, Columnist
Blackstone Sends Warning to Illiquid Debt Funds
Revolving-door policy for investors hurts returns and invites turmoil.
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Blackstone Group just sent an ominous message to many debt-fund managers: They are promising their clients too much.
Since the 2008 financial crisis, asset managers have pledged they could both invest in risky, infrequently traded assets while allowing clients to withdraw their money whenever they wanted. This was a supremely attractive feature for investors who had just been stung by a credit seizure that challenged people's faith in "safe" assets. But this structure doesn't work over the long term. It will either lead to lower returns, or, in a worst-case scenario, a complete breakdown.