But when the marks are set by the manager, that smoothness is a function of accounting timing (rather than economic reality).

If public markets are an open pot of boiling water, private credit funds are pressure cookers: quiet on the outside, harder to inspect inside.

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The unfolding restructuring of Medallia, a $1.1 billion position inside Blackstone Private Credit Fund (BCRED), offers a rare look inside the pot.

The mark has fallen from 98 cents to 78 cents to a reported 69 cents over three years. And yet the impact on BCRED’s $24.79 NAV per share will be almost imperceptible post-restructuring. That’s the good news.

That is not because the loss isn’t real. It’s because NAV already reflects the lower marks via unreali

zed losses. I'll walk through two hypothetical scenarios to show how that math works.

👉 This case study shows you how GAAP mechanics work when it comes to credit losses (pay attention to the side note about equity positions!):

The bigger question today’s case study raises: how many other Medallias are sitting in private credit portfolios right now? (that’s maybe the not-so-good news) - we’ll take a closer look at BCRED’s disclosures.

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

The Loan

In October 2021, at the peak of the pandemic-era software boom, Thoma Bravo acquired Medallia in a $6.4 billion leveraged buyout. Financing came from a who’s who of private credit lenders, including Blackstone, Apollo, KKR, and Antares.

Blackstone wrote the largest check, with BCRED holding more than $1.1 billion of par value exposure on its direct book.

It was a classic large-cap direct lending deal: sponsor-backed, scaled borrower, premium spread. But two features stood out:

1. The loan was underwritten based largely on Medallia’s annual recurring revenue (ARR), rather than traditional cash flow metrics. Public filings show that Medallia’s EBITDA was negative $109 million in 2021 (before the takeover). The lenders were betting on revenue growth converting to profitability.

2. The capital structure included payment-in-kind (PIK) interest. Rather than paying all interest in cash, Medallia could satisfy 5.6% of the rate by adding it back onto the loan principal (PIK is what you offer a company that can't generate cash).

A good read on the relationship between PIK and dividend yield:

When a borrower pays cash interest, lenders receive money. When a borrower pays PIK interest, lenders receive a larger loan balance. Reported income on lenders’ books climbs, and so does the borrower’s leverage.

And here’s how company leverage, interest coverage ratio, and enterprise value interact:

Between 2023 and 2024, BCRED’s direct par balance grew from roughly $1.0 billion to more than $1.1 billion, driven in part by capitalized interest. Across the lender group, total debt rose to approximately $2.8 billion, reflecting both PIK accrual and additional financing for add-on acquisitions.

The Warning Signs

The first sign of trouble was a 2024 amendment that widened the loan spread to SOFR + 6.5% and dropped the PIK component to 4.00%. That combination (a wider spread paired with reduced PIK) is what lender amendments look like.

Then the marks began to fall. Reported fair value went from the high 90s into the 80s, eventually reaching the high 70s by year-end 2025. Bloomberg subsequently reported that some lenders had marked the loan materially lower still: Blackstone and HPS Investment Partners (now part of BlackRock) wrote it down to 69 cents in February 2026, a nine-point drop in two months.

In late 2025, the lender group made a pivotal decision: they refused to extend the PIK arrangement, which expired at year-end. Medallia would now have to pay its full contractual interest in cash.

According to Bloomberg, the switch to all-cash interest will increase Medallia’s annual debt servicing costs by approximately $100 million to nearly $300 million, exceeding the company’s roughly $200 million in annual earnings.

The math does not math, even assuming the $200 million earnings figure is not inflated.

Before we get to the restructuring scenarios, let’s talk about PIK, LTV and scale.

The PIK Problem

Throughout this deterioration, BCRED never placed Medallia on non-accrual status. Under BDC accounting rules, a loan goes on non-accrual when collection of interest becomes doubtful.

Here’s more on PIK (plus another good story, Pluralsight):

Medallia was PIK-ing for over two years and the fair value had fallen 22 points, yet

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The read is reassuring: sponsors are putting in more equity than ever. Lenders are protected. Private credit is disciplined.

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But take a look at the second chart. LBO purchase price multiples have risen to roughly 11x EBITDA, also near historic highs.

Today, I’ll make the case for why LTV is an incomplete (and often misleading) metric for evaluating private credit fund portfolios when used on its own.

More specifically: in middle market lending, where “collateral” is often enterprise value rather than hard assets, headline LTV ratios can look safer even as borrower fundamentals weaken.

❓“Leyla, where do I find all this?” - the first place to look is financial statements. Start here:

We’ll look at what the math actually tells us about lender risk, using filings from two funds: Cliffwater’s Corporate Lending Fund (CCLFX) and Goldman Sachs Private Credit Corp (GSCR).

👉 If you missed the deep dive on Cliffwater’s CCLFX, you can read it here:

And GSCR was discussed here (as a comparison to GSBD), and is probably worth a deep dive of its own (stay tuned):

The Anatomy of Risk: Leverage vs. LTV

A long time ago, I was taught the three C’s of lending: collateral, capacity, and character.

• Collateral refers to the value of the asset securing the loan

• Capacity refers to the borrower’s ability to repay

• Character is self-explanatory (the softest metric of the three, and the hardest to gauge).

When it comes to loans to middle market portfolio companies backed by PE firms, character can largely be set aside (since you can’t assess credit history in the way you would for a consumer or public corporate borrower).

🧮 But we can do the math behind the two remaining C’s: collateral and capacity.

To understand the risk, we must first separate two concepts that are often conflated. The terminology doesn’t help, because "leverage" and "LTV" intuitively suggest the same thing.

They are not the same thing. (I don’t make the rules).

We’ll start from the left of this graphic:

LTV (the collateral metric):

• This tells you what percentage of the company’s total worth is encumbered by debt. It tracks the equity cushion (what’s left for the lender if the business has to be sold).
  In theory, bigger cushion = more protection.

‼️VERY IMPORTANT CAVEAT (with 2!! exclamation points): the difference between middle market lending and, say, a real estate loan is that there is no hard asset backing the debt.

A mortgage lender can foreclose on a building. In middle market private credit, the “collateral” is the company’s earning power (EBITDA, its customer contracts, its management team, etc). If earnings fall, the collateral falls with them, simultaneously and in the same direction. There is no building to sell. There is only a multiple applied to a cash flow stream, and both the multiple and the cash flow can compress at once.

The “cushion”, folks, is not a hard asset. It is an assumption on top of another assumption: what the market is willing to pay for a stream of earnings.

Leverage (the capacity metric) - middle of the graphic above:

In simple terms, leverage tells you how many years of earnings it would take to repay the debt if all free cash flows were directed toward repayment.
The higher the number, the longer it would take to repay, and the riskier the loan.
Unlike LTV, leverage does not depend on what someone else is willing to pay for the business. The metric is rooted in operating performance (as EBITDA goes up, leverage ratio improves, and vice versa).

👉 Speaking of private equity returns, read this:

Interest Coverage (the cash flow metric):

This is the most immediate and, arguably, the most important metric:

Read more

Every other week, we send a quick digest on what’s catching our eye across private markets - a quick rundown of things you need to know.

Today’s lineup:

1️⃣ Private equity: strong deal activity, weak fundraising, and what managers are watching next.
2️⃣ Private credit: redemption wave builds, regulatory scrutiny, and more data on SaaSpocalypse
3️⃣ Commercial real estate: record leasing and record vacancy, all at once

Before we dive in:

Accredited Insight delivers the LP’s perspective on private credit, private equity, and CRE, drawing on hundreds of deals, and thousands of conversations. Paid subscribers gain access to our database of over 40 case studies and articles on everything from evergreen funds to due diligence.

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1️⃣ Private Equity

Two reports this week offer complementary views on where PE stands.

1. PitchBook’s Q1 2026 Global PE First Look

PE delivered a healthy first quarter despite resurfaced tariff uncertainty, the ongoing conflict in Iran, and compounded by growing concerns in private credit:

• Over 5,100 transactions totaling $481.6 billion closed in Q1, pacing ahead of Q2 2025 (remember Liberation Day?)

• On exits, Q1 logged 975 transactions worth $306.7 billion. With $2 trillion in dry powder and more attractive borrowing costs, sponsors are well-positioned to keep capital moving.

❗️The one clear weak spot is fundraising. Q1 funds raised just $86 billion (roughly in line with Q1 2025 and likely setting the industry up for another challenging year).

The issue on the LP side is structural: many are short on capital for new allocations, as exit activity has yet to fully offset the prolonged period of limited distributions.

2. S&P Global’s 2026 PE survey

• 71% of GPs now rank operational improvements as their top value creation lever, ahead of financial engineering.

👉 How do you pick a skilled PE manager when all of them claim outstanding operational capabilities? Read this:

• Nearly half (46%) anticipate a shake-out of mid-tier managers unable to generate distributions.

• 53% flag deteriorating credit quality as the greatest risk to private credit markets in 2026.

Check out the chart in this post, it goes with the above, I promise:

2️⃣ Private Credit

Last time we covered Apollo, Ares, and BlackRock gating in March, there is more:

1. The wave continues 🌊

Carlyle’s $7 billion Tactical Private Credit Fund capped redemptions after investors sought to pull 15.7% of shares in Q1 (Bloomberg), more than 3x its 5% quarterly limit.

In total, individual investors requested over $20 billion in redemptions from private credit firms in Q1 (FT)

Regulators are now paying close attention. The Federal Reserve is asking major U.S. banks to share details about their private credit exposure, to assess the level of stress in the sector and its potential to spill into the wider financial system (Fortune)

Meanwhile, the Treasury Department announced it will convene a series of meetings with domestic and international insurance regulators focused on recent developments in private credit markets. (U.S. Department of the Treasury)

‼️ Speaking of regulators: we’ve argued that using NAV as a practical expedient in semi-liquid secondary funds (while allowing managers to crystallize carry on unrealized gains) can create a major incentive misalignment. , and I asked FASB to review the issue as newer-vintage funds increasingly shift toward getting paid on paper gains earlier. Institutional Investor covered it here.

