The Liquidity Risk in Private Credit
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Private credit funds promise investors access to their money, but that promise can be difficult to keep when many people want to cash out at once.
Itay Goldstein, Wharton Professor of Finance, explains why private credit funds that invest in illiquid assets can face a dangerous mismatch between investor redemptions and the cash they have available. He discusses the recent pressure on funds with exposure to software companies, how concerns about AI have affected investor sentiment, and why declining inflows can magnify a liquidity crunch.
Goldstein also explores what funds mean when they describe themselves as liquid, the risks of offering semi-liquid products to retail investors, and how clearer product design could help investors better understand when and how they can access their money.
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