Capital Allocators Podcast – Episode 494

Guest: Kieran Goodwin, Partner at Saba Capital
Host: Ted Seides
Title: Private Credit Concerns
Date: March 30, 2026

Overview

This episode features Kieran Goodwin, a veteran credit investor and partner at Saba Capital, in a wide-ranging conversation with Ted Seides. They journey through Kieran’s decades-long career on Wall Street and the buy-side, focusing in-depth on the present and future of private credit markets. Central themes include the risks stemming from asset-liability mismatches, liquidity and redemption stress in private credit vehicles, risk management practices, structural vulnerabilities, and how both allocators and managers should respond to evolving challenges.

Key Discussion Points & Insights

1. Kieran's Career Path and Foundations

• Early Inspiration: Sparked by reading Liar’s Poker at Duke.
  • “I read it in one night... I liked math. I liked puzzles. I liked risk in a sense… this is something that fits me.” (05:10, Goodwin)
• Street Experience: Started at Smith Barney, cycled through Citi, Salomon Brothers, Merrill, and moved from sell-side to buy-side at King Street, then founded Panning Capital, and now at Saba.
• Observations on Industry Culture: Banks were highly differentiated culturally in the 90s.
  • “Smith Barney, for example, was Italian and Irish Catholic. Morgan Stanley was more WASPy... Merrill was like mother Merrill.” (06:28, Goodwin)
• Transition to Buy Side:
  • “When you go to the buy side… you have to be much more intentional. You have to come into the day with a plan.” (08:03, Goodwin)

2. Learning Distressed & Derivative Investing

• King Street Evolution: Merged credit and derivatives expertise with distressed value investing during volatile cycles (‘05 minicycle, GFC).
• Navigating Uncertainty:
  • “We embraced the volatility and probably did our best during times of volatility... When markets are calm, I’m not that good.” (10:06, Goodwin)

3. Mistakes, Lessons, and Career Pivots

• After King Street: Took a break, flirted with consulting, education, and even farming, before co-founding Panning Capital.
• Start-Up Lessons:
  • “Even with [strong LP support], you do 100 meetings, you get 10 investors. It’s hard. Starting a hedge fund is difficult.” (14:32, Goodwin)
• Panning Capital: Rapid AUM growth but challenged by “low volume regime” and drifting from core competencies.
• Manager Drift:
  • “Every manager at some level gets away from what they’re good at... You stretch on what your comfort level was.” (16:53, Goodwin)
• Second Pause and Revival: Post-Panning, focused on family, networking (“I would literally meet with anybody for coffee”) (17:51), tried stand-up comedy, then re-engaged with Boaz Weinstein at Saba.

4. Saba Capital and New Investment Frontiers

• Dual Focus:
  • Quant Credit Trading: Led setup of Saba LT, an electronic/systems-driven corporate bond fund.
  • Private Credit Risks:
    • “Something’s going to happen in private credit. I have no idea... nothing against private credit, but it's grown so fast. There’s going to be some hiccup...” (22:04, Goodwin)

5. Underlying Risks in Private Credit

(a) Evolution Post-GFC

• Banks vs. Private Vehicles:
  • “Banks aren't necessarily the best vehicle to make loans... deposit flight risk... banks, we don't want you lending to six-time levered companies.”
  • Non-traded BDCs and interval funds ballooned from zero to $350B+ since 2018, bringing new liquidity mismatches.

(b) Structures and Mismatches

• Drawdown Funds: Best match on asset-liability, but unpopular with retail due to complexity and illiquidity.
• Non-Traded BDCs/Interval Funds: Created more accessible, liquid-seeming structures but introduce asset-liability imbalance.
• Risk Management Gaps:
  • “What happens if we suck for a while? Then what? No one really wants to talk about that.” (24:54, Goodwin)
  • “Good risk management would be a bigger liquidity sleeve... minimize unfunded commitments... being transparent on what’s in the portfolio.” (26:56, Goodwin)

(c) Concerns over Marks

• Marking Variability:
  • “There's a massive variance in a second lien… one [firm] marking [a loan] at 60 and then a fourth one marking 85. Come on, you can do better than that.” (29:15, Goodwin)
• Systemic Ramifications:
  • “If the best marker’s NAV is ‘right’… the worst marker might be 4-6% higher.” (30:16, Goodwin)

(d) Liquidity and Reflexivity

• Retail income product mindset creates fickle demand:
  • “You cut my dividend, I’m out... That's how I go. Understanding that mindset is important in understanding reflexivity.” (31:35, Goodwin)
• Redemption feedback loops: dividend cuts or NAV doubts can drive waves of outflows, stressing liquidity and potentially forcing sales at discounts.

