Tom Bilyeu

The underlying loans are typically five to seven year commitments to private companies borrowing the money, and you can't cash them out overnight to pay back impatient investors.

There's just no exchange.

There's no market maker.

And foolishly, the funds that hold these loans ended up promising investors they could withdraw their money every quarter

How is that supposed to work?

You have long duration loans, illiquid assets stuffed inside of a vehicle that promises short-term access to cash.

How?

That might work fine when everyone is calm and only a few people request to get their money back.

It falls apart though, the second people want their money back all at the same time.

Why?

Because the fund has to sell assets that were never designed to be sold quickly.

Now, that's the same mechanic as a bank run, except there's no FDIC insurance backing it up.

The third converging problem is that the government opened the door to 401 s to hold these assets.

In August of 2025, an executive order directed regulators to explore letting 401 plans invest in private markets.

The industry is already marketing to the $13 trillion defined contribution retirement market, so the risk waterfall is just being extended further and further downstream.

Now, I want you to see the full chain of cause and effect here, because when you see it laid out end to end, you will understand why the people at the top of this system sleep fine at night and why the people at the bottom should be worried, but don't even know what's happening.

It all starts with private equity.

Let's say a private equity firm wants to buy a company.

They need debt to finance the deal.

And before 2008, they just go to a bank.