DoubleLine Capital's Jeffrey Sherman delivered a blunt assessment of private credit in ETFs, declaring the combination 'absolutely not' viable. Speaking at the Exchange conference in Las Vegas, Sherman criticized hybrid structures that mix illiquid private assets with open-ended ETFs, which allow instant redemptions. His comments come amid widespread redemption requests from retail investors in semi-liquid private credit funds, with some firms gating withdrawals entirely.

Sherman argued that the mismatch between retail liquidity expectations and private asset lockups creates fundamental problems. 'The beauty of private is keeping it locked up and away from you,' he told Bloomberg News. While interval funds and BDCs are functioning as designed, the current redemption pressure suggests many investors misunderstood what they were buying. Asset managers who claim to be 'wrapper agnostic' are now facing the consequences of pushing private credit into retail-friendly formats.

The timing is notable as the $19 trillion ETF industry grapples with volatility across asset classes. Sherman's stance challenges the industry trend of packaging private credit in more accessible vehicles, especially as redemption pressures mount. His comments underscore the tension between investor demand for yield and the structural limitations of private assets, raising questions about whether the current wave of hybrid products can survive sustained redemption pressure.