Joyce Wong 1.1 2 ideas

BDCs (like those managed by Apollo and KKR) are marking down assets and cutting dividends. Retail funds are facing liquidity gates/redemption stress. Retail investors were sold "liquidity" in an illiquid asset class. As yields compress (down 150bps) and marks turn negative, a "herd mentality" to exit could force further gates and markdowns, creating negative sentiment across the sector. AVOID. The retail/wealth channel of private credit is undergoing a painful reality check regarding liquidity and returns. Institutional capital (which is stable) steps in to buy distressed assets, stabilizing the sector faster than expected.

Private credit spreads are widening due to stress, while high-quality liquid corporate credit offers ~5.5% yields without the illiquidity risk. The "illiquidity premium" in private credit has eroded. Investors are realizing they are taking extra risk for minimal extra return compared to liquid investment-grade bonds. LONG. Risk-adjusted returns favor liquid, high-quality credit over stressed private allocations. A resurgence in inflation pushing yields higher and prices lower.