WEBVTT - Carlyle's Mark Jenkins Talks $5.7B Capital Raise, Credit Market

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Carlisle announcing today that it has raised five point seven

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<v Speaker 2>billion dollars for its latest flagship credit fund, with more

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<v Speaker 2>than seven billion dollars with leverage. It's the funds ever

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<v Speaker 2>largest ever credit poll, exceeding the roughly four points six

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<v Speaker 2>billion dollars raised for the prior vintage in twenty twenty

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<v Speaker 2>two for Opportunistic Credit.

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<v Speaker 1>For more on this, we are joined by Mark Jenkins.

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<v Speaker 2>He is head of Global Credit at Carlisle Investment Management.

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<v Speaker 2>And we have to put this into context because you're

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<v Speaker 2>looking at Opportunistic Credit, you have two hundred billion in

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<v Speaker 2>credit here, So why is this pool of capital so

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<v Speaker 2>interesting at this point in time. It looks like you're

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<v Speaker 2>looking at very specific nimble ways to get into the market.

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<v Speaker 3>Yeah, thanks Chaneli for having me on.

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<v Speaker 4>You know, for us, this is like, you know, a

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<v Speaker 4>very important step forward as we continue to develop the

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<v Speaker 4>broad platform that we have. Opportunistic credit is one of

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<v Speaker 4>our core strategies on a very diverse platform for us,

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<v Speaker 4>So we focus on how we can have a diversity

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<v Speaker 4>of so we can attack if you will, or look

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<v Speaker 4>for opportunities across the market as we go through opportunities.

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<v Speaker 4>Opportunistic credit for US is really working with family employee

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<v Speaker 4>owned type businesses that we structure bespoke transactions for and

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<v Speaker 4>they're typically under banked organizations that look for capital solutions

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<v Speaker 4>up and down the capital structure.

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<v Speaker 3>So I think we have a unique.

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<v Speaker 4>Perspective in that regard and I've been building that, you know,

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<v Speaker 4>that reputation in the market over the past seven years.

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<v Speaker 2>It's interesting because you've seen over the last couple of years,

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<v Speaker 2>ever since you saw the Silicon Valley bank kind of

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<v Speaker 2>step back, and then you saw the interest rate movements

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<v Speaker 2>really shut out a lot of banks from the market.

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<v Speaker 2>Is this opportunistic opportunity bigger now that you're seeing the

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<v Speaker 2>banking system step back a little bit?

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<v Speaker 4>Yeah, I think it's it's kind of twofold. One is

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<v Speaker 4>when we look at these companies, they generally, you know,

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<v Speaker 4>we the opportunistic strategy for US is going to where

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<v Speaker 4>there's fewer participants looking to bank these people. So part

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<v Speaker 4>of the pullback in the banking system, yeah, is not

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<v Speaker 4>serving these companies.

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<v Speaker 3>Well, if you will. We also have a very large team.

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<v Speaker 4>In Europe as well, and there's a great dispersion, if

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<v Speaker 4>you will, in fragmentation in that market, So it does

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<v Speaker 4>create a lot of opportunity for us there in terms

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<v Speaker 4>of how the banks have pulled back. But overall, I mean,

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<v Speaker 4>it really is bringing the full scale of the platform

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<v Speaker 4>to bear for capital solutions, and I think that's the

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<v Speaker 4>key thing for us in terms of the strategy.

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<v Speaker 1>What's the return profile?

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<v Speaker 2>What can you expect back on a strategy like this,

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<v Speaker 2>and how does it compare to other type of credits.

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<v Speaker 4>Yeah, because of the complexity, because of the bespoke nature

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<v Speaker 4>of it, you're actually charging a premium above what somebody

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<v Speaker 4>would get into capital markets. And because this is also

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<v Speaker 4>typically not something that goes into the direct lending market,

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<v Speaker 4>You're looking for returns that are three to four inner

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<v Speaker 4>basis points above, sort of first lean direct lending.

