Newsletter · · Ashutosh Agarwal

Two Private Credit CEOs Depart as One Fund Faces a Federal Probe - The Private Credit Boom (and Cracks) - Week of August 5, 2026

Private credit and financials newsletter for the week of August 5, 2026. In roughly a month the executives running private credit at BlackRock and Blackstone have left their posts, one of BlackRock's listed lending funds is under a Manhattan federal probe after marking its book down about a quarter, and academics on Odd Lots detailed how private equity has parked roughly $750 billion of life-insurance money into its own private credit.

The Private Credit Boom (and Cracks)

Week of August 5, 2026: Two Private Credit CEOs Depart as One Fund Faces a Federal Probe

TL;DR

  • The stress went from spreadsheets to nameplates. In roughly a month, the two people running private credit at BlackRock and Blackstone left their posts, and one of the funds, BlackRock's publicly traded lender, is being probed by federal prosecutors after cutting the value of its portfolio by roughly a quarter. Reported on The Banker Next Door this week.
  • Even as retail money heads for the exits, the big managers are chasing more of it: Blackstone teamed up with Vanguard and Wellington on funds for everyday investors, and Goldman Sachs is pushing private credit into 401(k) plans. Bulls call it democratization; bears call it finding the next bagholder.
  • The insurance link is now the systemic worry. An Odd Lots episode with two academics laid out how private equity has parked ~$750 billion of life-insurance money into its own private credit, and why, if it ever goes wrong, taxpayers quietly foot part of the bill.

A quick honesty note up front: this was a week driven by journalists and academics, not operators. The hard numbers below (resignations, markdowns, redemptions) were reported by Bloomberg and relayed on a podcast, not spoken by the executives themselves. Where that matters, I flag it.

What's New

1. Two private-credit bosses are out, and one fund is under a federal probe. This is the single biggest development of the week. On The Banker Next Door (episode), host Dr. Joseph Bergquist walked through Bloomberg's reporting that Phil Seng is leaving as CEO of BlackRock's publicly traded lending fund, TCP Capital Corp (ticker TCPC). The backdrop: TCP Capital wrote down the value of its portfolio twice this year, 19% in January and another 5% in May (call it roughly a quarter of its net asset value gone), and federal prosecutors in Manhattan have been questioning executives at the fund. Quick definitions: a BDC, or business development company, is a publicly traded fund that makes loans to mid-sized companies; net asset value (NAV) is simply what the fund says its loan book is worth per share. A 24% cut to that number is a big deal.

Separately, Jonathan Bach resigned as co-CEO of Blackstone's two flagship lending funds, BCRED (the largest non-traded lending fund) and BXSL (Blackstone Secured Lending, the publicly traded one), effective July 20. His co-CEO, Brad Marshall, is now sole boss of both. Bach is a genuinely big name in this corner of finance: he built Barings' BDCs and wrote the widely-followed "BDC Scorecard" at Wells Fargo. The fund said his exit wasn't over any disagreement. But it's the second senior departure from BCRED in about a month (the chief operating officer left June 15). Why it moves the thesis: markdowns and index numbers are abstract; senior people losing their jobs and a fund under federal investigation are not. This is the clearest "cracks" signal since the boom began.

2. BCRED's redemption numbers are ugly, but Blackstone says the worst has passed. Same episode, more Bloomberg-sourced detail. A redemption is just an investor asking for their money back. Blackstone's giant non-traded fund, BCRED, got requests for a record 7.9% of its shares in the first quarter, about $3.8 billion, and had to raise its repurchase cap to 7% and put in ~$400 million of its own and employees' money to help meet them. Second-quarter requests hit roughly 10% of shares, and the fund could only honor its standard 5% cap (meaning many investors got about half of what they asked for). BCRED also cut its monthly payout to $0.18 a share, its second cut in nine months. The one piece of good news for bulls: on Blackstone's July 23 earnings call, management said the pressure eased heading into the third quarter. Why it matters: this is the read on whether the retail-money exodus is accelerating or calming. Right now it's "still elevated, but off the peak", at Blackstone's flagship, at least.

3. The managers are leaning into retail, hard, right as retail leaves. Also on The Banker Next Door: Blackstone is partnering with Vanguard and Wellington to launch its first products aimed at everyday individual investors, one that blends public and private assets, one that's purely private, with quarterly windows to get money out. And Goldman Sachs is launching a private-credit "collective investment trust" built for 401(k) retirement plans. The bull read: broaden access to an asset class that has genuinely delivered. The bear read, which the host pushed hard (this part is his opinion, not reported fact): mixing private loans with public assets and pushing them into retirement accounts makes any future rescue easier to argue for. Either way, the direction of travel is clear: the industry wants your 401(k). Tickers in play: BX, GS, BLK.