👉 This is an example of a fund that uses this practice to crystallize the incentive fee on unrealized gains:

And this one earns it on income only:

2. The AI/Software Problem

The question behind the redemption surge: what’s actually in these portfolios?

According to Bank for International Settlements, outstanding loans to SaaS firms grew from roughly $8 billion in 2015 to over $500 billion (about 19% of total direct loans) by 2025. A third of private credit funds now have exposure to the SaaS sector.

Here’s a fund with high software exposure:

The recent liquidity crunch appears tied to a mix of AI/software disruption fears, broader market unease, and the realization that inflows could no longer absorb outflows. Once headlines around withdrawal requests hit, additional redemption pressure likely followed.

👉 Wealth advisers face a classic prisoners’ dilemma when it comes to redemptions. And there is only one rational move:

The manager defense: PE owners, not lenders, are first in line to absorb losses if software buyouts deteriorate. True. But it also means the PE marks haven’t moved yet.

👉 Need to understand how gating actually works?

3️⃣ Commercial Real Estate

The office market managed to hit two records simultaneously in Q1 (a good one, and a not-so-good one).

On the leasing side, office tenants signed new leases for an estimated 120 million square feet in Q1 2026:

• the strongest quarterly total since mid-2018,

• a 25% increase year-over-year,

• and the first time this decade that quarterly volume exceeded its pre-2019 average.

  

The recovery isn’t being driven by a handful of mega-deals either: the number of individual lease transactions was the highest observed in a decade.

On the vacancy side, the picture is not so stellar:

• U.S. office vacancy hit 21% in Q1 (a new record, up 60 bps year-over-year and now 4 percentage points above where it stood at the start of the pandemic in 2020).

• Ten of the last 13 quarters have shown net contraction in occupied office stock, with Q1 seeing an overall decline of 5.2 million square feet. Oakland, Austin, Chicago, and San Jose led the losses. Moody’s expects vacancy to keep rising through 2026 as more legacy leases expire.

Tenants are signing more leases, but for smaller footprints in higher-quality space. The result is record leasing activity and record vacancy occurring simultaneously.

❗️For LPs, the implication is that top-line CRE metrics are increasingly unreliable; submarket, vintage, and asset quality are doing most of the work.

Side note: I’m seeing pitch decks with AAR 😱 Here’s why you need to pay attention:

Elsewhere across asset classes, Moody’s reports broadly stable but unspectacular performance:

• Multifamily rent growth came in under 1% with vacancy ticking up to 6.8%, with Sun Belt markets bearing the brunt of new supply.

• Retail held flat at 10.4% vacancy.

• Industrial vacancy edged up to 8.4% (its highest since 2021) as new inventory narrowly outpaced occupancy gains.

P.S. New here?

Here’s where you’ll find the full archive (somewhat organized):

Thanks for reading! As always, if you have any suggestions, reply to this email, leave a comment, or find me on socials (unhinged version on X, and a slightly proper version of me on LinkedIn)
-Leyla

The Variant Alternative Income Fund has posted positive fiscal year returns every single year since inception. FY2022: +11.79%. FY2023: +8.28%. FY2024: +9.62%. Even FY2025, which included a brutal write-down, still came in at +3.70%.

Now here's the other number: NAV per share has fallen from $28.93 in April 2023 to $26.68 by October 2025. That's a decline of ~7.8% over roughly two and a half years.

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Positive returns every year and a slowly declining NAV. How can this be?

Today, we’ll talk about how a fund can show positive returns every year while losing value underneath (and why looking at returns alone will mislead you).

If you invest in semi-liquid funds, start here:

And if you need a refresher on interval vs tender offer funds, read this:

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

The Distribution Mechanic

The answer starts with distributions (but doesn’t end there).

Let me show you the math from the fund's own per-share data. Note the fund reports annual performance on a calendar year basis, but the fund's fiscal year ends on April 30th. I did the math for you and converted everything to the same time period (so reported returns are on a fiscal year basis):

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Deal A looks like the obvious winner, until you realize Deal A is quoting AAR and Deal B is quoting IRR.

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If you’ve been reading this newsletter for a while, you already know IRR can be easily manipulated by timing cash flows. Today is Part 2 of that discussion: how ARR might look much better than IRR.

At the end, I’ll show you a better way to evaluate a deal (and a simple prompt that lets you calculate IRR yourself from any offering deck in about 30 seconds). Spoiler alert: there is no single perfect metric (but I’ll show you how they interact and what they mean).

👉 Read this first (on how to make IRR look pretty):

Invest in real estate deals? You’ll like our case studies:

What is AAR?

Average Annual Return is the simplest return calculation in real estate. You take your total profit (all distributions plus your proceeds at sale, minus your original investment), divide by the number of years, then divide by your initial investment.

Example:

• You invest $100,000 in a 5-year syndication.

• You receive $38,000 in cumulative cash flow over those five years and

• $173,000 back at sale (including return of capital).

Your total profit is $111,174 (cumulative cash received less $100K investment).

AAR says: $111,174 ÷ 5 years ÷ $100,000 = 22.2% per year.

Amazing, no? The trouble is, that number treats every dollar equally regardless of when you received it. The $5,000 you got in Year 1 counts the same as the $173,000 lump sum you didn’t see until Year 5.

“Leyla, just look at DPI, it’s airtight.” Oh, do I have news for you:

What IRR does differently

Read more

And yet it’s up 73.5%.

Before you run off to invest: that’s the puzzle we’re going to solve today. The answer tells you something important about how returns get manufactured in the evergreen PE fund world.

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If you invest in private equity, you need to read this:

In today’s case study we will:

1️⃣ What the fund is (and what’s inside)
2️⃣ How a fund with negative investment income generates positive returns
3️⃣ What's actually been realized vs. what's still a mark

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

The Pitch

JPMorgan Private Markets Fund (JPMF) is a non-traded interval fund that invests in private equity through three strategies:

• co-investments alongside PE sponsors,

• secondary purchases of existing fund stakes,

• and primary commitments to newly formed funds.

“Leyla, what’s an interval fund?” — Here you go:

Structurally, this is a fund-of-funds (FoF).

I hope this doesn’t come as a shock, but I’m not a big fan of FoFs (and neither is Tim McGlinn, who wrote the guest post below):

As of September 30, 2025, the fund manages ~$1.39B in net assets across 94 PE positions in 70+ underlying vehicles. Class I shares have compounded from $10.00 to $17.35. That’s a 73.5% cumulative gain in just over two years (driven largely by a one-time markup surge in the fund's first weeks of operations), or roughly 12–13% annualized once you strip that out.

Let’s take a look at how it’s done. We’ll start from the top:

1️⃣ The Balance Sheet

As of September 30, 2025:

• PE Investments: $1.07B

• Liquidity sleeve: $404M (JPMorgan money market fund) + $2M cash

• Total assets: ~$1.48B

• Liabilities: ~$87M

• Net assets: ~$1.39B

Technically off balance sheet, but an obligation nonetheless: $187.4M in unfunded commitments (13.5% of NAV). The $404M liquidity buffer covers this comfortably for now.

Here’s another fun case study:

What are the assets?

As of September 30, 2025, the PE portfolio carries a fair value of $978.6M against a cost basis of $789.6M. A ~24% aggregate mark-up. On paper.

Here’s how that breaks down by strategy:

When we zoom in on the co-investment portfolio (the light blue 41% slice of the pie chart on the right), the sector exposure is more skewed toward software:

Read more

Every other week, we send a quick digest on what’s catching our eye across private markets - a quick rundown of things you need to know.

Today’s lineup:

1️⃣ Private equity: CVs now account for 14% of all PE exits (meanwhile, zombie fund AUM is likely over $1T)
2️⃣ Private credit: Apollo, Ares, and BlackRock all gated the same week. Default rates ticked down in February
3️⃣ Commercial real estate: Core real estate finally turned positive. Fundraising is up 13%. Net cash flows are still going out the door (all true, simultaneously).

Before we dive in:

Accredited Insight delivers the LP’s perspective on private credit, private equity, and CRE, drawing on hundreds of deals, and thousands of conversations. Paid subscribers gain access to our database of over 40 case studies and articles on everything from evergreen funds to due diligence.

Subscribe now

1️⃣ Private Equity

TL;DR:

• CVs now represent 89% of GP-led secondary volume and 43% of total secondary volume

• Zombie funds AUM is likely already at $1T

1. The CV as Exit Strategy

In 2025, CVs represented 89% of all GP-led secondary volume and roughly 14% of all private equity exits, according to CAIA.

As of 2025, nearly 80 percent of the top 100 sponsors by AUM had completed a CV transaction, Jefferies reports. This, folks, is the new exit mechanism.

Take a look at the pricing trends in the chart below: (SACV = single-asset CVs, MACV = multi-asset ones). Research shows SACVs (which typically include “trophy” assets) command meaningfully stronger valuations than their multi-asset counterparts.

What you need to know about continuation vehicles:

2. The Rise of Zombie Funds

Buyouts wrote on research by TREO Asset Management, which shows that global tail-end fund (TEF) AUM hit $829 billion in 2024, up 24% from 2023's then-record $668 billion. Tail-end funds are at least a decade old (PEI wrote about it here).

For context: TREO's spring 2024 report projected $1 trillion in TEF AUM by 2030. At the current trajectory, they're likely already there.

