Sep 27, 2026 · 1h 5m
Private credit’s liquidity promise meets its reckoning
The Private Credit Boom is Over: Redemption Requests Exceed Liquidity | James Elbaor | Marlton LLC
Redemptions, opaque valuations, and AI exposure are testing whether private-credit structures can deliver the liquidity investors were promised.
- 1Private-credit funds are gating because liquidity terms overstated how quickly underlying loans could be sold.
- 2AI threatens software-heavy portfolios while forcing asset managers toward restructurings, mergers, and revised NAV marks.
- 3Public BDC discounts may offer event-driven opportunities when liquidity, consolidation, and NAV convergence align.
Don't miss
Elbaor argues that investors should analyze the wrapper—such as an interval fund or closed-end fund—rather than treating loan NAV as the whole problem.
The brief
James Elbaor argues the private-credit boom has ended as redemptions, liquidity gates, and scarce new capital expose a mismatch between liquid marketing and illiquid assets.
AI adds a second fault line: software borrowers dominate private-credit exposure, but managers cannot yet know which businesses will fail, adapt, or compete successfully.
The episode’s central analytical distinction is between impaired loans and impaired wrappers, including interval funds, closed-end funds, CLOs, and insurance products.
Elbaor favors an event-driven approach to public BDC discounts, where mergers, conversions, acquisitions, or NAV convergence—not discounts alone—create the opportunity.
The discussion widens from private credit to permanent capital, with Pershing Square presented as a model for durable funding and succession beyond Bill Ackman.
What was said on this episode
30 statements · 12 positive · 13 negative · 5 neutral
The private credit boom has ended.
“The private credit boom is over.”
Listen at 0:04
Mergers will increase across BDCs and private-credit firms.
“I fully expect to see a lot of merger activity within the BDC space and private credit space.”
Listen at 0:29
Private-credit products were marketed as more liquid than their gates allowed.
“the product was sold as if the gate did not exist”
Listen at 1:58
Private-credit wrappers cannot always provide promised periodic liquidity.
“these are liquid loans and a wrapper that promises periodic liquidity, but can't always deliver periodic liquidity”
Listen at 2:05
Strategic asset-manager buyers will likely pay above NAV in mergers.
“if you have an asset manager bidding to go ahead and merge with another asset manager vehicle, more likely than not, they're going to pay NAV+”
Listen at 11:50
Private-credit defaults will exceed levels currently priced into discounts.
“We do think it's going to be higher than what other institutions are pricing into these discounts at the moment.”
Listen at 12:56
Private-credit M&A activity is currently limited.
“There isn't a lot of M&A activity happening right now”
Listen at 14:29
BDCs will begin merging at NAV or possibly above NAV.
“I think that you're going to start to see BDCs merging on a NAV. Possibly NAV plus, NAV plus basis.”
Listen at 15:07
Private credit has over half a trillion dollars of SaaS exposure.
“The estimated exposure to SAS by private credit is over half a trillion dollars.”
Listen at 15:42
Some SaaS companies financed by private credit will fail.
“not every single one of those SAS companies is going to make it.”
Listen at 15:54
Higher rates and uncertainty will increase risk premia.
“as rates are increasing, as investors have issues with trust of the Fed and whether or not the Fed can keep inflation under control and whether or not we're in an asset bubble, you're going to see an increase in risk premia”
Listen at 26:14
Higher refinancing rates create problems for SaaS-heavy private-credit portfolios.
“that is a problem when. you have a heavy SaaS component that is going to need to refi into a higher rate environment.”
Listen at 26:32
Investors do not understand interval-fund liquidity structures.
“The Investors do not understand the interval fund wrapper.”
Listen at 27:58
Interval-fund investors face 5% gates and multi-year redemption cycles.
“they are going to be subject to a 5% gate and have a multi-year redemption cycle.”
Listen at 28:04
The BDC market is the best place to express a private-credit view.
“We think the BDC market is very particularly the best place to look at that right now.”
Listen at 28:59
Markets are penalizing alternative managers heavily exposed to private credit and wealth channels.
“The market is penalizing. Alt managers that moved very heavily into investments in private credit and wealth channel.”
Listen at 41:17
Markets highly value managers with permanent capital and equity-like investments.
“if you do have true permanent capital, we can get into the nuances on permanent capital. But if you do have true permanent capital, if you are making underwriting investments that are equity-like, that have a good margin of safety, good equity-like returns on the go forward, We will value you appropriately. We will value you highly.”
Listen at 43:06
Permanent capital cannot be redeemed except through entity wind-down.
“if the capital is permanent meaning it cannot be redeemed there is no redemption mechanism available to you other than a wind down of the entity”
Listen at 44:46
Alternative investments and their valuations will recover.
“I don't think that alts are over. I don't think that alt valuations are never going to come back.”
Listen at 48:26
Pershing Square deserves a valuation multiple above the S&P 500.
“we certainly believe that an S&P 500 plus multiple is is more is certainly appropriate for Pershing Square.”
Listen at 49:06
Traditional hedge funds are not attractive businesses.
“the traditional hedge fund business is is not a great business”
Listen at 50:19
The average hedge-fund LP remains invested for roughly three years.
“the average time that an LP stays in a hedge fund is roughly around three years.”
Listen at 51:52
Private-equity funds typically lock investors up for at least ten years.
“a private equity firm, by definition, typically has to have you locked up for at least 10”
Listen at 52:03
Permanent-capital vehicles will expand massively.
“we are going to see a massive permanent capital Boom.”
Listen at 54:57
Thrive Eternal is a permanent-capital vehicle.
“Thrive Eternal is a permanent capital vehicle.”
Listen at 55:17
Thrive Eternal may eventually conduct an IPO.
“It would not surprise me to see Thrive Eternal IPO at some point”
Listen at 55:25
PSUS margin loans carry rates around SOFR plus one or two.
“If I try and go ahead and take out a margin loan against PSUS, my rate is SOFR plus two. Sometimes SOFR plus one”
Listen at 56:57
Pershing Square will raise outside capital for its venture fund.
“we think that they're going to raise outside capital around that.”
Listen at 58:41
Capital invested in the vehicle remains permanent to that vehicle.
“the capital that's in the vehicle is permanent to the vehicle.”
Listen at 59:01
Permanent-capital vehicles are never forced sellers.
“That means that vehicle is never a forced seller.”
Listen at 59:05
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.