The private credit industry is doing some soul-searching—and one of the first casualties may be the term “semi-liquid.”
That was a key theme at this year’s Milken Institute conference, where industry executives gathered just weeks after the DOL made it easier for 401(k) plans to offer alternative investments like private credit. According to a Bloomberg report published by Wealth Management, several private credit leaders are now pushing to be more direct with investors about what these products actually are: illiquid.
“If I were to make one prediction for the industry—in particular for private credit—the word ‘semi-liquid’ will disappear,” said Per Franzen, CEO of EQT AB. “These products are not liquid.”
The timing is notable. The conference arrived at a difficult moment for private credit, following the abrupt collapses of Tricolor Holdings, First Brands Group, and Market Financial Solutions Ltd. Those failures, combined with rapid markdowns of some holdings and broader market jitters, sparked an unprecedented wave of retail investor withdrawals.
“Retail is a wonderful channel, but you really need to treat it with kid gloves when you are trying to tap that market,” said Paul Taubman, CEO of PJT Partners. “There’s an increasing realization it’s an institutional product, not a retail product.”
Franklin Resources CEO Jenny Johnson was similarly blunt: “We need to make sure the story is clear: Private markets are illiquid. That’s just it. You invest in private credit—it is illiquid.”
The comments carry extra weight given the DOL’s recent move to open the door to alternatives in retirement plans. Long the domain of pensions, insurance companies, and ultra-wealthy individuals, private credit and other alternative assets are now being positioned as potential options for everyday 401(k) savers. Proponents argue these investments can deliver stronger long-term returns than traditional equities.
But several industry voices raised concerns about mixing retail and institutional capital. Ted Koenig, CEO of Monroe Capital, said many institutional investors “do not want to see retail money invested side by side with them.” He also warned about the risks of rapid growth: “You can be the best underwriter in the world, but if you’re told you’ve got to do four times the volume in your portfolio than you have today, something’s going to give.”
Not everyone expects retail interest to fade. Frederick Pollock, chief investment officer of GCM Grosvenor, said that while retail investors need to better understand what they’re buying, alternatives are here to stay. “If you fast forward 10 or 20 years it would be shocking to me if this part of the market isn’t huge.”
Still, Alan Schwartz, Guggenheim Partners’ executive chair, offered a note of caution: “The recent demands for getting their capital back has put some focus on it. There are some tremors in that market.”
If even the firms selling these products are backing away from “semi-liquid,” plan sponsors considering private credit should take that as a signal to get very precise about what they’re offering—and how they communicate it to participants.
