Burry warns of private credit shell game involving insurers
Michael Burry says a new academic paper exposes a private credit and private equity “shell game” that could shift losses onto taxpayers through life insurers.
Michael Burry highlighted a 65-page academic paper by Andrew Granato and Pranjal Drall that argues private equity firms exploit insurance regulations by acquiring life insurers and loading their balance sheets with private credit assets that are opaque and difficult for regulators to value. The paper says the structure could shift losses onto taxpayers through state-based guaranty funds, which are designed to protect policyholders when life insurers fail and assess surviving insurers to cover insolvency shortfalls, unlike traditional corporate bankruptcy.
Burry said the authors were taking down the private credit/private equity/insurance shell game, in a post dated September 3, 2026. The study shared by Burry argues that the framework lets private equity firms take fees upfront while pushing losses onto competitors and the public. It says that this socializes losses more sharply than federal deposit insurance. It identifies Apollo Global Management (NYSE: APO), KKR & Co Inc.
(NYSE: KKR) and Blackstone Inc. (NYSE: BX) as major players shifting from traditional buyout shops toward diversified asset-management platforms. The report says Apollo uses Athene Holding Ltd. (NYSE: ATH) to hold billions in affiliated assets.
It also cites Blue Owl Capital Inc. (NYSE: OWL) for selling an underperforming loan portfolio to its managed insurer, Kuvare, describing PE-owned insurance subsidiaries as a “buyer of last resort.” The report says this structural transformation lets PE-owned life insurers capture value while leaving taxpayers exposed to the fallout. For recent performance across exchange-traded funds tracking private equity and the broader private credit market, Invesco Global Listed Private Equity ETF (NYSE: PSP ) was up 4.12% over 1-Month and 2.88% over 6-Months, while its YTD return was -7.74% and its 1-Year return was -11.86%.
ProShares Global Listed Private Equity ETF stock (BATS: PEX ) gained 3.51% over 1-Month and 4.37% over 6-Months, with YTD performance of -3.61% and a 1-Year return of -15.27%. State Street Financial Select Sector SPDR ETF (NYSE: XLF ) rose 1.26% over 1-Month and 12.40% over 6-Months, with YTD performance of 5.28% and a 1-Year return of 7.59%. VanEck BDC Income ETF (NYSE: BIZD ) increased 7.58% over 1-Month and 3.41% over 6-Months, with YTD performance of -5.92% and a 1-Year return of -16.78.