🦔Lawsuits accuse private credit funds run by KKR, Ares and Blue Owl of keeping their loan values high to collect bigger fees, Semafor reports. Last week the SEC warned accountants to bring more rigor to how these funds value their loans. My Take Private credit means investment firms lending straight to companies, mostly midsize ones, with no bank in the middle. Those loans never trade on a public market, so the fund managers largely decide what they're worth, and their fees go up when that number goes up. One company named in the suits is a big janitorial firm whose stock has been written down to zero, while its main lender values different loans to it anywhere from about 10 cents on the dollar to nearly full price. Some borrowers can't pay interest in cash, so they pay with more IOUs instead, and the funds still charge fees on that interest. Blue Owl's tech lending fund got more than a third of its reported income that way last year. Wall Street now sells funds like these to regular investors, and the Fed is reportedly looking at the banks that lend to them. I expect more writedowns over the next year, and if I owned a private credit fund I'd want to know what it holds before those values catch up. Hedgie🤗