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Exclusive: Games Private Credit Plays

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Category : research
Published Date : 08/11/2025
Is Blackstone artificially boosting returns?

In a story last week, Bloomberg reported that the largest position in Blackstone’s publicly traded private credit vehicle (BXSL) suffered a material price drop. This wasn’t a big story in and of itself (I expect more of this) but it did trigger my curiosity. BXSL as a publicly traded Business Development Company (BDC) is required to disclose their holdings which I was able to download in order to review market valuations.

I focused on investments greater than 2% of net assets (20 line items). I found something odd in my review - 12 of the 20 were valued precisely at par or 100. For a daily trading vehicle this seemed unusual. A serious valuation process would look at comparable company fundamentals, prices and spreads. A serious valuation process wouldn’t land on a price of exactly par for a large part of the portfolio. I could possibly understand if these were recent investments purchased at par. That wasn’t the case. In fact, all 12 were purchased at a discount.

Implications for return calculations
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Some of you may have anticipated my next question. If these positions were purchased at a discount and immediately marked at par, doesn’t that inflate reported returns? I found exactly that. For the sake of brevity I will call this the "par lift gambit". I calculated the weighted average annualized change in returns from the par lift gambit and found that it juiced returns by slightly over 1%. Given that the average spread to SOFR for these mostly floating rate assets is 5%, the par lift gambit materially adds to Blackstone’s claimed outperformance.

Looking beyond the sample at their overall portfolio tells a similar story. My sample of 12 had a relative returns lift of 1.16% vs 1.12% for the overall portfolio (200 out of 600-line items were priced at par). This reminds me of the recent stories of secondary private equity investors buying positions at a discount and immediately marking to NAV. Shooting fish in a barrel.

And it goes without saying the par lift gambit is just an obvious case of: buyer beware of rose-colored returns. This is one of many ways returns can be stage managed. And though this post is focused on the par lift gambit, it goes to the heart of the larger issues facing the private asset space – unreliable marks, produce unreliable returns and artificially low volatility.

Finally, I note that about 20% of the BXSL portfolio has Payment in Kind (or PIK) features. The amount of the PIKable interest is more than 55% of the SOFR margin in most cases. I believe this is in line with private credit overall but it does add an element of non-cash returns that, like the par lift gambit, can flatter the performance of private credit. 

I sometimes feel like the financial journalist equivalent of Don Quixote on the plains of La Mancha. At least he had Sancho. 

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Exclusive: Games Private Credit Plays