1 00:00:02,520 --> 00:00:07,080 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,280 --> 00:00:10,200 Speaker 2: Private credit where heavyheaters from Blackstorm to Sixth Street have 3 00:00:10,280 --> 00:00:14,440 Speaker 2: recently warned that returns will narrow following years of explosive growth, 4 00:00:14,480 --> 00:00:17,439 Speaker 2: and that growth has been explosive. We spoke with Akila 5 00:00:17,520 --> 00:00:19,720 Speaker 2: gray Wall of Apollo on her outlook. 6 00:00:20,600 --> 00:00:23,640 Speaker 1: Credit has grown tremendously, and our view is that it's 7 00:00:23,680 --> 00:00:26,000 Speaker 1: going to continue to grow. Our view is that private 8 00:00:26,000 --> 00:00:29,200 Speaker 1: credit is an enduring asset category, and we've expanded the 9 00:00:29,240 --> 00:00:32,120 Speaker 1: definition of what that means. We focus not just on 10 00:00:32,200 --> 00:00:33,840 Speaker 1: kind of direct lending. Of course, we have a big 11 00:00:33,840 --> 00:00:36,040 Speaker 1: franchise that does that, but I think our leg up 12 00:00:36,080 --> 00:00:37,959 Speaker 1: has really been the fact that we have an insurance 13 00:00:38,000 --> 00:00:41,120 Speaker 1: balance sheet that has allowed us to originate private assets 14 00:00:41,159 --> 00:00:43,600 Speaker 1: and private credit across the risk return spectrum. 15 00:00:43,960 --> 00:00:46,120 Speaker 2: Joining us now is a man that knows this space 16 00:00:46,280 --> 00:00:48,440 Speaker 2: very well, a veteran in a titan Ken can Sell, 17 00:00:48,479 --> 00:00:51,840 Speaker 2: President and CEO of Churchill Asset Management, a fifty seven 18 00:00:51,880 --> 00:00:54,760 Speaker 2: billion dollar private capital affiliate of neuven Ken. Thank you 19 00:00:54,800 --> 00:00:57,680 Speaker 2: so much for joining us this morning. This weird thing 20 00:00:57,760 --> 00:00:59,960 Speaker 2: is going on at the moment. Private credit is so high. 21 00:01:00,320 --> 00:01:02,800 Speaker 2: You look at your equity brethren, and there's this talk 22 00:01:02,840 --> 00:01:04,959 Speaker 2: of zombie firms popping up more than ever. 23 00:01:05,280 --> 00:01:06,720 Speaker 3: But private credit is so popular. 24 00:01:06,840 --> 00:01:09,839 Speaker 2: You have hedge funds like Point seventy two and Millennium 25 00:01:10,000 --> 00:01:13,000 Speaker 2: launching strategies. What are those dynamics say to you that 26 00:01:13,120 --> 00:01:14,840 Speaker 2: tortoises are now coming in. 27 00:01:14,959 --> 00:01:18,119 Speaker 4: A lot of tourists, a lot of new entrants. Look, 28 00:01:17,800 --> 00:01:20,480 Speaker 4: I think there's room for all of the players I 29 00:01:20,480 --> 00:01:23,000 Speaker 4: look at the end of the day, but private credit 30 00:01:23,200 --> 00:01:27,000 Speaker 4: and our view is all about differentiated sourcing, origination, and 31 00:01:27,080 --> 00:01:31,000 Speaker 4: ultimately relationships. So I think you will have new entrants. 32 00:01:31,280 --> 00:01:33,840 Speaker 4: I think there are certainly places to go with that capital. 33 00:01:34,240 --> 00:01:36,800 Speaker 4: Whether those are the most optimal places to go with 34 00:01:36,880 --> 00:01:39,360 Speaker 4: the capital and where they're lending I think is going 35 00:01:39,360 --> 00:01:42,200 Speaker 4: to be an interesting question. But you've got established players 36 00:01:42,440 --> 00:01:45,480 Speaker 4: that have relationships built over decades, and I think those 37 00:01:45,480 --> 00:01:48,080 Speaker 4: firms are going to continue to enjoy the benefits of 38 00:01:48,120 --> 00:01:49,080 Speaker 4: those relationships. 