Citadel's Griffin: "Private Credit Risks Stem from Liquidity Mismatch"

Individual Investors Failing to Grasp Private Credit Risks
Difficulty in Recouping Funds Likely During Economic Downturn
Concerns Raised Over Possible Misselling

Ken Griffin, a heavyweight in the U.S. hedge fund industry and CEO of Citadel, warned on April 29 (local time) that even high-net-worth individuals do not fully understand the risks of private credit (private lending) investments, and that there could be difficulties in recovering funds during an economic downturn.

Ken Griffin, CEO of Citadel. Photo by AFP News Agency

In an interview with the Financial Times (FT) that day, CEO Griffin stated, "The real issue is the mismatch in liquidity between individual investors and investment horizons." He added, "We live in a world where individual investors have become accustomed to immediate liquidity, but investing in private credit is a completely different story."

Private credit refers to investment funds that provide direct loans to companies owned by private equity funds. According to FT, private credit has grown rapidly over the past decade as banks have scaled back corporate lending due to tighter financial regulations.

According to the Alternative Investment Management Association (AIMA), the private credit industry's assets are estimated to exceed 3.5 trillion dollars. In particular, private credit funds targeting high-net-worth individuals have become one of the fastest-growing segments in the asset management industry.

The world's largest alternative investment managers—including Blackstone, Apollo Global Management, KKR, and Ares Management—have expanded private credit funds aimed at wealthy individual investors, moving beyond their traditional focus on institutional clients.

Although liquidity is limited, the expectation of higher returns has led hundreds of billions of dollars to flow into "semi-liquid" private credit funds. Unlike traditional publicly offered funds such as mutual funds, private credit funds only allow investors to redeem a portion of their funds at set intervals.

CEO Griffin commented, "In the individual investor market, private credit has been viewed as a remarkable channel for asset gathering," but pointed out, "I question whether individual investors truly understand the nature of the investments they are making."

The Blue Owl Case: Concerns Raised About Potential Misselling

In fact, cracks have already begun to appear in the private credit industry. Blue Owl Capital, which had been proactive in attracting individual investors, restricted redemptions from two of its major funds, following billions of dollars in redemption requests and concerns about exposure to software companies vulnerable to artificial intelligence (AI) impacts.

According to FT's data, in the first quarter of 2025, high-net-worth individuals attempted to withdraw more than 20 billion dollars from private credit funds, but due to strict redemption rules, the actual amount allowed for withdrawal was only slightly more than half of that.

Previously, Jamie Dimon, CEO of JPMorgan Chase, also warned in a shareholder letter that financial institutions that have lent to highly leveraged companies could face greater losses than the market expects, due to weakened lending standards.

At a conference hosted by Norges Bank Investment Management (NBIM), CEO Dimon mentioned more than 1,000 private credit firms, noting that their fortunes could diverge significantly when the economic cycle shifts.

Some observers have raised concerns that private credit funds may not have provided sufficient product explanations during the process of attracting individual investors.

John Waldron, President of Goldman Sachs, recently stated at a Washington event, "There have been cases where it was not made clear enough that this product is, in fact, low in liquidity," adding, "Individual investors seem to expect greater liquidity than is actually available."

This content was produced with the assistance of AI translation services.