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<v Speaker 3>If you will.

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<v Speaker 2>It feels like Carlisle and many of your peers are

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<v Speaker 2>looking at direct lending and saying this is, yes, a

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<v Speaker 2>large opportunity, but maybe there are larger ones elsewhere. You've

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<v Speaker 2>been diving into asset back finance, now more opportunistsic credit

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<v Speaker 2>as well.

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<v Speaker 1>What does this mean about the biggest growth.

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<v Speaker 2>Areas for your credit business moving forward?

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<v Speaker 4>Yeah, for us, we've been kind of consciously building out

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<v Speaker 4>this platform, which really spans everything from public or liquid

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<v Speaker 4>corporate credit, private credit, real asset and asset backs. So

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<v Speaker 4>that broad spectrum, if you will, and right now are

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<v Speaker 4>power allies, if you will, are really on the COLO side,

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<v Speaker 4>the opportunistic side and asset backside, and I think that's

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<v Speaker 4>where we see the growth. But it depends on where

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<v Speaker 4>you are in the cycle. So in twenty twenty three,

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<v Speaker 4>for instance, the COLO market was closed effectively, we didn't

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<v Speaker 4>do anything.

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<v Speaker 3>This year, we've had a record year.

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<v Speaker 4>We've priced over thirty six colos, refinancings, new issues, et cetera.

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<v Speaker 4>And we've raised over nine hundred million of third party equity.

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<v Speaker 3>So quite a change.

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<v Speaker 4>So you have to have that diversity on your platform

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<v Speaker 4>to take advantage of the market opportunities as you go

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<v Speaker 4>through cycles.

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<v Speaker 2>Power ally a strong word. How are these things serving

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<v Speaker 2>as power allies? Is there something about these markets growing

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<v Speaker 2>faster now than they were before?

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<v Speaker 1>Yeah?

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<v Speaker 4>I think you know you've got specifically on the asset backside,

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<v Speaker 4>you do have this secon shift where we've seen assets

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<v Speaker 4>that weren't ordinarily available to us for private investment or

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<v Speaker 4>now coming into the marketplace because of this shift you're

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<v Speaker 4>seen from basically banks in the United States in particular,

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<v Speaker 4>has to do with regulatory changes, how they manage our WA's.

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<v Speaker 4>It has to do some of the counting changes, and

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<v Speaker 4>that's been a secular shift that we've seen over the

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<v Speaker 4>past three years. But if it really has come to

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<v Speaker 4>fruition in the past year where we're seeing more opportunities

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<v Speaker 4>versus capital formations. So we see that as a great

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<v Speaker 4>opportunity for our investors and certainly an area where we're

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<v Speaker 4>going to lean into and grow over the next several years.

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<v Speaker 2>As money flows into private markets, where's the risk? We

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<v Speaker 2>had this great story on the terminal today about the

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<v Speaker 2>records COLO issue ince raising concerns because of the pick

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<v Speaker 2>provisions that are arising as well. If you kind of

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<v Speaker 2>look around the world here that you operate in, where's

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<v Speaker 2>your biggest concern?

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<v Speaker 4>Yeah, I don't think it's so much the flows of

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<v Speaker 4>capital into the private markets, because ultimately, when you think

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<v Speaker 4>about who the actual investors are, they're much better matched

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<v Speaker 4>to the private nature of it. I e.

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<v Speaker 3>You know, when it was.

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<v Speaker 4>Sat on bank balance sheets, you're financing those with customer deposits,

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<v Speaker 4>You're financing them in the capital markets and that's not

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<v Speaker 4>necessarily matching asset liability matching.

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<v Speaker 3>When you go to the private.