The secondaries market is not coming to the rescue (at least not for these assets).

Here’s how secondaries work:

Jefferies data shows that pricing varied by fund age: funds less than five years old priced at an average of 95% of NAV, while tail-end funds more than ten years old priced at 73% of NAV. The weighted average vintage sold across strategies was 2018.

👉 Invest in PE? Read this:

2️⃣ Private Credit

TL;DR:

• Apollo, Ares, and BlackRock all hit their redemption gates within days of each other ($4.6B now queued)

• Default rate came in at 5.4% in February, down from 5.8% in January

I wanted to share a quick resource: Sekond has launched a free liquidity tracker for non-traded funds. This tool is free (and not sponsored, I just thought it might be useful). You can check it out by clicking the button below:

Sekond

1. Gates Everywhere

In late March, Apollo, Ares, and BlackRock all hit the same wall within days of each other:

• Apollo Debt Solutions (~$15B AUM): 11.2% in requests against a 5% gate

• Ares Strategic Income Fund ($10.7B AUM): 11.6% in redemption requests, 5% gate

• BlackRock’s HPS Corporate Lending Fund (~$26B AUM): 9.3% in requests, 5% gate

The sector is now sitting on roughly $4.6 billion in queued redemption requests.

👉 Need to understand how gating actually works?

2. What's in the portfolio?

Per Fitch Ratings, the U.S. private credit default rate was at 5.4% in February (down from 5.8% a month earlier):

72 borrowers → 87 default events over the trailing 12 months (multiple events per borrower)

• Liquidity stress is driving defaults:

  • 55%: interest deferrals or switches to PIK

  • 31%: stressed maturity extensions

    
    There is “good” PIK, and there’s “bad” PIK:

• Hard defaults remain limited:

  • 6%: uncured payment defaults

• True break situations are still a minority (8%): bankruptcies, liquidations, debt-for-equity swaps, or restructurings

  • In these cases, sponsors exited their investments

Speaking of defaults, I traced all impaired loans in BlackRock’s TCP. Read the case study here:

3️⃣ Commercial Real Estate

TL;DR:

• Private RE fundraising hit $172B in 2025, first YoY increase since 2021

• Core open-end funds returned 3.7%, first positive year since 2022, but net cash flows are still negative $7.7B

1. Fundraising Up

Private real estate fundraising reached $172 billion in 2025, up 13% from the prior year. This is the first year-over-year increase since 2021, per With Intelligence's 2026 Real Estate Outlook.

U.S. open-ended core funds posted a 3.7% return for the year, technically marking the first positive outcome since 2022. Net investor cash flows from open-ended core funds remained negative at -$7.7B for the year (an improvement from the -$9.4 billion outflow in 2024), but still a net exodus.

Here’s an interesting dynamic: top 10 funds captured 40% of total 2025 fundraising, highlighting industry consolidation.

2. Real Estate Debt Funds on the Upswing

Higher interest rates and tighter lending push borrowers toward private credit. Real estate debt funds closed $51B in 2025, the highest since 2021:

Both established and new managers are launching debt strategies; market share expected to grow.

From S&P: “Debt funds have also outperformed their equity counterparts: the NCREIF/CREFC Open-end Debt Fund Aggregate, tracking 18 real estate debt funds, returned 5.5% YTD gross of fees at the end of Q3 2025, against the NFI-ODCE’s 4% over the same period.”

👉 Real estate people, you are going to love this icymi:

P.S. New here?

Here’s where you’ll find the full archive (somewhat organized):

Thanks for reading! As always, if you have any suggestions, reply to this email, leave a comment, or find me on socials (unhinged me on X, or come troll me - intelligently - on LinkedIn)
-Leyla

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CEO Phil Tseng called it "continued progress in repositioning our portfolio."

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Seven weeks later, the floor fell out. TCPC’s Net Asset Value (NAV) per share went down from $8.71 to $7.07 (an 18.8% decline in a single quarter).

How does a fund destroy nearly a fifth of its book value in ninety days?

The answer is buried in the Schedule of Investments and the accounting mechanics that govern how BDC loan losses actually flow through the books (I hate GAAP accounting with a passion, but what’s a gal to do?)

Today’s story started in 2022, and worked its way through the books for a few years, before running out of road in Q4 2025. Let’s get into it.

(I’ll include a prompt at the end you can use in your own LLM to pull this data from any BDC’s quarterly filings)

👉 I want two things from you: 1. subscribe, - but even more importantly, 2. start reading the footnotes.

The Metric and Its Blind Spots

Non-accrual percentage is the standard BDC credit quality indicator. When a loan stops paying interest, it goes on non-accrual. The percentage tells you what share of the portfolio’s stated value sits in distressed loans. Lower is better.

Here’s the problem with that metric: it’s denominated in fair value (which management marks). As impaired loans (numerator above) get written down toward zero, their weight in the percentage shrinks.

A loan marked at $128K contributes almost nothing to a $1.7B portfolio’s non-accrual percentage, even if $10.6M of original cost basis remains on the books (this, folks, is why you want to compare non-accruals on cost basis, which, for the record, TCP provided along with the FMV).

The metric (as measured by FV) gets better as the damage accumulates and loans get written down further.

Don’t sleep through the next bit, it’s important!

The mechanics work like this:

1️⃣ When a loan goes on non-accrual, the cost basis generally doesn't change (though it can decrease if the borrower is still making payments, or any deferred income like origination discounts gets applied). The Board marks fair value down, and NAV takes the hit from unrealized depreciation.

2️⃣ Cost resets when a restructuring or formal write-off occurs. At that point, the realized loss is recognized on the income statement. But there is no new impact to NAV, because fair value already reflected the loss (in step 1 above).

The unrealized depreciation simply converts into a realized loss, which is why it shows up as simultaneous unrealized gains and realized losses in the same quarter.

Hold this two-step process in your head, we’ll come back to it shortly.

A Story Three Years in the Making

The loans that drove Q4’s collapse had been deteriorating since 2022 and 2023, through multiple markdowns and restructurings.

Management’s own Q4 earnings commentary acknowledged that ~91% of the quarter’s NAV reduction stemmed from investments underwritten in 2021 or earlier.

TCPC’s non-accrual picture during Q4 2024 through Q4 2025 looked like this:

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As a parent of three, I can tell you the third one is always the wildest, because ain’t nobody got time for parenting anymore. (Please do not transpose this observation to private funds. Also, I’m not your mother or financial advisor).

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Cascade Private Capital Fund (CPEFX) an interval fund-of-funds that went from $477 million to $5.3 billion in two years (and it’s still growing). In its four-year life, the fund has had four names and three managers. 85% of the portfolio is valued by NAV practical expedient, and returns are mostly driven by unrealized gains.

If you missed the CCLFX story, start here. It’s the firstborn:

And here’s Cliffwater’s middle child:

Disclosure: This case study is provided for educational purposes only and does not constitute an offer, solicitation, or recommendation to buy or sell any security or financial instrument. Nothing herein should be construed as legal, tax, investment, or financial advice. All opinions are my own and may change without notice. Readers should perform their own due diligence and consult qualified professionals before making any investment decisions.

The Back Story

CPEFX was born in January 2022 as the MassMutual Access Pine Point Fund, a captive vehicle seeded entirely by MassMutual with $74 million of existing PE investments contributed in-kind.

For the next two years, MassMutual owned 100% of the shares, and showed 0% portfolio turnover. The fund cycled through two name changes and a handoff to Barings LLC before Cliffwater took over on February 27, 2024.

👉 At the handoff, net assets stood at ~$477 million. Nineteen months later: $4.25 billion. Here’s what the growth trajectory and returns look like:

Do you see what I see? In FY2025, the fund reported a 31.6% total return (here’s your reminder: high returns do not give you a pass on doing due diligence)

This is yet another “democratized” offering with no income or investor qualification requirements (firm minimum, however, is set at $25M).

This post shows you the mechanics of semi-liquid secondaries funds - it’s a fun one:

What It’ll Cost You

Cliffwater charges a 1.40% management fee on average daily net assets, but waived the entire fee through June 2025 and is charging 1.00% through June 2026.

Good news: that waiver saved LPs $20 million in FY2025.
Bad news: the waiver expires in June of this year.

There's no fund-level incentive fee, which is a meaningful positive. But CPEFX is a fund-of-funds (-of-funds), and here's where the fees live. The underlying PE managers charge their own management fees (1-2%) and carry (typically 10-20%).

The prospectus estimates this at 0.68% annually. ‼️ But read the footnote carefully: that figure excludes performance-based fees on realized gains. The 0.68% is a floor, not a ceiling, friends.

Here’s why you should read footnes (and how to do it without turning murderous):

🔎 What’s in the Fund

Well, I’ll cut to the chase: 23.5% of the portfolio is investments in funds-of-funds (which makes CPEFX’s position a fund-of-funds-of-funds).

Let’s start from the top. As of 2/28/26, CPEFX holds $5.3 billion in assets:

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For years, redemption requests in semi-liquid vehicles ran well below the 5% threshold and were met comfortably, quarter after quarter, because inflows dwarfed outflows, because it was the "golden age of private credit," and because it was cool to brag about your private credit exposure to your golf buddies.

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Then we heard about some "cockroaches," rapidly followed by "AI will eat software companies" and how those SaaS borrowers won't be able to repay the debt. And all of a sudden, direct lending is not so cool anymore.

I mean, when you have John Zito, co-president of Apollo's asset management arm, arguing that many private market participants are overly confident and stating "I literally think all the marks are wrong", — you should probably listen. (WSJ)

And listen investors did. (Turns out, many of them listened by requesting redemptions)

This quarter, the structural mismatch between illiquid assets and the “semi-liquid” nature of evergreen vehicles stopped being theoretical, as investors rushed for the exits.

