad private credit defaults remain within normal ranges, while software lending has been pressured by a sharp repricing after the AI-driven selloff in software names. He notes that listed BDCs have fallen sharply and are trading well below NAV, but that may reflect market sentiment as much as underlying credit deterioration.
Looking ahead, he says the next two quarters will be critical for seeing whether valuation gaps converge, whether weaker BDCs separate from stronger ones, and whether investor flows remain steady in interval funds and other retail credit vehicles.
Key takeaways
- Chris Acito says the private credit debate splits into two separate issues: liquidity pressure from redemption limits and genuine credit deterioration in loan portfolios.
- He says interval funds and non-traded BDCs were designed with redemption caps so managers would not have to sell illiquid loans into stress.
- Acito says private credit defaults are rising only modestly overall, but software exposure has been a real source of mark-to-market pressure after the AI-driven selloff.
- Listed BDCs have fallen about 15% in the last two quarters, and he says the gap versus NAV could reflect either market overreaction or real credit warning signs.
- He expects the March 31 reports and second- and third-quarter fund flows to show whether the current dislocation is temporary or a more durable repricing.
Notable quotes
“I think there there are two two legs to this narrative liquidity and credit”
“they are limited so that it's not a it's not a bug. It's actually in the system, it's actually the the way you can provide some liquidity without having to potentially”
“for the first time in that 5-year period did we see uh redemptions exceeding those limits”
“default rates, while they have been creeping up a little bit in the private and broadly syndicated loan space, are still at least cir uh you know, normal levels over a longer period of time”
“the value of the loans and the portfolio has been shrinking over the last roughly two years”
How the episode opens
Hello and welcome to another episode of the Wealth Management Invest podcast. I'm your host, David Bodmmer, editorial director with Wealth Management. This episode I'm really excited.
We're going to dig into private credit. I have a guest who I've had the privilege of speaking to multiple times over the past couple of years. Um, but first time I'm having him on the podcast.
It's Chris Aceto who's the CEO and founder of Gap Style Capital Partners. Chris, welcome to the show.
David, I'm really happy to be here. Boy, this is a uh a very topical topic these days. So, I look forward to digging in digging in with you. — Yeah. So, before we kind of get into into that, I just wanted to give you an opportunity just to tell the audience a bit about yourself and about Gap.
Gapdale Capital Partners is a registered investment advisor based in New York City. I founded GAPSW in 2009 and since that period of time we've had one exclusive focus very relevant to today which is to do alternative credit investing primarily through other managers. So we run fundto funds and give advice to people who want to invest with other managers.
That advice spans all forms of credit, private credit, which we'll touch on a lot today, but also structured credit and bonds and long uh loans managed long and short. Uh distressed credit. I mentioned structured credit.
Um those are all the areas we focus on. And again also importantly for today um the funds that we traffic in are not simply hedge funds and draw down funds but our firm does a lot of work in the BDC interval fund mortgage rate credit closedend fund space as well.
Yeah. So that's this is exactly why I wanted to get your perspective because this is a space that you've been in for a while and you have this visibility that goes across all these different fund formats and you know you put out these your firm puts out really great quarterly reports and other research on this.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private credit
- liquidity pressures
- interval funds
- non-traded bdcs
- valuation gaps
Companies and tickers mentioned
- Gapstow Capital Partners
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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