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<v Speaker 4>Markets, you're looking for much more longer investment horizons, so

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<v Speaker 4>you can ride the volatility that you might see in

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<v Speaker 4>a credit So the real risk isn't so much in

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<v Speaker 4>capital coming in obviously. You know, as capital comes into

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<v Speaker 4>certain pockets, some places get very expensive, if you will,

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<v Speaker 4>and that's always been through different cycles. I think the

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<v Speaker 4>bigger issue is, you know, how we deal with the

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<v Speaker 4>economic environment going forward, as opposed necessarily anything that's going

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<v Speaker 4>to happen in the private capital markets in particular.

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<v Speaker 2>You know, there's this notion out there that public and

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<v Speaker 2>private markets are converging, where some private capital providers have said,

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<v Speaker 2>no way, private is private, public is public.

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<v Speaker 1>How do you feel about that?

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<v Speaker 3>Yeah?

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<v Speaker 4>I think credit is credit, right. I think equity is equity.

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<v Speaker 4>So when somebody's putting it into their policy portfolio, nobody's saying,

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<v Speaker 4>you know, should this be private or should this be public?

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<v Speaker 4>They're thinking about what is that exposure that I have

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<v Speaker 4>in my portfolio? And I think the convergence that occurred

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<v Speaker 4>coming out of twenty twenty three is you've seen both

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<v Speaker 4>private and public markets and credit in particular, co exists

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<v Speaker 4>in a very you know, I think fruitful manner for

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<v Speaker 4>the community, if you will, and that's creating better opportunities.

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<v Speaker 4>So when I look at Carlisle in particular, and look

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<v Speaker 4>at the two Biot deals that we recently financed this year,

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<v Speaker 4>they're very large biots. One's a carve out, but we

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<v Speaker 4>use the private markets to finance them. But at some

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<v Speaker 4>point in the future, no doubt, we'll look to finance

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<v Speaker 4>in the public markets. So they coexist as opposed to compete,

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<v Speaker 4>I would say, And at various times they rub up

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<v Speaker 4>against each other for that competition or that tension, but

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<v Speaker 4>they're going to coexist going forward.

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<v Speaker 2>Last question from you, you were talking here about the

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<v Speaker 2>macroeconomic environment, what happens next year. You know, you look

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<v Speaker 2>at a rate environment where there is still a substantial

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<v Speaker 2>amount of rate cuts price into next year's market, but

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<v Speaker 2>investors also worried about even the possibility of a hike

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<v Speaker 2>if certain policies come into play, like tariffs.

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<v Speaker 1>Are you worried about the dispersion here?

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<v Speaker 4>Yeah, Look, I think our view is that we're going

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<v Speaker 4>to have higher rates for longer.

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<v Speaker 3>We've had that view for some time now.

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<v Speaker 4>I think the macroeconomic geopolitical tension that you see, and

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<v Speaker 4>you know, the new administration coming is going to be

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<v Speaker 4>very pro business, which I think is a good thing.

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<v Speaker 4>Is going to keep rates at a relative, relatively high

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<v Speaker 4>level relative to what the market's.

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<v Speaker 3>Predicted, if you will. And what does that mean.

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<v Speaker 4>I think what it means is it's good for the

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<v Speaker 4>liquidity in the marketplace. But right now, if you take

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<v Speaker 4>a look at financing costs for biotes right now and

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<v Speaker 4>you look at the high yield and leverage low market,

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<v Speaker 4>we're only about fifty basis points higher than when the

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<v Speaker 4>FED started raising rates in March twenty twenty two. So

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<v Speaker 4>you've got a very good environment right now for financing

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<v Speaker 4>for biots et cetera. There seems to be good momentum

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<v Speaker 4>in terms of the economy. So as you look forward

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<v Speaker 4>into twenty five, you know, we obviously going to see

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<v Speaker 4>some volatility, but I think.

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<v Speaker 3>We're in a very safe environment for investing.

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<v Speaker 2>Mark, Well, thank you so much for joining us here

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<v Speaker 2>on set. That is Mark Junggan's head of global credit

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<v Speaker 2>at carre

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<v Speaker 1>Relyle on the heels of a record breaking fundraiser