Thousands of wealth advisors faced the same decision independently:

• submit a redemption request for their clients’ interval fund holdings,

• or hold.

If only I hadn’t warned you…

Next quarter, advisers who didn't face this decision will certainly hear from more of their clients, and will face it again. But therein lies a problem: if everyone holds, the fund operates smoothly. If everyone wants to redeem, gates slam shut.

👉 Here’s how that works:

To add a complication: advisers don’t know what others are doing, while at the same time being bound by a fiduciary duty to their client (not to the fund's stability, and certainly not to the other advisers' clients).

Welcome to the prisoner’s dilemma. Semi-liquid edition.

(Please note: this dynamic is a whole separate issue from asset quality. It’s driven by the structure of the vehicle and investor behavior. For now, there’s little evidence of broad deterioration of underlying loans, but if asset quality does weaken, it will only accelerate the dynamic)

First, some context

Semi-liquid private market funds (interval funds, tender offer funds, non-traded BDCs and REITs) have gone from niche to nearly $500 billion in AUM, with assets growing over 30% in the twelve months through September 2025 alone. The private wealth channel now represents roughly one-fifth of total evergreen fund AUM.

The pitch is compelling: access to inherently illiquid assets through structures that offer periodic liquidity in the form of quarterly redemptions, typically at NAV.

For advisers managing client portfolios, these are dramatically simpler than traditional drawdown funds. No capital calls. No J-curve. Full allocation from day one, and option to compound via reinvesting distributions.

The industry responded with gusto: more than 120 evergreen funds were launched in 2025, and 30 so far this year:

The problem is that the “periodic liquidity” part is somewhat reliant on collective cooperation.

Today we’re talking about private credit semi-liquid funds (specifically, direct lending PC), since this is the topic du jour.

❗️And I’ll say this: of the universe of options, private credit is the asset class best suited for the semi-liquid structure:

• high yield,

• high portfolio turnover (20–30% organically pays off every year),

• relatively short tenor on assets (loans are typically originated with 5–7 year terms, and many pay off before maturity).

Compare that to, say, a fund-of-funds investing in secondary PE stakes: virtually no yield, minimal organic portfolio turnover. The asset-liability mismatch is far worse.

Compare to this fund, for example:

Or this one:

And yet even in the best case, the structure has a game theory problem.

The game

Every quarter, each adviser independently chooses: hold or redeem.

The outcomes depend on what everyone else does, but there is only one rational course of action:

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Every other week, we send a quick digest on what’s catching our eye across private markets (the data, the drama, and the stuff LPs should actually care about).

Today’s lineup:

1️⃣ Private equity: AI is coming to private equity, and Carlyle is engineering an exit
2️⃣ Private credit: S&P cuts CCLFX's outlook, a Morgan Stanley fund caps redemptions, and BCRED posts its first monthly loss in three years
3️⃣ Commercial real estate: BREIT records net inflows for the first time since 2022, and the private credit exodus may be sending capital back to real estate

Before we dive in:

Accredited Insight delivers the LP’s perspective on private credit, private equity, and CRE, drawing on hundreds of deals, and thousands of conversations. Paid subscribers gain access to our database of over 40 case studies and articles on everything from evergreen funds to due diligence.

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1️⃣ Private Equity

TL;DR:

• OpenAI and Anthropic are coming to PE

• Carlyle is structuring a multibillion-dollar deal, and it looks like a collateralized fund obligation.

1. OpenAI Wants PE to Be Its Enterprise Sales Force

OpenAI is negotiating a $10 billion joint venture with four private equity firms (TPG as anchor, Advent International, Bain Capital, and Brookfield) to distribute its enterprise AI products across their portfolio companies (Reuters). Equity commitments would be $4 billion.

Anthropic, is allegedly in similar talks with Blackstone, Permira, and Hellman & Friedman. (Bloomberg).

Carlyle’s Answer to the Exit Drought via CFO

Carlyle is building what could be the largest collateralized fund obligation-style transaction on record (Bloomberg). The deal would seed Carlyle Partners IX, while simultaneously paying back investors in older funds.

The mechanics: investors in prior funds transfer their holdings into a new vehicle that provides them with equity and some cash. That vehicle then invests in the new fund.

Here’s a sample CFO structure from Mayer Brown:

The financing combines senior debt, preferred shares, and common equity, with Carlyle retaining a significant minority equity stake.

A few unusual features: no credit rating (atypical for structures that need to attract insurance capital), large amounts of preferred shares (atypical for CFOs), and it’s being structured by AlpInvest, Carlyle’s own secondaries platform. What are the odds this will make its way to some secondaries evergreen funds?

➡️ When GPs start building their own structured products to manufacture liquidity, you know the exit backlog is a problem. Co-President John Redett acknowledged that the seventh flagship fund was “not our best work of art,” though distributions have improved. The eighth fund is 80% committed and invested. Project Potomac will hold stakes in both.

👉 Invest in PE? Read this:

2️⃣ Private Credit

TL;DR:

• S&P cuts CCLFX’s outlook to negative after record 14% redemption requests

• Morgan Stanley’s North Haven fund capped at 5%, returning less than half of what investors requested

• BCRED posts its first monthly loss since September 2022

1. S&P Cuts Cliffwater’s Outlook

What a change in two weeks: in the last issue, we flagged CCLFX’s repurchase deadline as the one to watch. Since then: investors submitted redemption requests of ~14% of shares (a record for the fund).

Cliffwater capped repurchases at 7% (the max without changing fund terms), meaning roughly half of investors who wanted out didn’t get out. For more, read this:

S&P affirmed the A rating but revised the outlook to negative (link), citing the risk that elevated redemptions and above-minimum repurchases could become the norm.

Separately (or maybe relatedly?), CCLFX was also reportedly in the secondary market looking to sell approximately $1 billion in loan assets from the fund (PitchBook).

2. Morgan Stanley Joins the Club

Morgan Stanley’s $7.6 billion North Haven Private Income Fund received redemption requests totaling approximately 10.9% of shares in Q1 2026.

The fund enforced its 5% quarterly cap, returning roughly $169 million, or ~45.8% of what investors asked for (Reuters and Morningstar).

👉 Need to understand how gating actually works?

3. BCRED’s First Monthly Loss in Three Years

Blackstone’s $83 billion BCRED posted a -0.4% total return in February, its first monthly decline since September 2022 (FT). Performance is flat year-to-date after an 8% gain in 2025.

The fund “wrote down the value of a “select” number of loans during the month, including the debt it extended to customer service software company Medallia”, reported FT.

Meanwhile, Q1 redemption requests hit approximately $3.7 billion (~8% of assets). Blackstone upsized its repurchase offer and put in $400 million of its own capital (including $150M from employees) to cover the gap

Before we move on: both CCLFX and BCRED use sale/buyback agreements. Worth understanding if you’re trying to make sense of how these funds manage liquidity.

3️⃣ Commercial Real Estate

TL;DR:

• BREIT records net inflows for the first time since 2022

• Capital may be rotating from private credit into CRE

• CRE debt markets are funded but selective

1. BREIT is Back, baby!

Blackstone’s $55 billion BREIT raised $1 billion more than it paid out in redemptions in 2025 - first net inflows since September 2022 (Bisnow). The fund’s net return on I Shares was over 8% last year.

➡️ This is interesting: BREIT is offering 1% bonus shares (funded by Blackstone, non-dilutive to existing holders) for new subscriptions through April 1.

2. The Private Credit → CRE Rotation

Here’s another interesting tidbit: as capital exits private credit funds, some of it appears to be flowing back into real estate.

Non-traded REIT capital formation went from $33.2 billion in 2022 to $5.7 billion in 2025, but recent months suggest a reversal. BREIT’s February net inflows (the first positive month in nearly four years) are one data point. As Willy Walker (CEO of Walker & Dunlop) put it: private credit funds dwarf CRE debt funds (trillions versus billions) so even a modest rotation could have a material impact on CRE capital flows (CNBC).

👉 Real estate people, you are going to love this icymi:

P.S. New here?

After 2 years of publishing, we got around to creating a table of contents 😅:

Thanks for reading! As always, if you have any suggestions, reply to this email, leave a comment, or find me on socials (unhinged me on X, or come troll me - intelligently - on LinkedIn)
-Leyla

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What you won’t expect to find (40 pages deep in Exhibit C-1) is this:

The fund’s largest investment, a 3,500-home single-family rental portfolio, has generated negative operating cash flow for three consecutive years (as far as I looked).

• 2025: -$5.6M

• 2024: -$10.7M

• 2023: -$9.1M

This portfolio accounts for ~46% of the fund’s value.

👉 For more on interval funds and how they work:

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What We’ll Cover Today

1️⃣ How the fund is structured (and why it’s so important to look at JV financials)
2️⃣ The operating performance of its largest investment
3️⃣ The debt stack (including a near-term maturity)
4️⃣ How the valuations get from a 3.3% cap rate on current NOI to the 5.3% cap rate the fund uses to mark the portfolio

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

👉 If you invest in real estate, you’ll want to start with our How to Read a Pro Forma series

Why Look at a JV?

First, some context on the fund itself. The Fundrise Real Estate Interval Fund (~$1.2B net assets) is a closed-end interval fund that invests in private real estate through co-investment joint ventures with Fundrise affiliates. Roughly 95% of assets are in these co-investment JVs.

Here’s another example of a real estate fund of funds:

Since fund-level financials are so simple, you can figure everything out yourself, right? Keep in mind, the income below is annualized, in $’000s, NAV is $1.2B.

