Private credit investors are cashing out at unusually high rates. According to Matt Wirz at The Wall Street Journal, big funds had about 5% of shareholders cash out at the end of last year. What’s happening?
According to the Federal Reserve, the largest investors in private credit include pension funds, insurance companies, family office, sovereign wealth funds and high net worth individuals. These institutional investors invest in private debt due to various factors such as portfolio diversification, low correlation to public markets and relatively high returns.”
But what if returns aren’t “relatively high?” According to Wirz in the Journal:
Total returns from five of the largest private-credit funds aimed at individual investors declined to an average of about 6.22% in the first nine months of 2025, compared with 8.76% in the same period of 2024 and 11.39% in 2023, according to an analysis by The Wall Street Journal.
The problem for investors trying to cash out is that there isn’t a lot of liquidity in the market for private credit. The Fed explains, “Private credit loans are illiquid due to the lack of a secondary market. There is limited market discovery, and investors acquiring these loans should expect to hold them to maturity or face steep losses in need of an emergency exit.”
That’s one reason the industry and regulators are pushing to put private credit, along with private equity, into your 401(k). The Trump administration set the stage for their inclusion in 401(k)s with an executive order in August of 2025 called “DEMOCRATIZING ACCESS TO ALTERNATIVE ASSETS FOR 401(K) INVESTORS.”
But investors should be careful any time they see institutional investors leaving an underperforming asset class while pushing for it to be accepted in 401(k)s. It could be seen as a way to get out of assets they no longer want to hold.
Action Line: Private equity (and credit) is the next big thing coming for your portfolio. When these assets inevitably hit your 401(k) selection, do your due diligence. Liquidity is important to getting a fair price for your assets. If you need to sell a private equity or credit stake, how hard will that be? When you want to talk about your 401(k) or your investments in general, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
Originally posted on Your Survival Guy.
