Citi continues to view private credit and private equity as long-term portfolio holdings, wealth management chief Andy Sieg said, as elevated redemption requests at some non-traded business development companies (BDCs) raise questions about investors’ access to cash. Shares of publicly traded BDCs are also changing hands below the reported value of their underlying assets.
Sieg stresses long-term horizons and manager due diligence
Speaking on CNBC’s “Halftime Report,” Sieg said private credit and private equity should be treated as long-term allocations, not short-term trades. He said Citi clients may have investment horizons of 10 to 30 years, making thorough due diligence on each fund manager essential. Clients, he added, have been satisfied with past returns.
Citi Wealth Management recently recorded a record $38 billion in net investment asset inflows. Sieg’s comments indicate that Citi continues to recommend the asset class to clients despite redemption pressure and valuation differences in private credit markets. But the terms under which funds offer liquidity do not necessarily match the long maturities of their loan assets. When pressure rises, investors may be unable to redeem their full holdings at once.
Redemption requests exceed common BDC limits
Non-traded BDCs hold longer-term loan assets but typically offer periodic redemption windows. Some commonly set quarterly redemption limits at 5% of net assets. If requests exceed a fund’s limit, investors may receive only part of the amount requested, depending on the fund’s terms.
Preliminary data show that investors in 11 of the 14 largest non-traded BDCs requested redemptions averaging 13.0% in the third quarter. That was down from 13.9% in the second quarter but remained well above the common 5% quarterly limit. Available information does not specify how much of the requests each fund met or how much investors ultimately received, so request rates should not be treated as actual outflows.
Public BDC shares trade at a discount to reported values
Valuation Research data show that many publicly traded BDCs are trading at prices 10% to 20% below the reported value of their holdings. The gap highlights a difference between market prices and funds’ reported asset valuations, keeping the pricing and liquidity of private credit products in focus.
The discount on listed BDCs and redemption requests at non-traded funds are distinct measures: the former reflects the stock market’s pricing of those companies, while the latter records investors’ requests to withdraw money. Citi continues to emphasize long-term investing and manager selection. The third-quarter redemption figures and discounts on listed BDCs underscore investors’ interest in fund redemption terms, valuation methods and the liquidity actually available.