And in case this doesn’t tell you the story, let me help you out: the fund generated $1.3M of investment income. It then paid $10.2M in management fees, $5.7M in marketing, and other platform and professional fees. The increase in net assets is mostly from unrealized gains. It’s really not worth digging into this one any further.

Back to the FAR more interesting subject: the JV, and what its financials look like:

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And some of the most interesting financing structures are buried in footnotes that almost nobody reads (the one thing I want to sell you even more than a subscription is an appreciation for footnotes).

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Before we get any further, I sorted and organized all content for your enjoyment:

Today: repurchase agreements and sale/buyback facilities. Don’t recoil and run away: they’re not as complicated as they sound. But they do fall squarely into the category of things you need to understand.

We will look into how two of the largest private credit funds in the market are using these tools right now (one of them uses both).

These are the two funds, both happen to use such facilities:

📺 Quick detour: I went on live TV to talk about what’s happening in private credit more broadly. If you missed it, it’s here:
https://video.foxbusiness.com/v/6391029463112

Disclosure: This article is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All analysis is based on publicly available SEC filings and third-party research cited herein; the author has no position in, and receives no compensation from, any fund, counterparty, or entity discussed. Fund structures, leverage facilities, and borrowing terms are presented as reported in the referenced filings and may have changed since the filing dates noted. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

📌 A Quick Primer on Repo and Sale/Buybacks

At a high level, these do the same thing.

A fund “sells” an asset to a bank and, at the same time, agrees to buy it back later at a slightly higher price. That price difference is the financing cost. The fund gets cash; the bank gets collateral.

Economically, it’s a secured loan.

So what’s the difference?

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1. Fund Deep Dives (analysis of individual 1940 act funds)

2. Case Studies (individual deals, across many asset classes)

3. How to Read the Fine Print (due diligence, understanding financial statements, AI-assisted DD, etc)

4. Understanding Fund Mechanics (from performance metrics, to fund structures and leverage).

5. Market Commentary (digests, reports)

🔒 = paid subscribers only

1. Fund Deep Dives

Filing-level investigative analysis of individual funds — BDCs, interval funds, REITs, PE vehicles, and secondaries.

Cliffwater Corporate Lending Fund (CCLFX) Faces Redemptions 🔒

What Will Liquidity Cost You When Barbarians Shut the Gates? 🔒

How Hamilton Lane’s PAF Turned Unrealized Gains Into Real Fees 🔒

Blue Owl Technology Income Corp (OTIC) Deep Dive 🔒

🦉Hoot, There It Is: OBDC II Sells the Crown Jewels, Halts Redemptions 🔒

How to Read Financial Statements of a Private Credit Fund, a CRDEX Case Study, Part 2 🔒

How to Read Notes to Financial Statements: CRDEX Case Study, Part 1 🔒

Five Q(uestion)s for Cliffwater’s Five Ws

Inside Apollo Asset-Backed Credit Company LLC (ABC) 🔒

Inside Coller Private Credit Secondaries (CollerCredit) 🔒

Inside Carlyle AlpInvest Private Markets Fund (CAPM) 🔒

Partners Group Next Generation Infrastructure 🔒

JLL Income Property Trust 🔒

Cliffwater Corporate Lending Fund (CCLFX) 🔒

Bluerock Total Income Plus -> Bluerock Private Real Estate Fund (NYSE: BPRE) 🔒

Cliffwater Enhanced Lending Fund (CELFX) 🔒

Funds of Funds: Special Sauce or Dead Weight? 🔒

Inside Apollo Diversified Real Estate Fund 🔒

Non-Traded BDC Meets Mr. Market: OBDC II’s Attempt to Merge with OBDC 🔒

Inside Blackstone’s Private Equity Strategies Fund (BXPE) 🔒

Goldman Sachs’ Private Credit: GSBD vs GSCRED 🔒

Carlyle Credit Solutions Inc. 🔒

Inside the Black Box: What First Brands Teaches Us About CLO Risk 🔒

KKR Private Equity Conglomerate LLC (K-PEC) 🔒

Inside BCRED: A Deep Dive into $30B of Debt 🔒

Private Credit Interval Fund 🔒

JP Morgan Real Estate Income Trust (JPMREIT) 🔒

Forced Liquidity: Bluerock’s Solution to Redemption Queue 🔒

Private Credit in a Public Wrapper: Inside the $PRIV ETF 🔒

Markups, Fees, and Fine Print 🔒

Kayne Anderson BDC (KBDC) 🔒

Morgan Stanley Direct Lending Fund (MSDL)

Is Your BDC’s Distribution Yield Reliable? 🔒

Beyond the Herd: Is Cliffwater the King of Private Credit? 🔒

BDC Landscape: Screening for Quality 🔒

2. Case Studies

Deal-level teardowns across property types and capital structures.

Multifamily

No Smoke, No Mirrors: A Plain-Jane Multifamily Case Study

Multifamily Real Estate: a Curious Case of Financial Engineering (and a Complex Capital Stack) 🔒

Multifamily Preferred Equity Case Study 🔒

Multifamily Recapitalization Case Study 🔒

Recapitalizations in Real Estate 🔒

JV Multi-Family Deal

Multi-Family Deal 8 🔒

Preferred Equity Multi Family Deal 🔒

Multi-Family Deal 7: Recapitalization 🔒

Multi Family Deal Analysis by ChatGPT 🔒

Multi Family Deal 6: Misleading NOI 🔒

Multi Family Deal 5 🔒

Multi Family Deal 4: Recapitalization 🔒

Multi Family Deal 3 🔒

Multi Family Blast from the Past Deal 🔒

Multi Family Deal 2: Public vs. Private 🔒

Multi-Family Deal 1 🔒

Industrial

Industrial Deal Case Study 🔒

Industrial Deal 5: Capital Stack and Cap Rate 🔒

Industrial Deal 4: Sale Leaseback 🔒

Industrial Deal 3 🔒

Industrial Deal 2 🔒

Industrial Deal 1 🔒

Retail

Retail Done Right (Case Study) 🔒

Shadow Anchored Retail Deal 🔒

Retail Deal 3: CURB 🔒

Retail Deal 2 🔒

Retail Deal 🔒

Preferred Equity

Reverse-Engineering Valuation and the Capital Stack 🔒

Multi-Family Preferred Equity [NO Deal]

Preferred Equity Deal 🔒

Preferred Equity Deal 🔒

Debt Funds

Real Estate Debt Fund: a Case Study of What’s Missing 🔒

Debt Fund Deal 2 🔒

Debt Fund Deal 🔒

Distressed / NPL

Zombie Deals in Commercial Real Estate 🔒

Non-Performing Loan Case Study

Self Storage

Self Storage Deal 2: When Critical Information is Missing 🔒

Self Storage Deal 🔒

Office

Net Lease Office Properties (NLOP) 🔒

Office Deal 🔒

Other

Manufactured Home Community Case Study

Off the Beaten Path: Investing in Tertiary Market CRE 🔒

Big Money, Bigger Mistakes 🔒

RV Park Deal 🔒

Franchise PE Deal 🔒

Skyscrapers, Scandals, and Ground Leases 🔒

Do Fees Kill Deals 🔒

3. How to Read the Fine Print

How to read financial statements, legal documents, pro formas — and how to use AI to do it faster.

Reading Financial Statements

It’s NAV... Until You Want Liquidity 🔒

Cash Flow Statement for Fund Investors 🔒

Understanding Financial Statements for Fund Investors 🔒

Show Me the Money 🔒

Decoding Legal Documents

How to Read a PPM and LPA Without Losing Your Mind (Hint: AI Can Help)

How a Securities Attorney Would Read a PPM 🔒

The Pro Forma Series

How to Read a Real Estate Pro Forma, Part 5. Yield on Cost 🔒

How to Read a Real Estate Pro Forma: Part 4 🔒

How to Read a Real Estate Pro Forma: Part 3 - Net Operating Income (NOI) 🔒

How to Read a Real Estate Pro Forma: Part 2 - Cap Rates 🔒

How to Read a Real Estate Pro Forma: Part 1

AI-Assisted Diligence

Cash Distributions ≠ Great Investment, CRE Edition 🔒

PIK Is Whispering. Are You Listening? 🔒

How to Use AI to Evaluate Industrial Real Estate Deals 🔒

Using AI to Stress-Test CRE Deals 🔒

Under Pressure: Stress-Testing CRE Deals 🔒

Using AI: CRE Investor Edition 🔒

Due Diligence & Sponsor Vetting

Due Diligence on PE Managers: Doing it Like the Best 🔒

How to Evaluate an Industrial Real Estate Deal as a Limited Partner

Trust, but Verify (or How to Vet a Sponsor)

Due Diligence in Private Markets 🔒

How to Conduct Due Diligence on a Hard Money Fund 🔒

The LP Punchlist 🔒

5 Factors to Consider for Limited Partners 🔒

Red Means Stop 🔒

The Horse or the Jockey

Watch Liquidity. Closely. 🔒

How Private Real Estate Funds Value Assets 🔒

1001 Pitch Decks: Stories GPs Need to Tell and LPs Need to Interpret 🔒

5 Key Considerations for Investors in Private Credit: Part II 🔒

5 Key Considerations for Investors in Private Credit 🔒

Non-Traded REITs: Mark-to-Magic NAV 🔒

Houston, We Have a Problem 🔒

Navigating the Real Estate Sector: Strategies, Routes to Market, and Risk Management 🔒

4. Metrics & Fund Mechanics

How returns are measured and how funds are built — from IRR critiques to waterfall mechanics.

