There's a scene in The Big Short where Michael Burry stares at the numbers, sees the entire market is wrong, and bets against it. Everyone laughs at him. Until it stops being funny.
Boaz Weinstein, founder of Saba Capital Management, is doing something similar right now — but with one crucial difference: he's not just betting against. He's buying other people's panic for pennies on the dollar.
The Alchemist Unmasked
In an exclusive interview with CNBC's Inside Alts, Weinstein didn't mince words: the problems in private credit are "compounding every quarter," and the root of the issue is what he called "financial alchemy — promising liquidity that doesn't exist."
Let me translate that from Wall Street-speak to plain English: massive asset managers created private credit funds sold to retail investors with the promise they could cash out whenever they wanted. But private credit, by nature, is illiquid. It's like selling movie tickets with a promise of instant refunds — works great as long as few people ask for their money back. When everyone rushes the counter at the same time? Well, shit hits the fan.
And that's exactly what happened.
Blue Owl and the Domino Effect
Saba Capital, alongside Cox Capital Management, launched an offer to buy 6.9% of shares in Blue Owl Capital Corp. II — a non-traded private credit fund — at a 34.9% discount. You read that right: nearly 35% off.
Why would anyone sell like that? Because the fund gated quarterly redemptions and had to sell $1.4 billion in direct loans trying to provide liquidity to investors. And it wasn't an isolated case. A flood of non-traded private credit funds got hit by redemption requests exceeding the quarterly 5% cap.
According to Jefferies analysts, private wealth flows dropped 19% in Q1 compared to Q4. And the expectation is that redemption rates in retail-facing credit products will keep climbing.
The dominoes are falling. And Weinstein is picking up the pieces off the floor.
The Two-Sided Play That Actually Makes Sense
This is where the story gets interesting — and where the financial circus starts complaining.
Some critics accuse Weinstein of trashing the private credit industry just to spook retail investors into selling their shares at a discount so he can scoop them up.
He hit back head-on: he said he doesn't believe a wave of defaults or fraud is coming in private credit. He doesn't even think people should redeem more. ("The redemptions have already arrived," he said.)
In fact, in recent weeks, Weinstein bought shares in the sector's biggest managers — Ares, Apollo, Blackstone. He even holds a bit of Blue Owl in his portfolio.
"We're long shares of these companies on the idea that, if this is being overblown, these are the guys that are going to be the winners at the end, when the dust settles," he said.
That's skin in the game, my friend. The guy is betting both sides of the table because he sees asymmetry: private credit is too pessimistic, public credit is too optimistic.
The Bet Against Public Credit
And here's the poisoned cherry on top: Weinstein is short public credit via credit default swaps and credit derivatives. His logic is brutally simple — if private credit funds gate redemptions, investors will need to sell liquid assets to raise cash. And that puts pressure on public markets.
"I think public credit is incredibly mispriced, and part of my short-term thesis is informed by the problems the private credit market is having," he stated.
What This Means for You
Weinstein is one of the most sophisticated players in the market. He's not some Instagram guru selling online courses. He manages billions and puts his own money where his mouth is.
The lesson here isn't "sell everything" or "buy private credit." The lesson runs deeper: be suspicious of any financial product that promises liquidity in illiquid assets. That's the definition of alchemy — turning lead into gold. It works until someone tests whether the gold is real.
When the tide goes out, you find out who's been swimming naked. And from the looks of it, there are a whole lot of people with no clothes on this beach.
The question that lingers: how many of your "safe and liquid" investments are actually liquid when everyone wants out at the same time?
