'Eject! Eject! Eject!' Inside the Private Credit Panic
5/6/202621 min
Private credit was the hottest craze on Wall Street. Throughout the boom, one firm became its poster child, Blue Owl. But a recent panic posed a troubling question. What happens if investors suddenly want out at the same time? WSJ's Matt Wirz reports on the turmoil and explains why private credit is something American workers need to pay attention to. Ryan Knutson hosts. Further Listening:
- The Wall Street Craze Jamie Dimon Can’t Resist. Even If It Blows Up. - Private Equity and Crypto Could Be Coming for Your 401K Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Clips
Transcript preview
First 90 secondsRyan Knutson· Host0:00
[upbeat music] Earlier this year, trouble showed up in the hottest quarter of Wall Street. Private credit.
Matt Wirz· Guest0:10
Private credit. The boom in private credit.
Speaker 2· Soundbite0:12
The private credit craze.
Ryan Knutson· Host0:14
Suddenly, a lot of investors were in a panic, and they started picking up their phones. They were all asking their financial advisors the same question.
Matt Wirz· Guest0:24
They were literally calling their brokers and being like, "How much money do I have in private credit?"
Ryan Knutson· Host0:30
This question, our colleague Matt Wertz says, was often followed by an urgent request.
Matt Wirz· Guest0:37
Eject, eject, eject. Get me out right now. And you saw massive amounts of people asking for their money back.
Ryan Knutson· Host0:46
But many of these investors couldn't get their money back, at least not right away. Private credit, a world of opaque lending without much regulation, is a more than $3 trillion market. It operates outside the traditional banking system and tends to offer higher returns, but also comes with higher risk.
Matt Wirz· Guest1:08
From day one, there's been skepticism about private credit.
Ryan Knutson· Host1:14
And as private credit's grown, so has an underlying worry. What happens if investors suddenly want out?
Matt Wirz· Guest1:22
The worst thing for the financial system is a liquidity crisis. It's when all of a sudden