Dan Rasmussen

Very excited to announce that my new book The Humble Investor is available for pre-order! See below for links to bookstores...

Over the past decade, the number of private equity funds has doubled while hedge funds stayed flat, causing concerns about deeper scrutiny of performance. Hedge fund allocators face increased pressure from superior market conditions. okt.to/uxJqhm

Valuation spreads (how cheaply value stocks trade relative to growth stocks) measured as the Price/Book ratio of value stocks divided by growth stocks in the US. "On average, US value stocks have traded at a 78% discount (i.e., 22 cents on the dollar) relative to growth stocks over the full five-decade horizon. Yet with the rise of Big Tech in the 2010s, this valuation spread has now widened to historically extreme levels, with value stocks trading at 10 cents on the dollar relative to growth stocks today. This discount is so extreme that even if today’s relative valuation of cheap stocks were to double going forward, we would only be returning to the long-term average valuation spread in the US. ... US valuation spreads today remain as wide as they were at the end of 2020, when value proceeded to outperform growth by 7.2% annualized over five years. Therefore, we believe it’s reasonable for today’s value investors to assume a similar level of outperformance over the next five years. There is also reason to hope that value outperformance over the next five years could be even greater than 7.2% per year because the value premium peaked at 9–15% annualized during previous clusters of positive value premiums." @verdadcap

Foreign value stocks are cheap but nobody owns any, which is probably why they are cheap, which is probably why nobody owns any. mfs.com/en-gb/institut… via @followMFS

Death of the value premium?

Do you think people who work in PE understand the enormous trust that has been placed in them - and the consequences to people’s lives when they get it wrong? wweek.com/news/state/202…

The value trade has already started...did you notice? via @verdadcap

$CCLFX. $32.5 billion. The largest interval fund in America. In 2021, ZERO borrowers were paying interest in IOUs. By September 2025: 188. And they thought: no losses, no redemptions. Read this. Cliffwater tells investors: "96% first-lien senior secured." "10% distribution yield." "Minimal losses." I parsed every position in their N-CSR filings on SEC EDGAR. All of them. I cross-referenced borrower names across every semi-annual filing. At least 53 borrowers were cash-pay in earlier filings. They used to pay cash interest. Then they couldn't. The loan was amended to PIK to avoid a technical default. Amend and extend. Cliffwater marks most at par. $1.24 billion. Five names that tell you everything: 1. WEALTH ENHANCEMENT GROUP — manages $136B in client assets. Can't service interest on its own subordinated debt. Holds a $23M tranche at 15% PIK — zero cash on that tranche. CW blended mark: 82c. My mark: 42c. The wealth managers can't manage their own leverage. 2. APEX SERVICE PARTNERS — HVAC rollup, 200+ companies, 43 states. Was cash-pay 2021-2024. Now holds 14.25% PIK sub-debt tranches paying zero cash. CW: 90c. My mark: 39c. Your AC repairman's parent company is paying its subordinated lenders in IOUs. 3. CPF DENTAL — dental chain. SOFR + 9.25% plus a 4.25% PIK component. All-in rate: ~18%. Maturity: December 31, 2025. The loan was due three months after the filing date. CW marked it at 99.7 cents. My mark: 64c. 4. PPV INTERMEDIATE HOLDINGS — healthcare. The name is the evidence: "Intermediate Holdings" = structural subordination. Sub debt. 13.75% PIK tranche, zero cash. CW: 97c. My mark: 37c. Behind SBA loans, revolvers, equipment lenders, tax liens, pension obligations, and every operating company creditor. Sixty cents of overstatement on a tranche paying nothing. 5. iCIMS — HR tech/SaaS. Was cash-pay from Mar 2022 through Sep 2024 in every filing. Now 10.07% PIK. The software company can't pay its interest bill. CW: 96c. My mark: 84c. Generous. Very generous. Even with a modest haircut, that's a confirmed credit event they won't recognize. The playbook: Borrower can't pay (SOFR went 0% to 5.3%) --> Amend to PIK (no default recorded) --> Extend maturity --> Mark at par (97% Level 3, no market price, Cliffwater sets its own marks) --> Book PIK as income ($57M of PIK interest in six months ended Sep 2025 alone) --> Collect fees Why they do it — the incentive: Cliffwater charges a 1% annual management fee on net assets. At $32.5B, that's $325 million a year. Every dollar of markdown reduces the fee base. Permanently. The incentive to not mark down is $325M/year. And here's the fund-of-fund layer they don't talk much about: six of their top ten holdings are CLOs, BDCs, and fund vehicles that charge their own fees underneath. Silver Point CLO ($1.4B), Barings Private Credit Corp ($919M), BlackRock Shasta CLO ($600M), Golub Capital, Blue Owl, AGTB. Your grandmother is paying Cliffwater 1% to invest in other funds that charge another 1-2%. Fees on fees on fees. On assets marked by the people collecting the fees. Cliffwater reports a non-accrual rate of 0.42%. I identified at least 53 borrowers that converted from cash-pay to PIK — borrowers that stopped paying cash interest. That is not 0.42%. That is systematic restructuring to avoid classification. Amend the loan before it hits non-accrual, and the number stays low. "First-lien senior secured" — on hundreds of holdco/intermediate/bidco positions, the collateral is equity of the subsidiary. Not the factory. Not the receivables. Not the cash. In liquidation: IRS eats first. Pensions eat. SBA eats. Revolvers eat. Equipment lenders eat. Employee claims eat. MCAs eat. Trade creditors eat. Then maybe the holdco "first lien" gets the scraps. They call that 96% senior secured. 97% of this fund is Level 3 — no observable market price. Cliffwater determines the value. Cliffwater collects the fees. Cliffwater reports the yield. And investors see 10% distributions and think it's safe. Remember that they went after unsophisticated investors. Retirement accounts. Your grandmother's financial advisor put her in this. First out gets the most out due to Cliffwater's bogus marks. Redemption requests just hit 14% in Q1 2026. The fund caps quarterly repurchases at 7%. This is the beginning. Every data point from their own N-CSR filings on EDGAR. CIK 1735964. Verifiable.