4. The insurance link is now the center of the systemic-risk argument. Odd Lots (episode) hosted two academics, Andrew Granato (UT Austin law) and Pranjal Dral (Yale), on their new paper about private equity, private credit, and insurance. The core facts: private equity now has roughly $750 billion of life-insurance assets under its wing, and it's been shifting those portfolios out of "boring AAA bonds" and into its own private credit. Why does a PE firm want an insurer? Because insurance money is patient (policyholders can't demand it back tomorrow), so it's a near-perfect home for loans you can't easily sell. (This is the old Warren Buffett insight, industrialized.)

The catch the authors zero in on: if a big life insurer ever failed, the safety net is weaker and stranger than the one for banks. There's no FDIC for insurance; instead, surviving insurers get billed after a failure, but in most states they get that money back as a tax credit, which the authors call a "stealth taxpayer bailout" that nobody ever votes on. They also flag "shadow reinsurance", moving assets to lightly-watched affiliates in Bermuda, Iowa, or Vermont, where outsiders lose sight of them. Why it matters: this is the intellectual backbone of the bear case on Apollo (APO, owns Athene), KKR (owns Global Atlantic), and Blackstone, the firms whose whole model runs on insurance balance sheets.

5. How much of this actually lands on the banks? A second The Banker Next Door episode (link) walked through a Bank Director article on bank exposure. The numbers worth knowing: banks hold about $1.32 trillion in loans to non-bank financial firms (the category that includes private-credit funds), per late-2025 FDIC data, and the 25 biggest banks hold 96% of it. But the structure is protective: Bank of America said it lends against only 70–75% of a fund's assets and keeps the right to reject individual loans it doesn't like. The article's conclusion: a private-credit bust would hit banks, but "more indirect than direct", through lost loan growth (lending to these funds has been banks' fastest-growing business, compounding ~22% a year) rather than through immediate write-offs. Tickers: BAC, JPM, and regional banks.

The Debate

Is this the start of a credit cycle turning, or idiosyncratic noise inside a structurally growing, well-underwritten asset class?

The bear case (cycle turning). The evidence stacked up this week. A publicly traded lender cut its portfolio value ~24% and drew a federal probe. Two of the most senior people in the business walked. Redemptions at the biggest non-traded fund hit ~10% in a quarter. And the macro backdrop is deteriorating: on The Julia La Roche Show, economist Danielle DiMartino Booth connected the visible stress to the invisible kind. The worry isn't just what's blowing up in public, it's what isn't marked at all in private portfolios. Add the insurance angle, and you have losses potentially migrating into a system with a thinner safety net.

The bull case (idiosyncratic, well-underwritten, growing). The counter, argued this week by Phil Huber of Cliffwater on The Millionaire Next Door (episode): the headlines are mostly about the ~15% of the ~$2.5 trillion market that sits in retail vehicles, and even there, people are pulling money out of funds that have performed well, which is behavioral, not fundamental. The math still works: over 20+ years, the asset class has lost about 1% a year to bad loans (a ~2% default rate times a ~50% recovery) while returning around 9%. The blow-ups making news (First Brands, Tricolor) were fraud, not bad underwriting, and even the bank-risk write-up concluded the danger is indirect. Institutions, notably, are adding, not fleeing.

The pull-quote that captures the week, DiMartino Booth on The Julia La Roche Show (episode):

"We've got bankruptcies that are visible at a 15-year high, which means that bankruptcies that are invisible in the private credit market, we have no idea what they might be. But I suspect we're going to find out."

Where the debate now sits: the bulls' best argument is still true (the loss math, the fraud-not-underwriting point, institutions adding). But the bears got the harder evidence this week: you don't lose two CEOs and draw a federal probe over "idiosyncratic noise."

Stocks In Play

Blackstone (BX). Bull: biggest, most diversified alternative manager; management said on the July 23 call that BCRED redemption pressure is easing into Q3; leaning into a huge new retail/401(k) distribution channel with Vanguard and Wellington. Bear: lost the co-CEO of its two flagship lending funds (plus the COO a month earlier); BCRED cut its payout twice in nine months and is meeting only half of redemption requests; its insurance-linked model is the target of the systemic-risk critique. Next catalyst: BCRED's monthly redemption and distribution data; any further senior departures.

Blackstone Secured Lending (BXSL). Bull: senior-secured, floating-rate book; benefits if forced sellers create cheap loans it can buy. Bear: just lost its co-CEO alongside BCRED; sentiment tied to the non-traded fund's redemption story. Next catalyst: next quarterly non-accrual and NAV update.

BlackRock / TCP Capital (BLK / TCPC). Bull: BLK is a diversified giant; the problem is contained in one relatively small BDC. Bear: TCP Capital wrote down NAV ~24% this year and is under a Manhattan federal probe; its CEO is on the way out. Next catalyst: resolution (or escalation) of the prosecutors' inquiry; TCPC's next NAV mark.

