Mar 30, 2026 · 50m · capital-allocators
Kieran Goodwin – Private Credit Concerns (EP.494)
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In this episode of Capital Allocators, host Ted Seides interviews credit market veteran Kieran Goodwin of Saba Capital to discuss his extensive trading career, the structural fragilities of retail private credit funds, and the systemic risks posed by liquidity mismatches and tech sector debt.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 24.8% of the talking time here. How this is scored →
Ted as informed peer 3.5 Guest teaching 4.6 Guest disagreement 0.8 Ted pushing back 0.4
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 28:44 Calling out blatant valuation mark disparities across BDCs
Kieran openly scoffs at managers who mark troubled second lien loans at 85 while peer funds mark the identical debt at 60, rejecting the industry's valuation integrity.
Hardest push from Ted ▶ 29:12 Pressing on whether loan mark variance creates systemic riskTed directly pushes back on Kieran's anecdotal valuation critiques by asking whether discrete marking discrepancies aggregate into a systemic problem across the asset class.
Biggest teaching moment ▶ 31:20 Explaining the retail mindset and dividend-cut trigger mechanismKieran educates Ted on the behavioral realities of retail wealth channels, demonstrating that advisory outflows are mechanically driven by base dividend cuts rather than credit fundamentals.
Ted holds their own ▶ 33:27 Dissecting default signals versus rate-driven dividend adjustmentsTed displays his sharp analytical grasp of credit structures by separating floating-rate dividend yield reductions from true underwriting deterioration and PIK modifications.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Early Career and Entry into Credit Derivatives | 3 | 3 | 0 | 0 | Ted prompts Kieran to recount his early path into finance and credit derivatives. Kieran shares his beginnings reading Liar's Poker and working across major Wall Street dealer desks in a relaxed, biographical exchange. | |
| Transition to the Buy Side and Growth at King Street | 3 | 4 | 0 | 0 | Ted asks about transitioning from sell-side prop trading to the buy side. Kieran explains the reality shock of crossing bid-ask spreads and developing long-term options and distressed positioning at King Street. | |
| Market Evolution, Synthetic Correlation, and Distressed Value | 4 | 5 | 1 | 0 | Ted inquires about navigating credit market structural shifts over several decades. Kieran draws direct parallels between 2005 correlation tranche blowups in autos/airlines and today's SaaS distress impacting CLO equity tranches. | |
| Resetting After King Street and Founding Panning Capital | 2 | 2 | 0 | 0 | Ted asks about Kieran's departure from King Street and founding Panning Capital. Kieran candidly details taking time off and the fundraising dynamics of launching a new fund with LP support. | |
| The Lifespan and Lessons from Panning Capital | 3 | 4 | 0 | 0 | Ted asks Kieran to unpack the trajectory and mistakes made during Panning Capital's six-year run. Kieran highlights underestimating the post-GFC low volatility regime and letting profitable trades drift into uncomfortable legal bets. | |
| Hiatus, Stand-Up Comedy, and Joining Saba Capital | 2 | 2 | 0 | 0 | Ted asks about Kieran's second hiatus and his re-entry into investing. Kieran humorously describes taking stand-up comedy classes before rejoining Boaz Weinstein at Saba Capital for proxy fights and credit consulting. | |
| The Rise of Private Credit and Fund Structure Mismatches | 4 | 6 | 1 | 1 | Ted asks Kieran to trace the evolution of private credit from post-GFC bank displacement to retail wealth products. Kieran highlights the acute asset-liability mismatch introduced by non-traded BDCs and interval funds offering quarterly liquidity on illiquid loans. | |
| Best Practices for Risk Management in Private Credit | 4 | 5 | 0 | 0 | Ted asks what best-practice risk management looks like for semi-liquid credit funds. Kieran outlines the necessity of maintaining larger liquid loan sleeves, reducing unfunded commitments, and providing transparent marks. | |
| Valuation Marks and Discrepancies Across Credit Portfolios | 4 | 6 | 2 | 1 | Ted probes on valuation marks and asks whether discrepancies across BDC portfolios represent systemic problems. Kieran calls out blatant marking disparities on identical second lien SaaS loans and emphasizes that credit markets hinge on fragile trust. | |
| Retail Investor Reflexivity and the Dynamics of Redemption Waves | 5 | 6 | 2 | 1 | Ted asks about redemption waves exceeding five percent caps and explores the tension between fundamental loan quality and investor reflexivity. Kieran explains that retail advisors systematically exit when floating-rate dividend cuts occur. | |
| Software Loan Vulnerabilities and AI-Driven Volatility | 5 | 6 | 2 | 1 | Ted frames the difference between floating rate dividend declines and underlying default cycles. Kieran argues that heavy capital misallocation in SaaS and AI disruptions will trigger inevitable defaults, which credit holders cannot absorb without equity-like upside. | |
| Structural Risks in Direct Lending and Managing Fund Redemptions | 4 | 6 | 1 | 1 | Ted asks how a GP should handle redemptions surpassing the standard quarterly threshold. Kieran contrasts Blackstone's institutional capacity to backstop B-Cred against standalone interval funds that must face balance sheet shrinkage. | |
| Saba Capital's Opportunistic Private Credit Strategy | 4 | 5 | 0 | 0 | Ted asks about Saba Capital's opportunistic strategy in private credit. Kieran explains Saba's public tender offer for Blue Owl OBDC-II shares at a discount to NAV and describes using LLMs to scrutinize BDC filings for mislabeled industry concentrations. | |
| The Bear Case: Systemic Feedback Loops and Contagion | 4 | 7 | 3 | 1 | Ted asks Kieran to paint the full bear case for private credit contagion. Kieran details a potential cascade involving SEC gating exemptions in interval funds, bank credit line pullbacks, and downstream pressure on annuity carriers. | |
| Private Equity Spillover and the Realities of Market Liquidity | 5 | 6 | 1 | 1 | Ted asks about spillover into private equity sponsor portfolios. Kieran explains the asymmetric risk profile of debt versus equity secondaries and warns that liquidity illusion disappears rapidly in a downturn. | |
| Strategic Partner Spotlight: Thema AI Private Deal Sourcing | 0 | 0 | 0 | 0 | Ted presents a strategic partner spotlight for Thema AI private deal sourcing. As a scripted sponsor read, host scores and combativeness are zero. |
Statements from this episode (22)
1997 Asian financial crisis marked the real beginning of credit derivatives
“That was the beginning of real credit derivatives with the Asian contagion of 97.”
