Zaid Admani

You know, every time I refresh my timeline, there seems to be more and more smoke in the private credit space.

You know, we've been talking about this a lot more over the last month or so.

Investors have pulled out more than $11 billion out of private credit funds over the past two quarters, and the withdrawals are hitting record highs.

Things have gotten so bad now that some funds are starting to limit how much money investors can actually take out.

One of the reasons that investors are starting to panic is because of AI and the decline in software stocks.

See, a lot of these private credit funds made a ton of loans to software companies over the past five years.

And now with AI threatening to disrupt or even replace a lot of these software businesses, investors are worried that these loans could go bad.

And here's where things get a bit sketchy.

The Wall Street Journal did an analysis and they found that four of the largest private credit funds actually have way more software exposure than they've been reporting.

On average, the four funds reported about 19% of their investments were in software, but the journal found that the real number is closer to 25%.

Some of these funds were categorizing software companies under different industries like healthcare or business services to make their exposure look smaller.

So the risks might be even higher than initially reported.

Now, these private fund managers say that this panic is all overblown.

They say the loans are performing well and that the AI fears are creating unnecessary panic.

And look, I think they might be right, but the optics are terrible when investors are already nervous and heading for the exits.

And here's where it gets even crazier.

Despite all the recent turmoil, the Trump administration just proposed a new rule today that would make it easier to put private credit and private equity into your 401k.

See, right now, most 401k plans stick to regular stocks and bond funds.

But Wall Street firms have been pushing the administration to allow more alternative assets like private credit to be investable via 401k.

You know, there are over $14 trillion locked up in 401ks.