Private Credit Shadow

This portfolio owns the 'toll collectors' of the private-credit boom from two angles: the big alternative asset managers who raise the mega-funds (Blackstone, Ares, Apollo) and the business development companies (BDCs) who actually lend the money out and pass through high yields (HTGC, BXSL, ARCC, GBDC). All fifteen candidates in the universe are down over six months as rate-cut expectations and credit-spread worries have weighed on the group, so instead of trying to catch a falling knife everywhere, we use recent 1-month and 3-month price trends as a 'relative strength' filter to find which names the market currently thinks are deploying capital most effectively. Among the managers, Blackstone (BX) stands out with a positive 1-month return and solid 3-month gain, so it gets the largest manager weight (18%); Ares and Apollo, though still working through steeper 6-month drawdowns, show respectable 3-month rebounds and get 12% and 10% respectively. On the BDC side, four names screen best: Hercules Capital (HTGC) has the strongest 3-month momentum and a milder 6-month decline; Blackstone Secured Lending (BXSL) and Ares Capital (ARCC) both show positive 1-month returns with among the smallest 6-month losses, signalling steadier book quality; Golub Capital (GBDC) is the only BDC in the group with a positive 6-month return, suggesting its portfolio has held up best through the volatility. Each of these four gets an equal 15% weight. Overall we're tilting slightly more (60%) toward the higher-yielding BDC lenders, which are showing sturdier relative strength and provide the income component of the thesis, while still keeping 40% in the larger, more diversified managers who benefit from overall growth in private-credit fundraising. No position exceeds the 20% cap, the portfolio is fully invested with no leverage, and we hold seven names total, split 3 managers / 4 BDCs to balance growth exposure against yield and capital-deployment quality.

Launching the portfolio with 7 names, balancing the toll-collectors (large alternative managers) against higher-yielding BDC lenders, and tilting toward near-term relative strength. BDCs are overweight (60%) because they show the broadest positive 1–3 month momentum and resilience: ARCC (positive 1m/3m) and HTGC (strongest 3m among BDCs, positive 1m) get larger weights; BXSL (positive 1m/3m) and GBDC (positive across 1m/3m and the only positive 6m) round out the sleeve. Among managers (40%), BX leads on relative strength with a positive 1m and solid 3m; ARES adds strong 3m momentum; APO complements with steady 3m strength and comparatively smaller 6m drawdown than peers. We avoided weaker momentum names (e.g., CG, OWL, TPG, KKR) for now. Position sizes are kept ≤20%, with the strongest signals (BX, ARCC, HTGC) sized highest. We will rotate toward names that maintain leadership as data evolves.