In Newsclips, we look beyond the headlines to extract lessons that help our clients become better stewards of capital. We pair timely market developments with insights from respected researchers, thoughtful practitioners, and enduring financial thinkers to surface frameworks that matter. Our goal is simple: cut through the noise, focus on what is durable, and reinforce the habits that support disciplined, long-term decision-making.
WealthManagement.com – Private Credit’s Biggest BDCs Grappling With Investor Exodus
Business Development Companies (BDCs) that typically invest in middle-market companies via private corporate direct lending. Many BDC’s are experiencing meaningful investor withdrawals as concerns mount over private credit valuations. This concern is exacerbated by the lack of liquidity in some of these offerings. In private non-traded BDC’s quarterly tenders are subject to Board approval. Additionally, questions loom with much of the lending provided to software companies, whose business models are beginning to face intense scrutiny given the AI revolution. Today, per Preqin data, lending to software companies makes up roughly 27% of lending from 2023-2026. While reported net asset values (NAVs) have remained relatively stable for non-traded BDCs, market prices tell a different story for those BDCs that trade on exchanges, with shares trading at discounts that reflect growing skepticism. Further, the underlying sponsors’ stocks have come under increased pressure. Ares, Blue Owl, Blackstone and KKR are all down over 22% year-to-date through February 26, 2026.
Flatrock’s Take:
Kevin often repeats an old trading floor line among bond managers: “Liquidity is like air. You can’t taste it, you can’t smell it — but you know when it’s gone.” While most private corporate credit and direct lending interval funds, Blue Owl aside, appear to have met redemption requests in the fourth quarter, withdrawals did accelerate relative to the third quarter and could continue amid recent headlines.
Flatrock has historically avoided maintaining a dedicated allocation to private corporate credit direct lending funds. A key concern is incentives and price discovery. When a fund originates and holds its own loans, there is a natural incentive to smooth net asset values, by smoothing markets the reported volatility is much lower than actual volatility. Many investors mistake this for “low volatility” and overallocate to an illiquid asset class. Accordingly, true market pricing can become difficult to observe. In stressed environments, limited transparency can heighten investor anxiety – which may help explain why some investors seem to be selling first and asking questions later.
Verdad frames one of finance’s longest-running debates as a clash between two giants in finance: Warren Buffett’s case for concentration and Harry Markowitz’s case for diversification. The article examines historical data on simulated portfolios at various levels of concentration, ultimately concluding that while concentration can produce spectacular winners, diversification delivers more reliable long-term results. The math is clear: concentration magnifies both upside and downside, but over extended horizons, diversified portfolios have tended to produce superior outcomes in absolute and risk-adjusted returns.
Flatrock’s Take:
We love both the framing and the analysis in this piece. Buffett versus Markowitz sounds like an old-fashioned finance cage match — reminiscent of a 1980s WrestleMania main event! In the end, Verdad’s extended analysis lands on diversification as the more dependable approach.
The good news? You don’t actually have to pick a side. We like to say: let your priorities drive your investments, not the other way around. Aspirational priorities — the “next level” goals that could materially elevate one’s lifestyle — can be funded with aspirational investments, which may be more concentrated. Meanwhile, your current standard of living and core financial security can remain supported by diversified capital. This “swing for the fences” sleeve does not jeopardize today’s spending or stability. In our view, that’s a superior framework — aligning risk-taking with ambition, while protecting what already matters.
Morningstar – Bitcoin ETF Doubled in Value. Its Investors Made Only One-Fourth That
Morningstar highlights a familiar behavioral pattern in a new wrapper: although a Bitcoin ETF roughly doubled over the measured period, the average investor captured only about one-quarter of that return. The culprit was not fees or structure, but timing. Investors tended to buy after surges and sell during pullbacks, resulting in a significant performance gap between the fund’s total return and the dollar-weighted returns actually realized by shareholders.
Flatrock’s Take:We explored this dynamic in The Mirage of More, where we warned that chasing big returns and bold bets often undermines long-term success. The largest investor shortfalls frequently occur in the most volatile assets, and Bitcoin is exhibit A. With annualized volatility around 70% — nearly five times that of the S&P 500 — the magnitude of price swings almost invites poor timing decisions. When assets whipsaw that dramatically, behavior becomes the hidden cost. It is not surprising that a large return gap emerged. Volatility is not just a statistic — it is a behavioral stress test, and few investors pass it consistently.
BlackRock: Advisors to HNW Clients Should Offer More Tax Services
BlackRock is urging advisors serving high-net-worth clients to deepen their tax capabilities, arguing that tax management is becoming a key differentiator in wealth advisory. As market returns normalize and fees compress, after-tax outcomes are increasingly central to client value. The article highlights growing demand for integrated tax planning, asset location strategies, and proactive tax management rather than traditional, performance-focused portfolio construction alone.
Flatrock’s Take:
We addressed this directly in Is Minimizing Taxes More Important Than Maximizing Performance?. TLDR: taxes matter just as much as performance and are substantially more predictable.
We experienced this firsthand when looking for a wealth manager for our own families. Very few wealth firms meaningfully integrate taxes into portfolio construction. Why? Most traditional finance models, including CAPM and mean-variance optimization, largely ignore taxes. Additionally, the industry has drifted toward institutional-style investing, with everyone aspiring to look like Yale. But taxes are not front and center in those frameworks. They are boring. They are messy. And they are operationally inconvenient for practitioners.
Yet for high-net-worth families, taxes are often the single largest expense over a lifetime. Ignoring them in pursuit of theoretical pre-tax alpha is not sophistication – it is oversight. As we often say, predicting performance is hard. Minimizing taxes is practical. The latter is far more controllable – and far more impactful – over time.
Let us know if you would like to discuss any of these themes with us. Markets fluctuate, priorities change, we’re here to help.