In Private Credit, Illiquidity Is a Feature, Not a Flaw

Private credit’s illiquidity is central to how the asset class works, not a flaw to be engineered away. By locking in capital and enforcing tender limits, managers can pursue long-term lending opportunities, avoid forced selling in periods of stress, and deliver the illiquidity premium that attracts many investors. Recent market volatility and concerns about credit losses or AI disruption have tested these structures, with some managers stretching beyond stated liquidity limits in response to elevated tenders. Doing so may offer short-term relief but risks weakening a core pillar of private credit: alignment between investment duration, portfolio construction and investor expectations.

For advisors and investors who can tolerate reduced liquidity, current dislocations may open attractive entry points into portfolios backed by disciplined underwriting and robust valuation practices.