Billionaire investor Jeffrey Gundlach is warning that parts of today’s private credit market resemble investment packages that helped trigger the 2008 Global Financial Crisis.
In a series of new posts on X, the Bond King says one private credit fund appears to have packaged loans reminiscent of collateralized debt obligations (CDOs), which pooled together debt assets with varying risk profiles and interest levels and were sold to investors.
But Gundlach says the private credit fund took it a step further to imitate CDO-squared, which are designed to repackage risky, unrated or low-rated CDO tranches into new securities.
“A Private Credit Fund of Funds in 2026 seems to rather closely resemble a CDO-squared in early 2007.”
The billionaire appears to be saying that layered leverage and opacity are back, just using a different name.
He also points to one private credit firm that touted a fund’s stellar performance but is having trouble honoring withdrawals.
“‘Our fund’s performance remains strong,’ but we can’t meet the redemption requests. Wow.”
Gundlach warns that the situation is becoming more fragile as lenders begin tightening collateral requirements.
“JPMorgan said it will likely (my interpretation) be demanding more collateral for their loans to private credit. That means JPMorgan believes the collateral values are down from the loan origination date.”
Private credit has been grabbing headlines as of late after Blue Owl Capital announced it had banned withdrawals from one of its debt funds. And last week, asset management titan BlackRock said it would be limiting redemptions from a flagship debt fund after a surge in requests.
Last month, UBS warned that private credit defaults could soar to 15% in a risk-case scenario.
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