In the summer of 2007, Bear Stearns blew up two structured credit funds and our LP hotline lit up. Pundits and talking heads told us it was contained. We told ourselves we’re non-correlated – different strategy, different assets, insulated from the chaos. We’re good. Fourteen months later, Lehman collapsed and we learned the hardest lesson in finance: in a real crisis, everything is correlated. The exits close all at once.
That memory is back. Michael Burry just said private credit looks like “the end of the road.” Jeffrey Gundlach called it “2007 for Private Credit.” BlackRock moved first. Morgan Stanley and Apollo followed. Then Carlyle’s flagship fund got hit with 15.7% redemption requests – three times its cap. They gated investors. Investors tried to pull $13 billion from over a dozen funds in a single quarter. That’s out of a $3.5 trillion market. Less than 0.4% of the market tried to get out the door and it’s already causing gates. Many of us have seen this movie before. The Bear Stearns funds weren’t the crisis. They were the canary. Pay attention to the canary.