A loan was worth 100 cents on the dollar on Friday. By Monday it was worth zero. Not down a little. Not under pressure. Zero. That's not a rumor. That's BlackRock.
If you have an annuity, I can't stop thinking about this. Because the people who sold you that annuity used markets just like this one to make it work.
Here's what worries me. Life insurance companies got bored of low yields. They needed to pay you your guaranteed return. So they went hunting. They found private credit — loans to companies that can't borrow from banks. The returns looked good. The risks looked manageable. They poured in billions.
The private credit market is now roughly two trillion dollars. That's not a niche corner of finance. That's a load-bearing wall.
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In February, Blue Owl blocked customers from pulling money out of one of its credit vehicles. Just blocked them. Apollo's BDC cut its payout and marked assets down. These aren't footnotes. These are early signals. Jamie Dimon put it plainly: when you find one cockroach, there are more.
I don't think most people realize how murky the pricing is. A Columbia finance professor said recently that "we're not entirely sure if the valuations are correct." That's a professor. Speaking carefully. What he means is: nobody knows. The loans sit on the books at whatever price the fund manager decides. Until they don't.
The real default rate in private credit is close to 5% once you count the quiet restructurings — the loans that got extended, renegotiated, or quietly reclassified. The headline number is under 2%. That gap is not an accounting quirk. That gap is what keeps fund managers employed.
I get it. The insurance company didn't do anything illegal. They chased yield because their customers — people like you — needed a return. The problem is the math only works if the assets hold their value. And right now, $265 billion in market cap has been wiped from the biggest private credit firms since their peak.
Washington is now pushing to open these same funds to 401(k) accounts. More ordinary savers. More exposure. Right now, at this moment, as the cracks appear.
The number I keep coming back to: $2 trillion. Priced by the people who own it. Checked by almost no one.
Jeffrey Gundlach called the new semi-liquid private credit ETFs "the ultimate sin." That's a strong phrase. He chose it on purpose.
I want to be clear about what I don't know. I don't know which insurers are most exposed. I don't know how many of these loans are quietly underwater right now. Nobody does. That's the point. The opacity is the product. It lets everyone pretend the number on the page is real — right up until it isn't.
What I do know is this. The same funds that just blocked people from getting their money back are the ones your insurance company used to juice returns on your annuity. That is not speculation. That is the business model.
Pull out your policy documents this week. Call your insurance agent. Ask one question: where are these assets held, and how are they priced? Watch how long it takes to get a straight answer.
The silence will tell you everything.
More on this tomorrow.
— Lauren
Editor, American Ledger
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