The Private Credit Illusion: Smooth Returns Are Just Hidden Volatility

Calm statements aren't the same as safe portfolios. In this episode, we sit down with Cliff Ambrose, a New York-based planner and author of the Yield to Maturity newsletter, to unpack the growing hype around private credit and private equity and the subtle ways classroom theory diverges from real-world practice. We take aim at the comforting language of "volatility smoothing," the promise of illiquidity premia, and the exclusivity pitch that often sells these products to younger investors.

We walk through a live example of a private vehicle marked near $24 that traded closer to $16 once it listed, illustrating how volatility isn't eliminated—just hidden until price discovery arrives. From there, we get specific: fee stacks that bill on NAV even when market prices fall, structures that embed leverage, and redemption terms that look fine in calm markets but fail when you most want flexibility.

We also cover the unglamorous but critical details—K-1s, delayed tax filings, and the real "return on hassle" that can eat into headline yields without warning. Rather than declare privates good or bad, we draw a line between investors who can underwrite these risks and those still building their foundation.

For most younger professionals, the durable edge is a simple, low-cost public core, consistent saving, and clear rules for rebalancing. For high earners with eight-figure net worth, carefully sized private satellites might add diversification or manager-driven alpha—if diligence is ruthless and expectations are honest.

KEY TOPICS:
The $24 marked vs $16 traded example
How "volatility smoothing" hides risk
Fee stacks and NAV-based billing
Embedded leverage in private structures
Redemption terms that fail under stress
K-1s and tax filing headaches
Illiquidity premium: myth vs reality
Who should (and shouldn't) own privates
Building a public core first

The takeaway is straightforward: do the easy things first, earn your seat at the table, and don't mistake opacity for safety.

Find Du Charme Wealth Management here:
https://ducharmewealth.com

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(435) 288-3396

DISCLAIMER:
Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.

[00:00:00] Disclaimers And Introductions
[00:05:08] The Allure Of Private Investments
[00:10:35] Case Study: NAV Vs Market Price
[00:19:00] Return On Hassle And K-1 Headaches
[00:26:55] Democratization Or Dilution Of Edge
[00:29:30] Due Diligence Over Hype
[00:33:00] Closing Thoughts And Next Steps