Performance Metrics

The Problem With PME

The DPI Games - How the “Bulletproof” Metric Can Be Manipulated 🔒

The IRR-elevant Metric? 🔒

Past ≠ Future 🔒

Comparing a Private Fund’s Net IRR to Public Market Terms

The Slow Erosion of Illiquidity Premium 🔒

Beyond the IRR 🔒

Infrastructure: An Example for Portfolio Allocation and Risk 🔒

Benchmarking Private Markets: From One LP to Another 🔒

Non-Traded REITs: Dampening Volatility Since the 1990s 🔒

The Illusion of Cash Flow: When Flowing Returns Mask a Stagnant Investment 🔒

Skill vs. Luck 🔒

Return Metrics 🔒

Fund Structures, Fees & Leverage

When Gates Shut Close: A Primer on Gating Provisions in Private Funds 🔒

WTF is ABF? Your Primer on Asset-Based Finance 🔒

Private Credit Secondaries: A Primer 🔒

Evergreen Funds, Part 2 🔒

Evergreen Funds, Part 1 🔒

Understanding Unitranche Loans in Private Credit 🔒

Stop Asking to Be Paid Your Own Money Back 🔒

The Golden Doodle of Private Markets: Evergreen Secondaries 🔒

Continuation Vehicles: The New Lifeline 🔒

Imaginary Gains, Real Fees 🔒

GP Skin in the Game

Decoding the Fee Stack in REPE

Ground Leases: What Every Investor Needs to Know 🔒

The LP’s Escape Hatch: Unlocking Liquidity with Secondary Funds 🔒

Interval and Tender Offer Funds: What a Pitch Deck Won’t Tell You 🔒

GP Stakes in Real Estate: The Math and The Incentives 🔒

How Phantom Income Happens in Real Estate

GP Stakes Investments: a New(ish) Frontier 🔒

Joint Venture Deals in CRE 🔒

NAV Loans in Private Equity 🔒

Understanding Collateralized Securities in Real Estate Credit Funds 🔒

Non-Listed REIT (CRE Debt) 🔒

Zero-Sum Game 🔒

Hidden Leverage in Private Credit 🔒

How Tax Efficient Are Real Estate Private Placements? 🔒

Private Credit Is Going Public (with Apollo) 🔒

Synthetic Risk Transfers (SRTs) and Private Credit 🔒

Pricing of Secondaries in Private Markets 🔒

Leverage in CRE 🔒

Capital Stacks 🔒

Waterfalls, Part 2: Preferred Returns and Hurdle Rates 🔒

How Private Markets Work 🔒

Beyond the Black Box: Transparency (and Lack Thereof) in Private Markets 🔒

Private Equity 101: What Every LP Should Know 🔒

A Fool’s Errand: The Impossible Task of Valuing Private Credit 🔒

A Canary in the Coal Mine

Demystifying Accredited Investing: Your Comprehensive Guide 🔒

5. Market Commentary

Weekly digests, yearly outlooks, and macro perspectives on PE, private credit, and CRE.

Sunday Digests

K-Shaped PE, Private Credit Gates, and $0.58 Recovery on a AAA Bond

Record Multiples; Bird Watching 🦉; and $77B in Hard Maturities

PE Returns, SaaS Bloodbath in Private Credit, and MF Green Shoots 🌱

Secondaries, 19% NAV Drop, and Cap Rate Projections

PE Fees Fall, Exodus from Non-Traded BDCs? and Distress That Isn’t

Unmonetized Companies, DSCR <1, and IPO to Watch

Toilets in CVs, Evergreen Trees, and $1.4B Wipeouts

What Do You Call a Group of Cockroaches?

♼ The Lending Loop, PE Q3 Update, and CRE: Patient is Alive 🩺

Talking First Brands (on live TV!), Secondaries 🌊, and Alts in Your 401(k)

🗞️ Sunday Digest: Private Markets Insights 9/28

🗞️ Sunday Digest: Private Markets Insights 9/14

🗞️ Sunday Digest: Private Markets Insights 8/31

🗞️ Sunday Digest: Private Markets Insights 8/17

🗞️ Sunday Digest: Private Markets Insights 8/2

🗞️ Sunday Digest: Private Markets Insights 7/20

🗞️ Sunday Digest: Private Markets Insights 6/29

🗞️ Sunday Digest: Private Markets Insights 6/15

🗞️ Sunday Digest: Private Markets Insights

🗞️ Sunday Digest: Private Markets Insights

🗞️ Sunday Digest: Private Markets Insights 🔒

🗞️ Sunday Digest: Private Markets Insights

Sunday Digest: Private Markets Insights 🔒

Sunday Digest: Focus on Private Equity

Sunday Digest: Private Markets Insights

Sunday Digest: Private Markets Insights

Dumb Money | Deal or No Deal? 🔒

Yearly Outlooks

Private Markets in 2026: What Changes, What Sticks

Private Markets Outlook 2025 🔒

CRE Market Updates and 2025 Outlook 🔒

Standalone Commentary

The Big, Beautiful Bill Meets the Bond Market 🔒

The Market’s Altimeter: Yield Curves, Spreads, and Economic Signals 🔒

Commercial Property Insurance in 2025

Private Credit in the News 🔒

Seeking Stability 🔒

Are We on the Other Side of CRE Pricing Correction? 🔒

Shadows of Private Credit 🔒

Bridges to Nowhere 🔒

👉 If you missed the original deep dive, start here:

The pitch was simple: access to private credit, 9.5% annualized returns, 1% management fee, no performance fee (and no minimum investor qualifications). Capital was pouring in. The machine was eating.

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Last week, the machine got indigestion.

Bloomberg reported that investors requested redemptions of approximately 14% of CCLFX shares in Q1 2026. That’s a record for the fund.

Cliffwater capped repurchases at 7%. Half the investors who wanted out didn’t get out.

In a letter to shareholders, CEO Stephen Nesbitt said the fund’s performance “remains strong”: annualized return of ~9.4% since inception, a “historical track record of near zero percent in realized losses,” and liquidity at 21% of NAV.

I don’t doubt the return number.

What I want to do today is something different: I want to look forward. The fund expects ~$3B in new capital this quarter (per FT), which means Q1 is manageable: new shares in, old shares out.

👉 This younger sibling’s repurchase offer deadline is on 3/18. Something to watch..

But what happens if the new money slows down?

And the answer comes down to three interconnected factors:

• The fund’s leverage (including off-balance-sheet CLO and PIV positions), and how reported leverage compares to the fund’s effective leverage

• $11B of unfunded commitments

• The regulatory leverage limit

Before we get any further, take a look at the inflows into the fund. The orange line is net share transactions as % of fund’s total fair market value (FMV), bars represent share transactions in $m.

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

Four Ways to Meet Redemptions

When an interval fund gets a redemption request, it has four ways to come up with the cash:

1️⃣ Cash on hand
2️⃣ New share sales (new investors in, old investors out, both at NAV)
3️⃣ Asset repayments and sales (selling loans or receiving paydowns)
4️⃣ Increasing leverage (borrowing more against the portfolio)

Let’s start with #1 and look at where the fund stood as of the last filing (September 30, 2025):

Translation: the fund ended September with $812M in cash and short-term securities on a $31.5B net asset base. That’s 2.58% of NAV.

That’s not going to cover a 7% repurchase on its own.

Source #2 (new share sales) is what’s keeping the fund liquid right now. The roughly $3B in expected Q1 inflows covers the 7% repurchase with room to spare. But this is the source most vulnerable to sentiment (I’m quoted in this WSJ article on this topic). If investors see a fund gating redemptions at 7% while 14% wanted out, the pipeline of new money may not look the same in Q2.

Source #3 (asset repayments and sales). Historically, the fund's portfolio has turned over at roughly 24% annually, which means ~$9.7B in natural loan repayments, refinancings, and sales per year (that’s ~$2.4B per quarter).

A 7% quarterly redemption is roughly $2.2B, so in theory, organic portfolio turnover alone nearly covers a max redemption quarter without the fund having to fire-sell anything.

But there are two catches:

1. 24% is a historical average. In a tightening credit market, refinancing activity would slow, prepayments drop, and we can expect that $9.7B number to shrink.

2. Every dollar of repayment the fund uses to cover redemptions is a dollar it can't reinvest into new loans. That shrinks total assets, which brings us to the next point.

Watch liquidity, friends. I’m not kidding:

The Leverage Picture

Let’s talk about source #4, borrowing capacity.

Between March and September 2025, total borrowings jumped from $6.7B to $9.8B (a 45% increase in six months). During the same period, total assets grew 18.5%.

In other words, the fund was borrowing faster than it was growing.

CCLFX maintains a senior secured credit facility to fund lending commitments and new investments. As of September 30, 2025:

Read more

Investors are starting to gallop out of evergreen private credit funds. Several large vehicles have recently bumped up against their redemption limits.

• HLEND gated redemptions (after receiving requests equal to 9.3% of NAV)

• BCRED saw redemption requests exceed 7% of NAV (though it met them)

• CCLFX capped redemptions at 7% (after investors sought to redeem ~14% of shares)

Speaking of CCLFX, stay tuned for an update on that fund, meanwhile, read this:

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Evergreen structures were designed to solve a real problem: how to package inherently illiquid assets into a format that feels accessible to a retired dentist in Oklahoma. The industry solution came with a convenient label: “semi-liquid.”

Now I can hear the argument forming inside your head: “Investors were explicitly told these funds limit liquidity.”

Technically, that’s true.

I’d be curious how many investors (and advisers) actually understood gating provisions before hitting one. If that sounds fuzzy, here’s a quick primer:

For years, while markets were cooperative, gating felt like a theoretical risk reserved for doomsayers. Especially in private credit, where loans amortize and generate steady cash flow. Liquidity almost felt built into the asset class.

Well, those assumptions are about to be tested.

