Traci Alloway

It's the other side.

So if you go back and just think about what happened at First Republic Bank, they were owning treasuries

And they had $40 billion of redemption requests for their demand deposits go out the door in a few days.

And the business was sunk.

So if you didn't have the gates up and you had a run on the private credit funds because people were unhappy, they got nervous, they got scared, you'd sink funds very, very easily that way.

But what's important about it, and this is where we're going to get into a potentially thorny period as we move down the road, is these funds will either need to do one of two

They'll either need to sell assets to meet their redemptions or they'll have to finance the redemption requests, provided that the inflows that they've been seeing slow down.

Now, I think because of all the noise out there that we see in the media, people's confidence in the private credit space, certainly the retail investors' confidence, the wealth managers' confidence, has been shaken.

So it wouldn't surprise me at all if we see those flows slow down.

If that happens, then the net outflows will be potentially greater and they'll build.

That means that these private credit managers will have to finance those or they'll have to sell assets.

And the assets they sell are the ones that are probably the easiest to sell, which generally are the highest quality.

So the concern here and really where when people are worried about the contagion,

The concern is you are left with a fund that has raised more debt to meet some redemptions, then been forced to redeem, to sell more positions, and some of those are your better positions, so now you've got a more levered fund with poorer overall investment quality.

Where does that stop and at what point does that potentially blow up?

Candidly, the private credit guys may sell.

The early sales there were from we heard from Blue Owl into an insurance company.

OK, that's great.

But I will argue that we're just seeing the beginnings of the pools of assets being created that are going to take on some of the stressed or distressed loans in that space.

And those those loans are not going to be as easy to move.