Higher fees, and harder to sell. Is that the description you want used for assets in your retirement account? That’s how Miriam Gottfried and Gunjan Banerji describe private credit in The Wall Street Journal:
With growth slowing from traditional pension-fund and endowment clients, private-markets giants such as Blue Owl, Apollo Global Management and Blackstone have aggressively courted individual investors from everyday millionaires on up. The firms are now pushing to get their offerings into 401(k)s. The funds make loans to companies, often those backed by private-equity firms, and aren’t as closely regulated as banks. Some in the investing world have said the funds aren’t well-suited for the masses, in part because they tend to come with higher fees and are harder to sell.
Higher fees, harder to sell, and giants aggressively looking to push them into your 401(k) account. The description leaves a bad taste in one’s mouth. After Blue Owl caused alarm recently with some fund closures, investors were so shaken that the company held a phone call for advisors. Investors seem reassured. Gottfried and Banerji continue:
Chris Paladino, 58 years old, said he initially decided to invest around a quarter of his portfolio in private credit, hoping for yields of 9%. When he saw the headlines last week, he briefly wondered if he had made a mistake.
Instead, he decided to double down on a private-credit fund. He said such funds are meant to be held for long periods.
Action Line: “Double-down” is a term typically used in the casino, not a word you want associated with your retirement savings, and yet that’s exactly what is happening here. There’s nothing inherently wrong with private equity or credit, but when big institutional investors are abandoning ship while simultaneously looking to stuff your 401(k) full of the stuff, it pays to keep your eyes open. When you want to talk about your portfolio, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
Read the entire series here.
Originally posted on Your Survival Guy.