Private Credit Shadow

Building the private-credit 'toll collector' portfolio from scratch with 8 names, split roughly 55% asset managers / 45% BDC lenders, and using each name's 1-3 month price momentum plus fresh news as a proxy for who the market thinks is deploying capital best. On the manager side, Blackstone gets the largest weight (16%) because it has the best 1-month momentum in the group and, per recent coverage, its more diversified, less credit-concentrated business model has made it the most resilient of the majors through the current private-credit redemption scare. Ares (15%) and TPG (14%) follow for their strong 3-month relative strength, while Apollo (10%) rounds out the managers - it has weaker recent momentum but has been credited with correctly anticipating credit stress in names like First Brands/Tricolor. We deliberately excluded Blue Owl and KKR: Blue Owl has the worst 6-month return in the universe and has been at the center of redemption freezes on its retail funds, and KKR's affiliated BDC (FS KKR) needed a shareholder-support package after a large NAV markdown, both signs the market is questioning their capital deployment right now. On the BDC side, Ares Capital (13%) and Golub Capital BDC (12%) are favored for capital preservation - they show the smallest 6-month drawdowns in the universe and, in GBDC's case, recent filings confirm still-strong credit quality with the large majority of the portfolio performing at or above expectations. Main Street Capital (10%) is included despite middling recent momentum because of its structural edge - internally managed with no incentive fees, growing NAV per share even as peers absorbed markdowns. Hercules Technology Growth Capital (10%) is added for its standout 1- and 3-month momentum, the strongest of any BDC, suggesting the market currently favors its deployment even though tech-lending carries some AI-disruption risk. We avoided FSK, OBDC, BXSL, and TSLX because their momentum is weak and, in FSK and OBDC's cases, they are directly tied to the two BDC platforms (FS KKR and Blue Owl) currently under the most acute redemption and NAV stress. The portfolio is fully invested with no single position above 16%, comfortably under the 20% cap.

As of the 2026-07-07 close, I’m building an 8-name, long-only basket that owns the toll collectors (large alternative managers) and the private-credit lenders (BDCs). I’m tilting slightly toward BDCs (54%) over managers (46%) because the BDC cohort has been more resilient on 6-month performance (e.g., ARCC -4.8%, GBDC -1.0%) than the managers’ deeper drawdowns, while still showing acceptable 1–3 month relative strength. Among managers, I favor ARES and APO (strong 3-month momentum: +19.3% and +12.9%) with BX and TPG as steady contributors (positive or solid 1–3 month trends). Among BDCs, I overweight HTGC (best short-term momentum: +2.7% 1m, +8.1% 3m) and ARCC for scale and stability, and add GBDC and BXSL for consistent, lower-volatility execution. This creates a balanced exposure to fundraising/fee streams and high-yield loan deployment, uses recent relative strength to emphasize names deploying capital best, holds 6–8 names as required, keeps each position ≤20%, and uses no leverage. Orders will fill at today’s close (2026-07-08).

The strategy captures the secular shift from bank lending to private credit by owning the 'toll collectors' of the space. To follow the mandate, we establish an equally weighted, 8-position portfolio holding 4 alternative asset managers and 4 Business Development Companies (BDCs) at 12.5% each. On the asset manager side, we selected Ares (ARES), Blackstone (BX), TPG (TPG), and Apollo (APO), favoring them for their dominant market presence and superior 3-month relative strength as they aggressively gather fee-generating assets. We balance this against 4 higher-yielding direct lenders—Hercules Capital (HTGC), Ares Capital (ARCC), Golub Capital (GBDC), and Blue Owl Capital Corp (OBDC)—which boast the strongest near-term momentum and stability among the BDC group based on their 1-month and 3-month price action. This balanced 50/50 split ensures we are positioned in the top-tier fundraisers while simultaneously capturing the high yields of entities that the market indicates are deploying capital most effectively.

Starting with 100% cash, building a balanced 8-name portfolio of 4 large alternative asset managers (BX, ARES, APO, CG) and 4 BDCs (HTGC, MAIN, ARCC, BXSL) per the private-credit strategy. Allocation favors recent relative strength (1-month returns) among names with positive momentum—HTGC (+2.7%), BX (+2.0%), MAIN (+1.9%)—while capping any position at 15% to stay under the 20% limit and maintain diversification. This strikes an even split between fund-raisers and capital-deployers, fully invests the portfolio with zero cash, and uses stronger recent performers to tilt toward those the market views as most effective at deploying capital.