What options do investors have once gates close?

⚰️ Some funds will prioritize redemptions for deceased investors. But death is a bit of an extreme exit strategy.

Sometimes another path appears: secondary tender offers.

Today, we’ll:

• Evaluate the OBDC II portfolio post-sale

• Estimate potential outcomes for remaining investors (and what’s in it for the party making the offer)

• And answer the key question: what does liquidity actually cost in evergreen private credit funds?

Here’s how you can check financials to assess fund’s liquidity (not to gloat, but the timing was 🤌):

Disclosure: This case study is provided for educational purposes only and does not constitute an offer, solicitation, or recommendation to buy or sell any security or financial instrument. Nothing herein should be construed as legal, tax, investment, or financial advice. All opinions are my own and may change without notice. Readers should perform their own due diligence and consult qualified professionals before making any investment decisions.

What's Going On With OBDC II?

If you missed the prior episodes, here’s a quick recap:

Blue Owl Capital Corporation II (OBDC II) is a non-traded business development company managed by Blue Owl Capital. As of December 31, 2025, the fund had ~$1.6B in total investments at fair value, a NAV of $8.27 per share, and ~114.9 million shares outstanding.

After a cancelled attempt to merge with its publicly traded sibling (OBDC), Blue Owl is winding down the fund. They sold $600M of the fund's best loans, declared a $2.50/share special distribution (about 30% of NAV), and plan to return 50%+ of capital to shareholders over the course of 2026.

Now enter Saba Capital and Cox Capital Partners. On March 6th, they announced a tender offer for OBDC II shares at $3.80 per share for up to 8 million shares (6.9% of outstanding shares in the fund)

The offer price represents a 34.9% discount to the post-distribution NAV of ~$5.84.

Now the fun part, let’s do the math on the remaining portfolio and game-play scenarios for investors:

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Every other week, we send a quick digest on what’s catching our eye across private markets (the data, the drama, and the stuff LPs should actually care about).

Chart of the day (I’ll explain later, keep reading):

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Today’s lineup:

1️⃣ Private equity: $1.3 trillion in dry powder, and PE comes to your brokerage account
2️⃣ Private credit: the golden age is over. The question is, can you leave voluntarily?
3️⃣ Commercial real estate: a AAA bond recovers 58 cents, and extend-and-pretend might never end

Before we dive in:

Accredited Insight delivers the LP’s perspective on private credit, private equity, and CRE, drawing on hundreds of deals, and thousands of conversations. Paid subscribers gain access to our database of over 40 case studies and articles on everything from evergreen funds to due diligence.

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1️⃣ Private Equity

TL;DR:

• The K-shaped recovery in PE: deal value surged but only the mega-funds are eating

• $1.3 trillion of dry powder, and a surge in CVs

• Capital Group and KKR just launched a PE interval fund for retail investors with a $1,000 minimum

Bain dropped its 17th annual Global Private Equity Report

Buyout deal value hit $904 billion in 2025, up 44% year-over-year. Exit value jumped 47% to $717 billion. Second-best year ever on both counts.

Fundraising remains flat (down 30% from 2023 peaks). Why? Distributions to LPs as a percentage of NAV have been stuck below 15% for four consecutive years (industry record). LPs are tapped out: when distributions aren’t coming, LPs don’t make new commitments.

It would be very interesting to find out how many institutional LPs are having trouble coming up with liquidity to meet capital calls on prior commitments - has anyone seen this data?

The industry is sitting on 32,000 unsold companies worth $3.8 trillion. Holding periods at exit now average around seven years, up from five to six during the 2010s.

Continuation vehicles continue to fill the gap. GP-led CV volume grew 62% year-over-year. Secondary deal volume (GP- and LP-led combined) rose 41%.

➡️ Bain’s big thesis this year: “12 is the new 5.” In the 2010s, a typical deal needed ~5% annual EBITDA growth to hit a 2.5x return over five years. Today, with borrowing costs at 8–9%, leverage ratios at 30–40%, and purchase multiples at record highs, that same return requires 10–12% annual EBITDA growth. The math is A LOT harder.

👉What drives returns in PE deals:

2. Capital Group + KKR: PE Comes to Your Brokerage Account

The retailification of private equity continues.

On March 3, Capital Group and KKR launched Capital Group KKR U.S. Equity+, the first public-private equity interval fund from their partnership. (The two firms already rolled out two credit interval funds in 2025).

The structure: roughly 60% in actively managed large-cap US equities, up to 40% in KKR’s private equity strategies. A truly “democratized” product: no accreditation required, and $1k minimum. This, friends, is an interval fund, with limited quarterly liquidity.

👉 Yes, you need to know how gating provisions work:

2️⃣ Private Credit

TL;DR:

• BlackRock just gated redemptions at its $26B HPS fund (the first time since inception)

• Blackstone met record $3.8B in redemptions at BCRED (but had to step in with its own capital)

Dare I say it? We have begun testing the limits of semi-liquid structures.

Here’s your primer on evergreen vehicles:

The Gates Are Going Up

Turns out, the OBDC II saga was the opening act. Last week we got the main event.

On Friday, BlackRock disclosed that investors in the $26 billion HPS Corporate Lending Fund (HLEND) requested redemptions of 9.3% of shares, roughly $1.2 billion (LINK). Management capped repurchases at 5%, paying out approximately $620 million. It’s the first time requests have breached the 5% threshold since the fund’s inception.

BLK stock dropped ~8%. KKR and Ares sold off in sympathy.

Three days earlier, Blackstone reported that investors requested a record 7.9% of shares from BCRED, its $82 billion flagship credit fund (~$3.8 billion). Blackstone upsized its quarterly repurchase offer from 5% to 7%, then the firm and its employees collectively put in ~$400 million to cover the rest ($250M came from the firm, $150M - from employees).

Investment bank RA Stanger is now forecasting a ~40% year-over-year decline in BDC capital formation for 2026. If accurate, that would be the most severe fundraising contraction in the sector’s modern history.

👉 Invest in private credit? Here’s how you can learn to read the statements:

→The one to watch this week is CCLFX: the repurchase offer deadline for Q4 is 3/10/26.

3️⃣ Commercial Real Estate

• CMBS bondholders just lost $139 million on a single San Francisco office tower

• The February Trepp data for office delinquencies looks better, after hitting an all-time high of 12.34% in January. But don’t pop the champagne yet

The February CMBS delinquency rate fell 33 bps to 7.14%, but it was driven by modifications and extensions on a handful of large office and mall loans, not by borrowers actually paying off debt.

Extend and pretend is alive and well. The rate is 8.75% including loans past maturity but current on interest.

How to Lose Money in a AAA-rated Security, a Short Tutorial

A $240 million single-asset, single-borrower (SASB) CMBS tied to 600 California Street in San Francisco just liquidated at roughly 58 cents on the dollar (generating losses of 42 cents). Six junior tranches were wiped out entirely. The second-most senior bonds, originally rated AA- by S&P and AAA by Morningstar, lost more than 40% of principal (Bloomberg).

Back in 2019, the building was appraised at $349 million when WeWork Capital Advisors acquired it. By the time the loan was sold to Lone Star Funds in December for about $123 million, the property was only 26% leased 🤕

This is not a one-off, either. Bloomberg flagged that top-ranked SASB tranches tied to Peachtree Center (Atlanta), EY Plaza (Los Angeles), and River North Point (Chicago) all trade below 80 cents on the dollar. Lower tranches at far steeper discounts.

Why should LPs care? If you’re in a fund that holds SASB paper, the rating on the bond you bought may have very little relationship to the recovery you’ll actually receive. (58 cent recovery on a bond rated AAA is quite something, isn’t it?)

P.S. New here?

Check out some of our popular topics to get started: on private credit, private equity, and commercial real estate.

Thanks for reading! As always, if you have any suggestions, reply to this email, leave a comment, or find me on socials (unhinged me on X and an increasingly unbothered me on LinkedIn)
-Leyla

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“Show me the incentive, and I’ll show you the outcome” - Charlie Munger

Today’s post is about one thing: how a small change in incentives can move tens of millions of dollars from LPs to the fund manager (without a single asset being sold).

Tim McGlinn of will walk you through a real-life example with Hamilton lane. I (Leyla) will tell you the moral of the story.

I’m going to explain this very simply, and I want you to do me a favor and forward this explanation to everyone you know: it’s truly that important.

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1️⃣ Primary Fund

Let’s start simple. Bob buys two rental properties for $1 million.

After attending a guru seminar in a hotel conference room, Bob learns he can wrap those properties into a fund. He’ll earn:

• A 1% annual management fee

• A 10% incentive fee

So Bob forms Fund I and sells the $1 million of equity to four investors at $250,000 each.

A year goes by, nothing has been sold. But Bob marks the properties up to $1.25 million. For simplicity, assume operating income covered expenses, so the entire $250,000 increase is unrealized gains.

That was a trick question. It depends entirely on how the incentive fee is defined in the documents.

Bob has options. His legal team can draft the fund document so that incentive fees are calculated on:

• Income only

• Realized gains + income

• Total return, including unrealized gains

If the incentive is based on realized gains only? Bob makes $0. Nothing was sold (he does accrue “incentive fee payable”, but will only get paid when the properties sell).

If the incentive is based on total return including unrealized gains? Bob’s Fund I makes 10% × $250,000 = $25,000, which will be paid out that year.

(And yes, Bob earns his 1% management fee either way)

Another (rhetorical) question: what structure do you think Bob prefers?

👉 If you invest in private markets, read the darn footnotes, you’ll find the basis for the incentive and AUM fees in said footnotes. Here’s how I do it (I’ll even give you AI prompts to get you started):

2️⃣ Secondary Fund

We’re now going to introduce a complication into Bob’s Fund I.

