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How retail clients access private credit
- Non-traded BDCs — publicly registered but not exchange-listed; quarterly liquidity windows.
- Interval funds — registered closed-end funds with periodic repurchase offers (typically quarterly).
- Tender-offer funds — similar gating mechanism with discretionary tender offers.
- Private credit ETFs — newer wrappers offering daily liquidity over an underlying portfolio that doesn't have it.
The wrapper matters as much as the asset. Daily-liquid wrappers over illiquid loans create structural mismatches that can stress in market drawdowns.
What examiners care about
The SEC's concern is not private credit per se — it is whether the advisor documented the risks specific to the wrapper and the client. Three questions surface in examinations:
- Did the client understand the liquidity terms — gating, redemption windows, potential for proration?
- How is the position priced when the underlying is not actively traded?
- Does the position fit the client's risk tolerance, time horizon, and spending needs?
Common documentation gaps
- Reliance on fund marketing materials for the suitability conversation.
- No documented discussion of the redemption schedule and potential for gating.
- No re-suitability when the position size grew through fund returns or new contributions.
- Multiple private-credit positions across funds creating undocumented concentration.
The liquidity reality
Most retail private-credit vehicles offer 5% per quarter redemption windows that can be reduced or denied if the redemption queue exceeds capacity. Clients who treat these as "moderately liquid" because the fund has periodic windows often discover the gating in the moment they want to exit. Documentation of that conversation is the difference between a defensible recommendation and an examination finding.
How StratiFi thinks about private credit
Private credit can be a legitimate diversifier. The discipline that holds up under examination is treating each position as having three risks — credit, liquidity, valuation — and documenting how each was discussed with the client at the time of the recommendation, then refreshed as the position grew or markets shifted.
Frequently asked questions
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Is private credit liquid?
Generally no. Most retail private-credit vehicles offer periodic redemption windows (typically 5% per quarter) that can be gated if the redemption queue exceeds capacity. Daily-liquid ETF wrappers are an exception with their own structural concerns. -
How is private credit priced?
Funds use fair-value methodologies that combine model inputs, comparable transactions, and judgment. The pricing is less responsive to market conditions than public credit, which can mask losses during stress periods. -
Does private credit belong in retiree portfolios?
It can, in measured allocations, but only with a documented suitability discussion that addresses liquidity gating, potential drawdown, and the client's spending horizon. The SEC has flagged retiree exposure as an examination focus.