Trying to learn more about BCRED

hank

Blackstone’s BCRED is mentioned (page 1) in today’s FT. Blackstone just floated a big loan to finance this private equity offering. Ostensibly, the fund is for high net-worth individuals. But I’ve come across some websites that mention a $2500 minimum investment. Fido doesn’t even show it when I do a search. Since I know nothing about it you may safely assume I’m not planning to invest in it.

I do understand that private equity / securities constitute an area of investment not typically recommended for or available to retail investors. Would like to learn more about BCRED and am also curious to learn whether any retail mutual funds / ETFs venture into private debt or equity. A guess would be that some CEFs probably can and do offer exposure.

PS - I was thinking (incorrectly) of Blackrock when I first posted. However, the issue of private securities vs public is much in the news lately. Apollo’s CEO Mark Rowan has been pushing the concept on Bloomberg - claiming valuations are much more reasonable in the private markets than the public ones.

yogibearbull

BCRED is a nontraded credit fund by Blackstone/BX.

Some here may be more familiar with nontraded-real estate BREIT (Blackstone), SREIT (Starwood). They have been in the news for max redemptions for almost a year.

These nontraded/nonlisted funds can be bought through brokers, may have accreditation requirements, but have only optional redemption windows, typically, for up to 2% AUM/mo or 5% AUM/qtr. There is practically no secondary market, but someone was recently offering instant cash for BREIT at about 40% haircut.

Closest to them may be interval-funds.

rforno

If you're interested in them, maybe consider one of the ETFs or CEFs that hold BDCs. I'm sure at some point these things will be included in them.

As for me, i have no interest in those specific names, but am considering BIZD for exposure to the finance sector and play on interest rates over the next few years. (I still have a very hard time buying bank stocks.)

hank

Thanks @yogibearbull. Sounds like a treacherous area. Rowan’s (house view) argument is that for many investors “liquidity” is being oversold (and is costly). His “sell” is that most of us need perhaps 10% of our invested assets at any one time (ie in the next 3 years). Even to me that sounds like a difficult argument to make (and losing half your money doesn’t sound like a great idea).

If folks are inclined, perhaps the scope here could be broadened to discuss valuations in both the public & private markets. Despite many nay-sayers at the start of ‘23, the public markets - especially the S&P - have plowed ahead. Always trying to learn more here - to go beyond simply looking at a fund’s 10 year track record and assuming it’s a relatively profitable / safe / predictable investment.

yogibearbull

One reason for large haircuts on must-sell-now is that these nontraded funds don't have many rules to follow. Some value holdings whenever they feel like, in a month or a quarter; the valuations are also up to their firms/boards. Mark-to-market idea is foreign to them.

For investors, liquidity may be of value not just when they "need" the money, but for asset reallocation purposes. That isn't possible with these nontraded funds. They are like Roach-Motels.

rforno

hank said:

Always trying to learn more here - to go beyond simply looking at a fund’s 10 year track record and assuming it’s a relatively profitable / safe / predictable investment.

Most of us MFO regulars certainly do that. But the average person probably doesn't, and probably only looks at the chart before making a decision -- heck, how many actually even look at a fund's holdings viz-a-viz their other holdings to see if they're overweighted anywhere in their accounts?

Speaking of which, remember those 'principal protected notes' sold to Joe/Jane Public going into the GFC? Folks only saw "won't loose money" and piled into those things, not reading the fine print in their prospectuses (not just the retail-grade marketing slicks) about when their 'profits' might kick in (or what probably would invalidate them) and especially counterparty risks. A $2500 initial investment into these eclectic 'private' funds smacks of that kind of target audience, imho ... but provides these firms a source of 'cheap' locked-up capital to play with. Caveat very emptor!!!!