One of Bob’s investors, Janet, wants out. She finds a willing buyer for her $250,000 stake, and sells it to Herbert for $200,000 - after a round of price negotiations.

This, folks, is called “the secondary market”.

“Leyla, WTF are secondary funds?” — Here you go:

Herbert runs a fund-of-funds (FOF). His FOF charges:

• 1.25% management fee

• 12.5% incentive fee

He buys Janet’s stake at $200K, - a 20% discount to the underlying $250K NAV.

⚠️ I’m about to introduce an accounting sleight of hand into this conversation, so PAY ATTENTION, pretty please.

Herbert’s accounting team will use NAV as practical expedient (under rule ASC 820) to mark the value of this investment on Herbert’s FOF books. The very next day, they mark the investment to the reported NAV of Bob’s Fund I: $250,000.

In other words:

• Purchase price: $200,000

• Book value on Day 2: $250,000

• Unrealized gain: $50,000

Nothing changed economically in 24 hours. But on paper, Herbert’s FOF now shows a $50K gain.

Do I need to run another poll, or do you already know how much Herbert’s FOF will earn on this investment in the same quarter they bought it?

🧮 If his incentive fee includes unrealized gains: 12.5% × $50,000 = $6,250

(Plus the 1.25% AUM fee)

That $6,250 is incentive income generated the same quarter the investment was purchased. This is what people mean when they talk about “crystallized carry.”

👉 Many funds charge incentive fees on unrealized gains. Here are some examples:

Others do not:

CCLFX, for example, doesn’t have a performance fee at all. CollerCredit explicitly excludes capital gains and NAV appreciation. More case studies here.

Now that you understand the mechanics, I’ll give the wheel to Tim, so he can show you what happens when this playbook runs with real money.

Hamilton Lane PAF (by Tim McGlinn)

Hamilton Lane’s Private Assets Fund (PAF) is a $5.6 billion registered ‘40 Act fund launched in September 2020 that gives retail and wealth channel investors access to private equity primarily through:

• secondary fund stakes (buying LP interests at a discount to NAV) — 46% of total assets

• direct equity co-investments — 42% of total assets, as of 9/30/25.

The fund has grown rapidly, powered in large part by a strategy aptly called “NAV squeezing” (FT wrote about this HERE): buying secondary stakes at 70–90 cents on the dollar, then immediately marking them up to full NAV under fair value accounting rules, producing instant (but unrealized) gains. (Remember our discussion about Herbert’s FOF?)

The PAF’s original set up:

Read more

Today’s case study focuses instead on Blue Owl’s Technology Income Corp (OTIC), a widely distributed BDC that has raised billions over the past few years.

We’ll cover the usual:

• What’s actually in the portfolio (stats on borrowers, ARR loans, unitranche, etc)

• How the fund makes money (and whether distributions are covered by cash net investment income), and the fee structure

• What fundraising and redemptions have looked like - and, most importantly, what to watch.

There are also some interesting tidbits:

• Unitranche loans
  ❓WHY is nobody talking about them? Here’s your primer:

• “Second lien senior secured” debt (senior to what? third lien? equity?)

• And, my personal favorite: an LP investment in a Thoma Bravo Regulation D vehicle sitting on the books:

As one social media commenter said:
🎶 “Relax,” said the PM, “we are programmed to receive… You can check the IRR anytime you like — but you can never leave.” 🎶

If you missed OBDC II story, it’s worth reading:

Disclosure: This case study is provided for educational purposes only and does not constitute an offer, solicitation, or recommendation to buy or sell any security or financial instrument. Nothing herein should be construed as legal, tax, investment, or financial advice. All opinions are my own and may change without notice. Readers should perform their own due diligence and consult qualified professionals before making any investment decisions.

The Pitch

Blue Owl Technology Income Corp. (formerly Owl Rock Technology Income Corp.) is a non-traded business development company formed in June 2021 and managed by Blue Owl Technology Credit Advisors II LLC, an affiliate.

It filed its first quarterly report in 1Q22 with $151 million in assets. As of 9/30/25, net assets stood at $3.3 billion.

The mandate is straightforward: invest at least 80% of total assets in “technology-related” companies. In practice, that means predominantly senior secured lending to software and tech-enabled businesses.

👉 Here’s why you want to watch liqidity. Like a hawk:

Fees

1️⃣ Base Management Fee

1.25% annually, calculated monthly in arrears, based on the average net assets over the prior two months.

For the nine months ended 9/30/25:

👉 Management fees totaled ~$30.3 million (net of a ~$40k waiver tied to an affiliated consulting arrangement).

2️⃣ Performance Based Incentive Fee

12.5% of pre-incentive fee net investment income.

There is a hurdle:
A 1.25% quarterly preferred return (5% annualized) on NAV.

There’s also a catch-up provision: between 1.25% and 1.43% quarterly return, the Adviser receives 100% of incremental income. After that, the 12.5% split resumes.

For the nine months ended 9/30/25:

👉 Income incentive fees totaled ~$31.7 million.

3️⃣ Capital Gains Incentive Fee

12.5% of cumulative realized capital gains, net of all realized capital losses and unrealized depreciation.

For the nine months ended September 30, 2025:

👉 Capital gains incentive fees: ~$110,000 (of that, $1.4M in Q3).

❗️The capital gains fee is accrued on unrealized gains but not paid until gains are realized. That’s more conserviative than some funds we’ve covered.

4️⃣ Servicing Fees (The Share-Class Tax)

Before we get into the weeds, let me remind you that you need to read footnotes:

🔎 What’s in the Fund

OTIC is predominantly a first-lien senior secured lender to technology and software companies. Here's the breakdown:

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The dirty word in the world of semi-liquid funds.

Nobody notices them when things go well, but when things go south, investors view gates as a lifeboat with a wait list.

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Today we’ll talk about:

• what gating provisions are,

• how they work across different fund structures,

• and where to find them in the documents you signed.

We’ll use two real-world examples, Blue Owl’s OBDC II and Blackstone’s BREIT, to show how gates play out in practice, and why the language around “liquidity” can mean very different things depending on who’s talking.

Let’s start with the freshest example.

You’ve seen the headlines. You may have also seen Blue Owl’s statement (emphasis mine):

“Contrary to what has been reported, we are not halting investor liquidity in OBDC II. In fact, we are accelerating the return of capital.”

And that may have left you hooting scratching your head.

Some headlines were correct. Redemptions were halted. But liquidity was not.

Those are not the same thing. Let me explain.

OBDC II is a closed-end, finite-life fund: it stopped selling shares back in April 2021. The plan was to provide a liquidity event to investors 3–4 years after that date (via merger, IPO, or asset sale).

During the life of the fund, the manager utilized quarterly tender offers: each quarter, they would offer to repurchase up to 5% of the fund’s outstanding NAV from shareholders. As long as aggregate demand didn’t exceed 5% of NAV.

From the fund manager’s standpoint: they liquidated 5% of the fund’s NAV quarterly.

From the investor’s standpoint: you liquidated 100% of your position.

The change announced on February 18 means the fund will no longer offer to repurchase your shares through quarterly tender offers. Instead, the fund sold $600 million of direct lending investments at 99.7% of fair value and will return approximately 30% of investors’ capital to all shareholders on a pro rata basis, within 45 days.

From LP standpoint: you get 30% of your money back, whether you asked for it or not.

From the fund’s standpoint: they liquidated 30% of the fund’s NAV (six times the size of the 5% quarterly tender offer they replaced).

Blue Owl’s framing is worth reading carefully. They’re not wrong: “Instead of resuming a 5% quarterly tender — under which only tendering investors would receive a partial return of capital — we are distributing an amount six times greater and returning capital to all shareholders.”

That is, mechanically, accurate.

But let’s also be precise about what changed. Under the old structure, an investor who wanted full liquidity could get it (100% of their position) as long as aggregate demand didn’t exceed 5% of NAV.

Under the new structure, every investor gets 30%, but no investor can choose to get 100%. The door is wider, but you no longer get to decide how far you walk through it.

When do you get the rest? Blue Owl says the Board “intends to prioritize quarterly return of capital distributions going forward”. Note there is no timeline.

And OBDC II is hardly the only example. Remember BREIT? In late 2022, Blackstone’s $69 billion non-traded REIT hit its redemption limits, and gated the fund.

👉 Speaking of non-traded REITs. Here’s how valuation of assets works:

🔎 What IS a Gating Provision?

At its core, a gating provision is a contractual or regulatory mechanism that limits the amount of capital investors can withdraw from a fund during a specified period.

That’s it. That’s the concept.

They exist across virtually every private fund structure that provides periodic liquidity (from ’40 Act interval funds to Reg D evergreen vehicles), and they all serve the same fundamental purpose:

Protect the remaining investors from forced asset sales when too many people head for the exits at once.

When you, LP, wire money to a fund, you are handed a stack of documents you are supposed to read and sign. Somewhere in that stack (between the fee disclosures and the tax representations) is a warning about how illiquid your investment actually is.

👉 No post would be complete without me pounding you on the head about reading financial statements (and notes to said statements):

The fund can call itself evergreen, open-ended, whatever. Every prospectus will warn you: liquidity is conditional.

How conditional? That depends on the fund structure, regulatory framework, drafting of the governing documents. This is what we’ll talk about today.

Think of it this way: if the liquidity mechanism is the door, the gate determines

• How many people can walk through it at once

• Whether there’s a line

• And under what conditions the door gets locked entirely

(And as with most exit doors, people tend to rush them at the same time.)

Gates come in several flavors (cue Coldplay’s “nooooobody said it was easyyy”🎶):

Read more