DoubleLine Capital Chief Executive Officer Jeffrey Gundlach raised pointed questions about financial advisors and other intermediaries who ushered individual investors into private credit and other so-called semi-liquid funds, suggesting they've been motivated by high fees as much as by their clients' interests.
"It's clear that prospectuses talked about the gating mechanism, but I have a feeling that the financial intermediaries, not all of them of course, but enough of them, didn't explain," he said Wednesday on a panel at the Milken Institute Global Conference in Beverly Hills.
The products have been "kept opaque and not granularly described," he said. "That's why everybody wants their money back: They're starting to realize they might be the bag-holder."
Private credit firms are grappling with a wave of redemption requests, a jolt to an industry that had viewed individuals as a new source of capital to complement institutions. At Milken and elsewhere, asset managers are now questioning the wisdom — or at least, the marketing message — of selling illiquid investments to the masses.
Gundlach, whose DoubleLine manages almost $100 billion in fixed income and other assets, compared today's private credit market to the boom-and-bust cycles in the dot-com era and in mortgage-backed securities and other derivatives.
Risky credit might be able to hide in the private market, he said, noting that the quality in the high-yield public market is much better than it was before the global financial crisis.
"This is gonna be an interesting period because the data points aren't as frequent as they were with the dot-coms and the mortgage market," Gundlach said. "I don't know what systemic means, but people are going to lose money here."
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