(e) Underwriting and Defaults

• Growing sectoral exposures (e.g., tech/SaaS) increase correlated risk.
  • “If you’re talking about credit, you take any zeros, it’s tough… or serious impairments.” (34:45, Goodwin)

(f) Leverage and Capital Structure Innovation

• Market chased innovation (e.g., ARR loans)—now faces regret:
  • “No one would have done that... you’re lending to a company with negative EBITDA… I don’t think ARR loans are good risk reward.” (38:02, Goodwin)

6. Opportunities and Saba’s Positioning

• Secondary/Discounted Liquidity:

  • Saba tendering for Blue Owl’s non-traded BDC at a discount: exploring whether a market exists for liquidity-starved holders. (40:49, Goodwin)
  • “If we do become a shareholder, we want to be constructive. We hope for transparency not only for us but for all shareholders in every fund.” (41:35, Goodwin)

• Due Diligence Focus:

  • “We’re going through the filings line by line… also not taking at face value what the industry concentration are… There has been some mislabeling of concentrations.” (42:19, Goodwin)

7. Bear Case and Systemic Risk Scenario

(Timestamp 43:28–46:03)

• Feedback Loop Risk:
  • “You get redemptions, you get some real defaults, you get forced selling of private credit… interval funds, you just run out of what’s liquid and the bar to gate is really high… That goes on a feedback loop of where’s the actual bid for private credit? It’s hard to say.” (43:28, Goodwin)
• Leverage Is Key: Returns have depended on asset-level and particularly fund-level leverage. If unlevered, these vehicles are unexciting yield-wise and vulnerable to stress.
• Risk to Insurance/Annuity Providers:
  • “Lastly, the worst, worst case… would be that there is lack of confidence in some of the annuity providers that have loaded up mostly on triple B rated private credit… Not a high probability, but that’s where it gets bad.” (46:03, Goodwin)

8. Liquidity and Behavioral Risk

• What Most Investors Miss:
  • “Liquidity. I understand private markets and I have investments in funds. There’s some advantage to being an LP and not being tempted to trade… But when you need liquidity or you get liquidity taken from you, that’s where traders come in.” (47:45, Goodwin)
• “Everybody has a plan until you get punched in the face like Mike Tyson. That’s liquidity.” (48:45, Goodwin)

9. End Notes & Reflections

Personal Motivations

• Solving the Puzzle:
  • “I still like the puzzle… the puzzle of the market, what’s going to happen and how are problems going to get solved is still super interesting.” (48:50, Goodwin)

Influences and Life Lessons

• Favorites: Playing basketball (49:43)
• Biggest Professional Influences: Coaches Tony Casamassa and Reggie Weiss - “Defense wins championships, which is probably the best advice with respect to investing. Protect your downside.” (49:59, Goodwin)
• Main lesson:
  • “Never lose your cool...I probably got upset more than the average person... there's really no reason to.” (50:30, Goodwin)

Notable Quotes & Memorable Moments

• Identifying Structural Danger:
  • “I’ve looked throughout my career for asset-liability mismatches, and I truly believe that asset-liability mismatches cause liquidity crunches, and liquidity crunches can cause credit crunches.” (00:00, Goodwin)
• On Transparency & Trust:
  • “The better that you inform your investors about your process and the investments… the more comfortable they get, the less they’re going to rush to the door.” (27:48, Goodwin)
• On Cyclicality of Credit Markets:
  • “Credit is correlated when it gets stressed… when you lose belief, it happens really quickly. Trust is the biggest thing.” (30:16, Goodwin)
• Bear Case Summary:
  • “Prices going down… causes more redemption, less interest… where is the clearing level? You don’t want to test that bid.” (43:28, Goodwin)
• Career Perspective:
  • “Every manager gets away from what they're good at... Sometimes that makes you uncomfortable and gives you bad risk positions.” (16:53, Goodwin)

Timeline of Major Segments

| Time | Segment & Topic | |-----------|------------------------| | 00:00 | Asset-liability mismatch roots of credit stress | | 05:10–12:52 | Kieran’s background, sell-side, derivatives, buy-side transition | | 12:59–18:32 | King Street, panning capital, career breaks, lessons learned | | 20:39–23:02 | Saba Capital - innovation in bond trading, private credit risk thoughts | | 23:10–27:48 | Structure and risks in private credit vehicles | | 28:58–34:18 | Marking loans, risk management, redemption cycles, reflexivity | | 34:18–38:49 | Underwriting, default cycles, sectoral risks, leverage innovation | | 40:34–42:09 | Saba’s investment approach to distressed/liquidity events in private credit | | 43:28–46:03 | Bear case scenario for private credit ecosystem | | 47:45–50:49 | Liquidity, personal reflections, key life and investment lessons |

Conclusion

Kieran Goodwin provides an incisive, experience-driven critique and explainer of today’s private credit market risks—underscored by the hazards of mismatched structures, illusory marks, lack of transparency, sector overconcentration, and retail reflexivity in times of stress. His perspective weaves together historical lessons and actionable warning signs for both allocators and asset managers. The episode is highly recommended listening for anyone navigating private credit or thinking about market structure as a source of systemic challenge or opportunity.