Saba Capital’s Boaz Weinstein has sounded an alarm over the private credit market, highlighting what he calls 'financial alchemy' in certain investment products.
At the heart of the issue is a liquidity mismatch. Many private credit funds, particularly those sold to retail investors, hold loans that are inherently difficult to sell quickly. Yet, they promised investors the ability to cash out their money on a regular basis, like every quarter. This structure works fine when money is flowing in, but it faces a serious test when many investors want their money back at the same time, which is what we are seeing now.
The pressure began building in late 2025. First, data showed that investor requests to withdraw money from these funds started to accelerate, with redemption requests in several major funds climbing to around 4.5% to 5.7% of their assets in the fourth quarter. This was a significant jump and an early warning sign.
Second, this rising tide of redemption requests forced fund managers to act in early 2026. Blue Owl, a major player, announced it was halting its regular quarterly redemption program for its OBDC II fund. Instead of letting investors cash out at will, it would sell assets to return capital over time. This was a clear signal that the promise of easy liquidity was breaking.
Third, just a few weeks later, an even bigger player, BlackRock, had to limit withdrawals from its $26 billion private credit fund (HLEND) for the first time ever. Investors asked to pull out over 9% of the fund's assets, but the fund's rules only allowed for a 5% exit per quarter. This confirmed the problem was not isolated to just one firm.
This is where Weinstein's argument comes into focus. He is distinguishing between the semi-liquid retail products now facing these redemption gates, and the large, publicly traded asset managers like Ares (ARES), Apollo (APO), and Blackstone (BX). He believes these giants are more resilient and will likely gain market share as weaker structures falter. His own firm is even making offers to buy shares from trapped investors in Blue Owl's funds, albeit at a discount to their stated value.
- Private Credit: Direct lending to companies, typically by non-bank institutions. These loans are not traded on public exchanges, making them illiquid.
- Liquidity Mismatch: A situation where an investment fund holds long-term, illiquid assets but promises short-term, easy redemptions to its investors.
- NAV (Net Asset Value): The total value of a fund's assets minus its liabilities, often expressed on a per-share basis. It represents the theoretical value of a share.