@bankingslut Yes the idea is to use the historical data to predict what the future might hold…

@verdadcap It’s 4% today you dunce. Guy who gets his data from 2004 and tries to look smart^ fitchratings.com/research/corpo…

Private credit is low single-B loan. Over long term according to data from Moodys default rate should be ~24%... That said recovery rate historically was high, but not sure that's going to be true of the software ARR loans.

The software maturity wall isn't a secret. Everyone has this chart. $38B in 2028. Mostly B and below. These aren't getting refinanced at par. They're getting extended. The only question is whether the A&E is consensual or coercive. And if the last two years of LMEs taught us anything, bet on coercive.

Big Show Today Staying Calm, Cool, and Collected @verdadcap @StockSavvyShay  @EvercoreISI @TheLunaRob @RodDMartin Making Money with Charles Payne Fox Biz 2 PM Please Tune In

I'll be talking to @cvpayne today at 235 about issues in the private credit market. And pitching some US energy stocks!

This has only happened twice in the last 25 years Private Equity (dark blue) is trailing the S&P 500 (light blue) on a 10 year rolling time-weighted return PE has consistently outperformed public equities, even in deep recessions (GFC) The recent run up in public tech stocks and PE performance challenges have allowed the S&P 500 to catch up and now outperform on a 10-year rolling TWR basis

Who could have predicted such an outcome?

Who are the best follows on the South Korean public equity market?

@Will_Schryver there's a lot of tech exposure in the other sectors too, particularly healthcare

Investors don’t appreciate how exposed private and public markets are to tech companies Private Equity buyout has 26% of its equity investments in technology Private Credit is at 16% exposure across all credit Everyone talks about the Mag 7 concentration in the S&P 500 (~35% tech) but few appreciate the exposure to tech in the private markets

For Dan Rasmussen, "capital has flowed away from an industry that has been forced to prove alpha under relentless scrutiny [hedge funds] and toward one that has largely avoided it [private equity]." institutionalinvestor.com/article/alloca…

Private credit doesn't have a default problem. It has a trust problem. And trust problems are worse. If you're at JPM this week, you already know. junkbondinvestor.com/p/credit-weekl…

The math of private markets is pretty straightforward. Trillions of marketing-hyped dollars chase a limited supply of superior private companies (equity), meaning less superior companies will make the cut. As a result, returns will drop or turn negative. Trillions of marketing-hyped dollars must be invested in private debt, meaning covenants and other protections for investors will be lifted. As a result, default risk increases. Slow valuation and mark-to-market mechanics will artificially lower volatility and correlation statistics. As a result, investors who are sensitive to slick marketing stories and less sensitive to risks to their clients will continue to pile in. So-called professional investors, such as endowments, family offices, insurers, and pension funds, invest massive amounts of (YOUR) money in illiquid, opaque, and statistically manipulated assets. Feel free to ask these investors some serious questions.