00:00What is the concern around these record redemptions that they're facing?
00:04Yeah, I think there is a funny sort of juxtaposition going on where private credit funds are reporting pretty strong
00:13returns and good performance.
00:15And yet investors can't seem to shake the kind of like overwhelming fears around AI and software.
00:24And I mean, they're just broader kind of points in the credit cycle.
00:27And, you know, BDCs are the kind of vehicle through which investors can either opt in or opt out of
00:35funds.
00:36And so we're sort of seeing the flows there.
00:38I think with Blackstone, look, I mean, you know, B-cred is not an insubstantial character.
00:43It's kind of like, I don't know, it is to private credit what sort of Chopin is to classical music
00:49or something like that.
00:50I mean, it's not an insubstantial figure.
00:52And so I think people are paying very close attention to B-cred and how it responds to an uptick
01:01in investor withdrawals.
01:03I mean, it's by far the largest of the non-traded BDCs.
01:07And I think, you know, at the moment, if you want to just hear another little thought I had, at
01:14the moment, you know, what's happening in BDCs is effectively like a kind of, I mean, in my mind at
01:19least, it's a sort of high stakes blinking contest going on between the funds.
01:23No one wants to be the first people to kind of restrict investor withdrawals.
01:30And yet everyone agrees with the premise of them.
01:32You know, it's an important feature of the market that you have these kind of 5%, 7% caps.
01:38But no one wants to be the first people to use them because they don't want to take the reputational
01:43risk of being the first one and kind of all the headlines going on about, you know, the first people
01:48to gate investors.
01:50So it's a kind of fascinating time for BDCs at the moment.
01:52I think it will play out, you know, in the spotlight over the next few months.
02:01It's a really good point.
02:02Again, Brad Marshall on the panel I was just on, Silas, saying that no one should be buying these funds
02:06if they think they have 100% liquidity.
02:08Everyone in broad agreement that, yes, it's good to have these gates and for investors to understand that.
02:12But if investors don't understand that, Silas, and this is an industry that keeps being hit by redemptions,
02:17at what point does a technical issue turn in to a fundamental issue for these credit markets?
02:24Well, yeah, two initial thoughts.
02:28Goldman put out a shareholder letter last week.
02:31And they made the point that they never refer to these funds as semi-liquid, unlike others in the market.
02:37And they refer to them as evergreen because their view is that semi-liquid paints a sort of somewhat misleading
02:43portrayal of what these funds are,
02:46where actually they are funds that you can have a very small amount of liquidity.
02:50And if everyone wants the liquidity, you will find that there isn't much liquidity to go around.
02:55And so I think there's a degree of framing going on in private credit and a degree of distancing one
03:02fund to another
03:03about how they kind of characterize what's going on and how they should characterize the industry.
03:07I mean, I think this is a moment where, you know, this mechanism, which I think is sensible,
03:14which is, you know, this like 5%, you know, the right to kind of cap investor withdrawals at 5%.
03:21You know, my guess is, I think a lot of people in the industry's guess is that people will have
03:26to start using these gating mechanisms,
03:29although I'm sure they hate the use of the word gate, but these kind of mechanisms to cap withdrawals.
03:38But I think, as I said before, no one wants to be the first person to do it.
03:43So actually people are kind of redeeming over and above what they, I mean,
03:47it's the level of generosity that you're seeing in funds in terms of investor withdrawals.
03:52I think we'll have to subside at some point.
03:54Okay.
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