Goldman Sachs (GS). Bull: launching a private-credit vehicle for the enormous 401(k) market, a potential long-duration asset-gathering engine. Bear: pushing individual investors into an illiquid asset class right as the retail experience turns sour. Next catalyst: uptake and terms of the GS Private Credit CIT.

Apollo (APO) & KKR (KKR). Bull: insurance-funded model (Athene, Global Atlantic) gives them the patient, permanent capital that's ideal for private lending. Bear: that same model is now the bullseye of the academic/regulatory systemic-risk argument laid out on Odd Lots. Next catalyst: any regulatory movement on insurance-affiliated private credit (SEC/Treasury are reportedly already looking).

Bank of America (BAC) & JPMorgan (JPM). Bull: conservative structures (BofA lends against just 70–75% of fund assets, keeps loan-veto rights); private credit has been a top loan-growth engine. Bear: the 25 biggest banks hold 96% of the ~$1.32 trillion in loans to non-bank lenders, if that engine stalls, so does loan growth. Next catalyst: the expanded NDFI disclosures banks now report each quarter.

Meta (META). Appears as a data-center borrower: a $12.5 billion bond (sold by BlackRock, arranged through JPMorgan) to fund a Texas data center priced at a 7.53% yield, described as the highest for a blue-chip data-center deal since early 2025 (Wall Street Unplugged, Jul 29). Why it's here: if even investment-grade data-center debt is getting pricier, the private-credit managers chasing data-center lending face the same repricing.

Read-Throughs

  • BDCs (ARCC, BXSL, OBDC): the sentiment hit from the BCRED/TCP Capital news spills onto the whole listed-BDC complex. But the bull twist stands: well-capitalized listed BDCs like Ares Capital (ARCC) and Blue Owl (OBDC) could be the buyers if non-traded funds are forced to sell loans cheaply to meet redemptions. (Neither had an operator on a podcast this week; ARCC's Q2 print, reported 7/29, went undiscussed.)
  • Insurance balance-sheet partners: the Odd Lots thesis puts a spotlight on PE-owned insurers behind Apollo (Athene), KKR (Global Atlantic), and others: watch for any SEC/Treasury action on affiliated-asset disclosure.
  • Regional & big banks: the exposure is concentrated at the top 25 banks; the risk to watch is loan growth stalling, not immediate losses. New quarterly NDFI disclosures are the tell.
  • Data-center / asset-based lending: the BlackRock/Meta bond at 7.53% (widest AA-or-better spread in three years) signals data-center financing is getting more expensive across the board, relevant to the ABF and data-center origination that Apollo, Blackstone, and Blue Owl are all chasing.
  • Syndicated loans / CLOs: DiMartino Booth's point about widening CCC (lowest-rated) high-yield spreads and rising distressed-debt exchanges is the leading indicator for where private marks may eventually follow.

What Changed vs Last Week

Last week (July 22–29) the story was that the bear case had finally gotten an inside witness: Golub Capital's David Golub conceding, with a number, that Fitch's private-credit default index was running at "2x, a little more than 2x normal." This week the stress escalated from a number to a personnel and legal event: two CEO departures and a federal probe. A few specific moves:

  • Redemptions got more precise and slightly more hopeful. Last week's data point was Barings honoring 5% of an 11% request (a 46% fill). This week we got Blackstone's flagship: ~7.9% requested in Q1 ($3.8B), ~10% in Q2, but with management saying pressure eased into Q3. So: still elevated, arguably peaking.
  • The insurance thread advanced from enforcement to theory. Last week it was federal grand-jury subpoenas to Delaware Life and Clear Spring. This week Odd Lots supplied the structural, academic frame for why the insurance link is dangerous (the guarantee-fund "stealth bailout," shadow reinsurance). SEC and Treasury investigations were referenced again.
  • Retailization flipped from "outflows" to "the managers doubling down." Last week was about non-traded redemption pressure; this week the news is Blackstone/Vanguard/Wellington and Goldman's 401(k) vehicle, the industry pressing harder on retail even amid the exodus.
  • One carryover to flag honestly: Trevor Clark of TPG Twin Brook (InsuranceAUM Ep. 378, dated 7/29) surfaced again in the search, but he was already covered in last week's issue, so he's not counted as new here.

Still missing (multi-week gap): a named public-BDC executive discussing their own live non-accrual, PIK (payment-in-kind, i.e., interest paid in more debt rather than cash), or NAV numbers on a podcast: this week's hard figures all came via journalists relaying Bloomberg. Still no Ares/KKR/Blue Owl/HPS operator by name; still zero dedicated episodes on PIK toggles, watch-list marks, or amend-and-extend.