Activist Hedge Funds and Gadflies Target Private Credit with Deep-Discount Tender Offers

Activist Hedge Funds and Gadflies Target Private Credit with Deep-Discount Tender Offers

The liquidity freeze across retail-facing, non-traded Business Development Companies (BDCs) has attracted aggressive activist hedge funds and specialized asset managers seeking to exploit the massive gap between reported Net Asset Values (NAVs) and the price of immediate liquidity. As redemption requests exceed the standard 5% quarterly caps, investors wanting to exit are increasingly forced to accept steep discounts in the secondary market.¹

Cox Capital's Deep-Discount Tender Offers

In mid-July 2026, specialized money manager Cox Capital Partners launched a series of hostile tender offers targeting retail investors stuck in non-traded BDCs managed by Apollo Global Management, Ares Capital, and BlackRock's HPS Investment Partners.

• The Discounts: Cox offered to purchase shares at discounts ranging from 15% to 30% of their May-end reported NAVs:
  • Apollo Fund Investors: Offered 70 cents on the dollar (a 30% discount).
  • HPS Investors: Offered 75 cents on the dollar (a 25% discount).
  • Ares Holders: Offered 85 cents on the dollar (a 15% discount).
• The Arbitrage: While the combined size of Cox’s offers is small (approximately $31 million), the pricing reflects a harsh reality: listed BDCs trade at an average of 75 cents on the dollar on public markets. This public-private valuation mismatch means that identical private credit loans are carrying vastly different marks depending on whether they are held in a public or private vehicle.

Rising Redemption Pressure

These discount offers are thriving because retail redemption requests remain at record highs, leaving investors prorated and queued up for quarters.

• According to Fitch Ratings (July 2026), redemption requests rose at 10 of the 16 non-traded BDCs it tracks in Q2 2026, reaching an average of 10.3% of shares outstanding (up from 9.7% in Q1).
• Because these vehicles limit quarterly repurchases to 5% of NAV, the secondary market has become the only viable option for investors seeking a rapid exit, allowing "private credit gadflies" like Cox Capital to step in and purchase assets at distressed prices.

This trend highlights a structural shift in the private credit ecosystem where secondary-market discount pricing is starting to impose a market-driven "reality check" on the amortized, held-to-maturity valuations reported by major managers.