39 00:01:50,160 --> 00:01:52,040 Speaker 3: But the new entrants that come in I think. 40 00:01:51,920 --> 00:01:56,720 Speaker 4: Will probably focus more on opportunistic strategies areas where they 41 00:01:56,720 --> 00:01:59,400 Speaker 4: can drive somewhat higher returns. Particularly if you look at 42 00:01:59,400 --> 00:02:03,440 Speaker 4: hedge funds, right, that's their thing, right, They're looking for, 43 00:02:03,720 --> 00:02:06,960 Speaker 4: you know, a niche or a way to drive incremental return. 44 00:02:07,200 --> 00:02:09,920 Speaker 4: So I think those firms will focus more on opportunistic 45 00:02:10,000 --> 00:02:13,680 Speaker 4: areas and relationship lenders. Folks like ourselves that rely on 46 00:02:14,280 --> 00:02:18,959 Speaker 4: those historic differentiated sourcing and relationships I think have advertisey. 47 00:02:18,480 --> 00:02:21,239 Speaker 2: Ken, just one point on that, we've seen this movie 48 00:02:21,240 --> 00:02:23,320 Speaker 2: play out before. We had some of the Tiger Cubs 49 00:02:23,320 --> 00:02:24,720 Speaker 2: get into private equity. 50 00:02:24,360 --> 00:02:26,359 Speaker 3: For example, it didn't work out well. 51 00:02:26,600 --> 00:02:28,560 Speaker 2: Yes, a lot of them took a lot of losses 52 00:02:28,560 --> 00:02:30,919 Speaker 2: and were force sellers into the market. Who's to say 53 00:02:30,919 --> 00:02:33,160 Speaker 2: that that won't happen again if you have firms again 54 00:02:33,200 --> 00:02:36,600 Speaker 2: whose history and credentials aren't necessarily in private credit. 55 00:02:36,720 --> 00:02:38,760 Speaker 4: Yeah, yeah, well I think Look, part of where I 56 00:02:38,800 --> 00:02:41,400 Speaker 4: think you'll see them goes in distressed areas, you know, 57 00:02:41,440 --> 00:02:43,760 Speaker 4: where they can come in and provide capital and maybe 58 00:02:43,760 --> 00:02:46,919 Speaker 4: a higher risk scenario. Look, the world we focus on 59 00:02:47,280 --> 00:02:51,080 Speaker 4: is more traditional, right. We're looking for high quality mid 60 00:02:51,120 --> 00:02:56,279 Speaker 4: market businesses that are market leaders in their space, non cyclical, 61 00:02:56,560 --> 00:02:59,320 Speaker 4: where we can drive a very consistent long term return. 62 00:02:59,440 --> 00:03:02,560 Speaker 4: So got kind of the regular way private credit, and 63 00:03:02,560 --> 00:03:05,520 Speaker 4: then you've got situational or opportunities to credit. I mean, 64 00:03:05,520 --> 00:03:07,880 Speaker 4: the reality in private credit is you hear about it 65 00:03:07,919 --> 00:03:08,600 Speaker 4: as a monolith. 66 00:03:08,720 --> 00:03:09,840 Speaker 3: Right, We're in private credit. 67 00:03:10,280 --> 00:03:14,440 Speaker 4: It's venture lending, it's distressed lending, it's upper middle market, 68 00:03:14,520 --> 00:03:17,160 Speaker 4: lower middle market. So there are lots of flavors of 69 00:03:17,200 --> 00:03:19,800 Speaker 4: private credit. It's you know, asset base lending. You know, 70 00:03:19,840 --> 00:03:22,560 Speaker 4: we saw with you know, First Brands and Tricholor, So 71 00:03:22,960 --> 00:03:25,720 Speaker 4: it's it's much more differentiated. And I think there are 72 00:03:25,840 --> 00:03:29,040 Speaker 4: niches where those hedge funds will play, but it's not 73 00:03:29,080 --> 00:03:29,760 Speaker 4: where we play. 74 00:03:30,080 --> 00:03:33,200 Speaker 5: You play in the middle market. The firms that you 75 00:03:33,280 --> 00:03:35,040 Speaker 5: invest in here in the US are ten to one 76 00:03:35,120 --> 00:03:37,800 Speaker 5: hundred million dollars in EBITDA, right, Yes, And I'm wondering 77 00:03:38,280 --> 00:03:42,440 Speaker 5: there's two trends, big headline trends from the Trump administration. 