Investors seeking liquidity from private credit vehicles appear unwilling to crystallise steep losses, even as redemption queues continue to put pressure on the sector, according to a report by Bloomberg.
Cox Capital Partners offered to purchase up to $90m of shares from investors in five non-traded business development companies (BDCs), with discounts averaging around 26%. The reported cites unnamed people familiar with then matter as pointing out that the response was muted, with investors submitting less than $5m of orders before the deadline.
The BDCs involved are managed by HPS Investment Partners, Apollo Global Management, Ares Management and Blue Owl Capital. The discounts varied between the vehicles, with some attracting no offers at all, the sources said.
The limited participation suggests that, while liquidity concerns remain a significant issue for private credit investors, many holders would rather remain invested than accept a substantial reduction in the value of their holdings to exit immediately.
The report cites John Cox, chief executive of Cox Capital, as saying that the firm had hoped for stronger demand but expected investor participation in secondary transactions to increase as the market became more familiar with the concept.
Cox also indicated that the firm could modify the pricing of future offers in response to market conditions. The firm is now looking beyond non-traded BDCs and plans to extend its strategy to interval funds, another type of private investment structure with limited liquidity.
Cox is expected to target private credit vehicles managed by Cliffwater and Variant Investments, according to a person familiar with the plans.
The potential opportunity is significant. Investors sought to withdraw around half of their shares from Variant’s Alternative Income fund during the most recent quarter, according to the source, while approximately 17% of investors in Cliffwater’s flagship interval fund requested redemptions.
