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Hedge fund manager Lee Robinson notched a 900% gain during the global financial crisis by turning a $20 million position into $200 million with timely bets against the US subprime mortgage sector.

Today, he sees a new opportunity as risks bubble up around private credit. But instead of betting directly against the sector, he’s focused on potential second-order effects and is shorting some of the $1.8 trillion market’s biggest backers: insurers.

Robinson is ramping up bearish wagers on firms from Lincoln National Corp. to MetLife Inc. and even Berkshire Hathaway Inc. through the use of credit default swaps, derivative contracts designed to protect investors against a default.

Robinson, who previously worked for hedge fund billionaire Paul Tudor Jones, has a track record with opportunistic and distressed debt wagers.

https://www.bloomberg.com/news/articles/2026-06-24...

What is Berkshire’s exposure to private credit?

What is Berkshire’s exposure to private credit?

Zero!

This guy is an idiot if he thinks Berkshire is exposed. More likely he thinks private credit problems will take down the whole insurance sector as people sell in fear whether it's warranted or not in the case of Berkshire. Hopefully Greg will just buyback a ton of stock if that happens.

More likely he thinks private credit problems will take down the whole insurance sector as people sell in fear whether it's warranted or not in the case of Berkshire.

And to be fair, that might be a smart trade. One insurance blowup might not do it, since not everyone will buy the cockroach theory. But two insurance "oopsies" might. The stock prices of solid firms fall all the time: you don't have to be able to predict business weakness if you have a decent shot at predicting price weakness.

I'm a little on the fence on whether to open some short positions when the time seems auspicious. A market rout is a terrible thing to waste, but it would be more for the intellectual challenge than for the profits. It's not as if I have to make money in the markets in any particular year. No year end bonus on the line.

Jim

And to be fair, that might be a smart trade

May be, or may be not. If I were him, I would try to short a basket of shitty insurers (mostly life insurers) that loaded up on private credit for extra yield and would specifically exclude Berkshire from the list. And who knows? Market may very well distinguish between Berkshire & others in the sector during a period of stress.

What's behind these shorts is probably new rules the private equity regulators have enacted. They take place bgeinning in 2027. It's an area I've been following as it develops. I'm trying to learn more about the private lending world. Below are some extracts from an AI search that may explain what's going on, and why it may impact a lot of insurance companies owned by private equity.

*****

Beginning in 2027, private equity owned insurers will no longer be able to treat most of their bespoke lending structures as a single, uniform “collateral loan” category. Instead, they must look through to the underlying assets and classify each exposure according to its economic substance. This dramatically reshapes how PE firms must classify and capitalize

Beginning in 2027, PE firms must classify loans based on look through economic substance, not structural packaging. This:
• raises capital charges
• forces disaggregation of private credit exposures
• reduces the ability to use collateral loan buckets to manage RBC
• increases transparency and regulatory oversight

The 2027 rules are not a tweak — they are a structural shift in how PE owned insurers must classify and capitalize their loan portfolios.

Historically and through 2026, the standard Risk-Based Capital (RBC) factor for collateral loans held by life insurers was a flat 6.8%.

The NAIC historically grouped these investments together in Schedule BA (Other Long-Term Invested Assets). This broad categorization created unique dynamics for insurers up to 2026:

Uniform treatment: The flat 6.8% charge applied regardless of what actual assets were backing the loan—whether high-risk equity tranches or lower-risk asset classes.

• The structural flaw: The NAIC previously deemed this risk immaterial. However, as insurers increased structured credit investments, the flat rate created a loophole. Higher-risk underlying investments (like joint ventures or residual tranches) only received a 6.8% charge instead of the 30% to 45% capital charges they would face if held directly.

*****

These moves will very significantly increase the amount of capital that these firms must retain to support the loans under the new regulations. Another factor, not discussed above, is that risk evaluation focus is significantly increased. In the recent past, now ending in 2026, many private lending firms would use risk ratings from sub-par rating agencies, or even their own evaluations of their loans. Going forward the regulators will put increased focus on these ratings. Moreso, regulators will now have the right to do their own risk evaluations if they deem necessary, and the lending firms must use their evaluations.

In a nutshell, up to 2027 the private lending firms could enjoy a lot of leverage by only needing low risk based capital, and using questionable risk evaluations. This will significantly change going forward. I think this is what the new short sellers are focusing on. A lot of these firms must restructure, could go under, or sell off their insurance holdings at whatever price they can get.

When asked what percent of earning from major PE firms will be impacted by these changes, AI gives numbers all over the map. Apollo is believed to have the highest impact, followed by Blackstone and KKR.

Berkshire Hathaway is not in the private lending business, and is totally un-effected by the foregoing.

******

Interested readers should do their own AI inquiries.

It's been a while since I had anything I thought was worth posting. Maybe the foregoing will be helpful to some.

