Private Credit, Diligence Failed, Not The Asset Class

Why It Matters

Understanding that diligence failures—not the private‑credit asset class—drive recent losses helps investors recalibrate risk controls and protect future returns.

Key Takeaways

• Private credit losses stem from failed diligence, not asset class.
• $12 billion vanished when PE bought Amazon FBA firms without experience.
• Major firms like BlackRock, KKR reporting sizable credit write‑downs.
• Effective underwriting requires real collateral and strong control structures.
• Four diligence filters are essential before committing to private credit deals.

Summary

The video argues that recent turmoil in private credit is a symptom of poor due‑diligence, not a fundamental flaw in the asset class. The speaker draws a parallel to the 2021 Amazon FBA aggregator boom, where private‑equity firms raised $12 billion to acquire small sellers despite having no operational experience.

Key data points include the $12 billion evaporating in real time, headline‑making write‑downs at BlackRock, KKR, and gated redemptions at Blue Owl. The core message is that underwriting must focus on tangible assets, favorable loan terms, and robust control structures rather than speculative upside without collateral.

Notable quotes underscore the point: “I saw 12 billion dollars evaporate in real time,” and “private credit is broken. It is not broken. Diligence failed.” These examples illustrate how mis‑aligned risk assessments can devastate portfolios, even for industry giants.

The implication for investors is clear: tighten diligence frameworks, apply the four filters the speaker outlines, and prioritize loans backed by real assets and strong covenants. Doing so can preserve capital and restore confidence in private credit markets.

Original Description

Most people think markets cause losses.

They don’t.

I’ve watched billions in funds be deployed by people who didn’t fully understand the risks, and it didn’t end well.

And I’m seeing similar patterns again.

The opportunity isn’t the problem.

The way people evaluate it is.

I break down exactly how I think about this.

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