Private Credit Investors Want Their Money Back… And It’s Getting Worse

Blue Owl Capital

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Jeff Snider · Atlas FinancialBearish

  Blue Owl's redemption pressure and capped withdrawals contradict its claim that loans are resilient; stock prices show distrust.

  Blue Owl Technology Income Corp had investors request to withdraw 39% of the fund's shares in the third quarter, and withdrawals have had to be capped. Blue Owl says the requests partly reflect investors rejoining the queue and that credit fundamentals are fine. Snider argues that repeated redemption requests and gated withdrawals make that denial unconvincing. He points to the sharp fall in Blue Owl's BDC share price as evidence that the market no longer trusts the company's account of its loans.

  “But when investors repeatedly ask for their money back and withdrawals have to be capped, that denial just doesn't work. Just look at the stock prices of some of these publicly traded credit funds. No one believes the industry spin any longer.”at 0:35

Banks

• Steve Van Metre · Steven Van Metre Financial

  Bank stocks falling while rates rise is a warning that consumers are squeezed and delinquencies will rise.

  Van Metre says higher rates usually help banks because they earn more on the spread. Bank stocks fell anyway while rates rose. He reads that as the market saying the economy is heading the wrong way. Consumers are squeezed by rates, energy and food prices, which will lead to rising delinquencies. Higher net interest income is worth little if loans stop being repaid. He ties this to investors pulling out of private credit.

  “But what's going to happen if bank stocks continue to drop, it's a warning that the economy is going the wrong direction.”at 18:04

• Jeff Snider · Atlas Financial

  Bank stocks sold off without a clear catalyst, a sign investors see broader credit-cycle danger.

  Snider notes the KBW bank index is down about 13-14% from its high in under two months. Banks fell sharply in the March-April 2025 tariff shock and in March-April 2026 energy shock, and rebounded afterwards, but there is no clear catalyst this time. He reads the selloff as the market recognising the credit cycle and the risks it creates, even if banks do not look catastrophically exposed.

  “So the market is clearly concerned about something, but there's no identifiable catalyst this time around to to really connect to selling.”at 20:49

Credit markets

• Jeff Snider · Atlas Financial

  A credit cycle downturn is underway and spreading from private credit into the wider credit market.

  Snider links a run of stress signals to a turning credit cycle: the Tricolor and First Brands failures in 2025, Blue Owl's redemption pressure, a surge in spreads on the riskiest junk debt, some selling of investment-grade debt, and a weak September payroll report. He says this is the first credit-cycle turn since 2006-07. He also points to triple-C spreads rising steadily for over a year while investment-grade spreads stayed historically low, which he reads as investors pulling back from risk while still betting on AI-driven recovery in safer assets.

  “this is the beginning of this thing that's gonna spread throughout the entire credit market because that was just the announcement of the beginning of a credit cycle shift and a credit cycle downturn.”at 1:46

Private credit

• Steve Van Metre · Steven Van Metre Financial

  Investors are right to exit private credit: if the economy slows, they may not get their money back.

  Van Metre argues that private credit loans are backed by receivables, payables and inventory, so their value depends on businesses and consumers. As the economy slows, wages grow more slowly and prices rise, investors start to doubt they will get their money back. Private credit is not liquid: investors have to ask for withdrawals each quarter and can be cut off when the door closes. He concludes that investors are trying to get out before losses appear, even though the manager says everything is fine.

  “And we know investors want out of private credit. ... And we're starting to wonder now, are we going to get our money back? Because if things slow down, yeah, we're getting a really great coupon.”at 2:05

US jobs & labor market

• Jeff Snider · Atlas Financial

  The labor market trend is deteriorating; the weak September payroll report is part of a worsening pattern.

  Snider says the September payroll report was unexpectedly bad, after only one month that looked less weak. He sees this as one more sign of a fragile economy and an unfavourable labour market trend. He says job growth has been absent for a couple of years, and that this will eventually catch up with the economy and the credit markets.

  “You had the fragile economy, the labor market. We just got the payroll report for the month of September, was unexpectedly bad after only one single month where it wasn't as bad.”at 3:27

Oil & fuels

• Jeff Snider · Atlas Financial

  The energy shock has lasted seven months with no sign of ending and adds pressure on businesses and consumers.

  Snider says the energy shock has lasted about seven months with no sign of easing and that more signs point to it getting worse. He argues it is not inflationary and will not cause a boom. Instead it adds pressure to businesses and consumers already weakened by the labour market and income trends. He treats it as one more trend moving the wrong way for the credit cycle.

  “We've got an energy shock. The trends for the energy shock are not inflationary. It's not the economy is gonna suddenly boom. It's gonna be more pressure on the business sector, more pressure on consumers.”at 3:45

Software & SaaS

• Jeff Snider · Atlas Financial

  AI could erode software firms' revenues, threatening credit portfolios where software loans are common.

  Snider says investors are looking at AI-susceptible portfolios of credit, and software companies are everywhere in them. If AI erodes software firms' revenue opportunities and business models, that would be another trend moving the wrong way for credit. He says the share price falls in publicly traded credit funds reflect that worry.

  “People are looking at the AI portfolios or the AI susceptible portfolios, all these software companies. Software is everywhere in these portfolios. And if AI really does start to erode some of their revenue opportunities in their business model, then again, it's another trend that's going in the wrong direction.”at 4:16

Earnings & corporate profits

• Steve Van Metre · Steven Van Metre Financial

  Diesel-driven energy shock will squeeze small and mid-sized businesses that cannot pass costs to customers.

  Van Metre says corporate profits look strong in backward-looking data, but profits have historically fallen during energy shocks. Rising diesel prices hit small and mid-sized businesses hardest, since they cannot raise prices to customers who cannot afford them. Factory price surveys show rising prices, but he doubts consumers can absorb them. Investors now expect the shock to last at least a few months, not fade quickly, so these businesses face a margin squeeze and possible loan defaults.

  “So the issue comes is when you get a spike in diesel prices, what do businesses, particularly the small and mid sized ones, what do they have to absorb? That rising increase in price at their margin. They know they can't pass it on to their customers.”at 6:55

US consumer

• Steve Van Metre · Steven Van Metre Financial

  The bet on the American consumer is about to fail as squeezed spending, drawn-down savings and weak jobs hit.

  Van Metre says private credit investors are worried because consumers are being squeezed. Wage growth is slowing and prices are rising, with energy and food costs going up. He says the strong retail sales report was a one-off that does not show a trend. The personal savings rate is falling because consumers have been drawing down savings in hope of a recovery. With net zero job creation over two months, he expects weak holiday spending and then layoffs after the season.

  “It's because they realize their bet on the American consumer is about to go bust.”at 10:52

US rates & the Fed

• Steve Van Metre · Steven Van Metre Financial

  Fed rate cuts would do nothing now because the economy is being held up by manufacturing and AI spending.

  Van Metre says the policy options are limited. Rate cuts would not do anything because the economy is being held up, with manufacturing production and AI-related activity in the data. He says this support is not feeding through to jobs. Separately, he criticises the narrative that strong retail sales should push the Fed to hike, arguing the economy is weaker than that story suggests.

  “Fed rate cuts? Are they gonna really do anything right now? No. Not gonna do anything at all because the economy is really being held up.”at 13:33