Makes me wonder about Brookfield and Oaktree.

Interested readers should do their own AI inquiries.

..but not if intending to give any credence to the result for investing purposes.

Just sayin'

Use AI to suggest links to credible documents

Jim

The new capital rules may actually help BRK.

Lots of new capital has rushed in as private equity and hedge funds have sought "permanent capital" by buying insurance companies for their float. This has softened the insurance/reinsurance markets. Maybe this will reverse and harden the markets again. This may provide BRK the opportunity to underwrite more risk and also acquire the "bonnie babies" dumped with the bath water. I hope Ajit Jain is around for a few more years for a last hurrah.

I have a large position in Brookfield and I had the same question. I took the lazy approach and asked Google AI. No idea how accurate it's answer is. Do your own due diligence.

The new NAIC look-through requirements shift Risk-Based Capital (RBC) from a flat 6.8% charge to a risk-weighted scale. This will increase Brookfield's overall capital requirements for its insurance vehicles. However, because Brookfield (BN) relies on diversified asset-backed portfolios and fee-related earnings, the impact on distributable earnings will likely be modest and manageable.

Capital Requirements: Insurers will be forced to hold more capital against riskier underlying collaterals. A flat 6.8% charge does not accurately represent higher-risk exposure (like residual equity or fund investments, which could attract much higher RBC factors up to 45%). The look-through rule will drive up the total capital required to support Brookfield's portfolio.

Asset Repositioning: To maintain optimal capital efficiency, Brookfield may need to shift some assets. By adjusting underlying portfolios toward higher-rated, investment-grade credit, they can mitigate spikes in required capital.

Distributable Earnings Impact: Distributable earnings are highly dependent on Fee-Related Earnings (FRE) rather than just net statutory margins. As Brookfield grows its insurance base, any required capital increases would generally be funded by raising third-party capital or utilizing excess balance sheet capacity. This helps protect FRE from significant volatility.

Brookfield's Structural Advantage Brookfield’s diversified strategy in private credit—focusing heavily on asset-backed finance, real estate, and infrastructure—provides strong underlying collateral quality. By avoiding heavy reliance on generic, opaque "collateral loans", they are generally well-positioned to classify underlying exposures favorably and minimize capital bloat.

Makes me wonder about Brookfield and Oaktree.

If what those silly insurers are using for regulatory assets no longer make the cut, a lot of those assets will come up for sale. It will be hard to find buyers of that mountain of stuff with only second-tier ratings.

That makes me think that the smartest folks in the room might do very well indeed, picking up from forced sellers. A lot of the underlying notes might be dubious, but there is a price for everything, and Oaktree probably knows it better than most. Of course, you can't buy Oaktree shares.

Jim

oaktree's outsized rep is via deploying committed capital at market bottoms.
other regimes have long been poor, especially their public vehicles.
if brookfield does face any insurance distress, they may be relying on oaktree to hit 'less-than-guaranteed' homeruns.

via several podcasts, i infer that the soft market is due to relatively recent, subscale, insurance floaties incorporating in bermuda\bahama.
this is a more likely vulnerable space.
sounds like ackman.

This mainly an issue with life insurers and peripherally P/C insurers - but mainly those that are PE owned right?

https://www.ft.com/content/35a5475d-0c90-4b2c-b7d4...

FT's Alphaville column did a deep dive look at regulatory arbitrage of insurers holdings of "private letter rating" on bonds and private credit.

Again mainly a PE-owned life insurer problem.

Which leads me to wonder again who is buying all these PE-owned life insurance policies and annuities?

So does this apply to the NAIC new rule on CDOs, CBOs, and CLOs?

The GFC cleaned up the CMOs but I guess didn't touch these other pooled credits.

Structured finance strikes again!

I always liked Charlie's words on shorts. Something to the effect of at best, you'll double your money, and at the worst, you lose it all and then some with unlimited downside risk should securities rise.

Bias alert, I've never shorted anything. Nor have I used margin, options, or anything else exotic or complicated or exciting, but my book value CAGR was 20% in the 20 years or so I tracked it, until I retired and now don't care too much.

Now, I have derisked, in today's high Shiller PE, AI mania market. My stock/fixed allocation went from 75/25 to 65/35 last week. I expect in a couplefew years there will be another early 2009 or March 2020 style opportunity. Wife and I backed up the truck with what cash we had in 2020, and it paid off very well. Perhaps Greg is doing the same.

I always liked Charlie's words on shorts. Something to the effect of at best, you'll double your money, and at the worst, you lose it all and then some with unlimited downside risk should securities rise.

I just calculated the results before taxes since 2024 when I started to heavily trade in BRK Puts:

2024: +6% of net assets
2025: +10% of net assets
2026: +8% of net assets (including some profits from selling cash-secured puts and buying them back cheaper)

There was no put where I "lost it all" (LEAPS only).

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