SaaS stress is driving sharp CLO equity underperformance
“It reminds me today where you just had one or two sectors having a lot of stress like we have today and the SAS with respect to levered loans, and we're seeing it in CLO equity has way underperformed. The relative loan market, because all of the damage has bee…”
Investors must exit successful trades that drift outside their core expertise
“Even if it's not mission drift, you just have to get out of trades. There were a bunch of trades that we went into. They were in my wheelhouse, and then they did well, and they got out of my wheelhouse, and some of them were really bad reversals.”
Boaz Weinstein's hostile takeover bid for Sculptor Capital failed after six months
“We went through that process. I'd never been in a hostile takeover situation. The bidding group was super interesting people that he's friends with. That took six months, and we didn't win.”
Non-traded BDCs recreate the structural asset-liability mismatches of the past
“Maybe we do a non-traded BDC, which was now up to 2018. That's where I was like, well, this is the original asset liability mismatch that you tried to cure by doing a drawdown fund because You might have all the investors looking for the exit, even though it's…”
Non-traded BDCs exploded from zero to $350 billion in assets since 2018
“Zero to three hundred and fifty billion dollars in non-traded BDCs from 2018 to now. That's unprecedented.”
Unfunded loan commitments carry identical credit risk but yield lower returns
“Unfunded commitments, whether it's a delayed draw term loan or a revolver, no one wants those. There's like kind of a cost of doing business. That's why credit derivatives was started. Banks didn't want those on. Let's hedge them out. You're not getting paid a…”
Apollo's move to monthly portfolio marks is a win for credit transparency
“Apollo came out, we're going to mark every month. That's a good move.”
Public BDCs show massive valuation discrepancies on identical syndicated club loans
“There's some obvious ones where you see, let's just say public BDCs that own the same club deal, the same loan. One BDC versus another, or two or three versus a fourth BDC, there's a massive variance, in a second lien especially, where you're like, wait, the f…”
Certain private credit loans drop from par to zero in one quarter
“Then you have micro situations where loans are getting marked from hundred to zero in one quarter.”
80% software gross margins will not last indefinitely against aggressive competition
“If you think about economic, 80% gross margins, they're not going to last forever. Someone's going to try to figure out how to attack them.”
The software sector will experience a coming wave of debt defaults
“We're going to have a wave of defaults in the software space.”
Long credit positions are structurally short volatility due to capped upside
“If you're long credit, you're short volatility. You want things to chug along, Because you don't have upside. Yeah, growth is okay, but you more want stability.”
Lending against ARR without equity upside is venture lending without warrants
“You're doing venture lending without warrants.”
Blackstone's BCRED private credit vehicle faced 7.9% in redemption requests
“When Bcred had 7.9% of redemptions, they thought about, listen, we're gonna do everything we can to get everyone their money back.”
Saba Capital is tendering for Blue Owl's OBDC-II fund at a discount
“We are tendering for one of the Blue Owl funds, their Blue Owl OBDC-II, which we're going to see if there is any demand for liquidity at a discount to NAV.”
Private credit BDCs are mislabeling industry concentrations in their loan portfolios
“Literally putting in every loan into Claude or ChatGBT to figure out what do they think it is. There has been some mislabeling of concentrations.”
Interval funds must prove total illiquidity to secure SEC exemption for gating
“The bar to gate is really high. You literally need an SEC exemption, and that's not because prices are low. You have to show the SEC, I don't have any liquidity.”
Private credit returns depend entirely on fund-level leverage to attract investors
“One of the issues with private credit is all the returns are predicated at leverage at the fund level. You need fund level leverage to get anyone excited about it. If anyone came out with a unlevered BDC, it would be a yawn, especially after fees.”
JPMorgan Chase marked down valuations on some software loans
“JP Morgan marked down some software loans as far as their bank lender.”