78 00:03:42,680 --> 00:03:45,360 Speaker 5: One is the tariffs, and I imagine that is much 79 00:03:45,360 --> 00:03:47,720 Speaker 5: more difficult for middle market companies to deal with than 80 00:03:48,120 --> 00:03:51,320 Speaker 5: megacap companies. The other is deregulation, which must be a 81 00:03:51,360 --> 00:03:54,640 Speaker 5: tailwind for middle market companies. So how do those two 82 00:03:54,680 --> 00:03:55,240 Speaker 5: balance out? 83 00:03:55,440 --> 00:03:55,640 Speaker 3: Yeah? 84 00:03:55,680 --> 00:03:58,839 Speaker 4: Sure, Well, interesting about tariffs is that when you look 85 00:03:58,840 --> 00:04:05,160 Speaker 4: at our businesses, companies we finance exclusively US companies, primarily 86 00:04:05,280 --> 00:04:09,520 Speaker 4: service businesses that interestingly have very little influence on their 87 00:04:09,560 --> 00:04:13,840 Speaker 4: business internationally, right, so very very limited, you know, international 88 00:04:13,840 --> 00:04:17,760 Speaker 4: customer base for these businesses US mid market service companies 89 00:04:18,080 --> 00:04:20,360 Speaker 4: and actually very minimal manufacturing. 90 00:04:20,480 --> 00:04:22,039 Speaker 3: So when you look at our. 91 00:04:23,720 --> 00:04:27,200 Speaker 4: Concentration or tariff issue in our portfolio, less than ten 92 00:04:27,240 --> 00:04:29,640 Speaker 4: percent are really impacted at all by tariff. 93 00:04:29,720 --> 00:04:31,320 Speaker 3: So the tariff. 94 00:04:31,000 --> 00:04:32,960 Speaker 4: Dynamic has actually turned out to be a pretty good 95 00:04:32,960 --> 00:04:35,000 Speaker 4: thing for US, and in fact, our investors see that 96 00:04:35,640 --> 00:04:38,120 Speaker 4: and like the fact that there's limited tariff exposure. 97 00:04:38,160 --> 00:04:40,839 Speaker 5: What about deregulation do you have to do your companies 98 00:04:40,880 --> 00:04:44,440 Speaker 5: have to spend less to deal with that kind of compliance? 99 00:04:45,440 --> 00:04:48,719 Speaker 4: It's certainly a positive look. I think deregulation overall is 100 00:04:48,760 --> 00:04:51,640 Speaker 4: a good thing. And certainly mid market companies, you know, 101 00:04:51,720 --> 00:04:53,840 Speaker 4: those that maybe don't have, you know, or want to 102 00:04:53,880 --> 00:04:56,840 Speaker 4: invest heavily in dealing with regulation, I think you know, 103 00:04:56,960 --> 00:05:00,360 Speaker 4: benefit from not having to do that. So I think 104 00:05:00,400 --> 00:05:04,359 Speaker 4: deregulation is a net positive overall that the tariff dynamic, 105 00:05:04,400 --> 00:05:08,840 Speaker 4: I'd also say, you know, for US is something that 106 00:05:09,560 --> 00:05:12,320 Speaker 4: you know, has turned out to be even a positive from. 107 00:05:12,200 --> 00:05:13,680 Speaker 3: A fundraising perspective, right. 108 00:05:13,760 --> 00:05:15,800 Speaker 4: I think when tariffs came in, there were a lot 109 00:05:15,839 --> 00:05:17,760 Speaker 4: of questions about, oh my gosh, you know, what's this 110 00:05:17,839 --> 00:05:18,280 Speaker 4: really going. 111 00:05:18,200 --> 00:05:19,320 Speaker 3: To do to portfolios? 112 00:05:19,560 --> 00:05:22,120 Speaker 4: And as things have played out over the last several months, 113 00:05:22,360 --> 00:05:25,160 Speaker 4: investors can see that it really hasn't had a significant 114 00:05:25,200 --> 00:05:28,719 Speaker 4: impact on our portfolio. So that's for more fundraising, which 115 00:05:28,760 --> 00:05:31,000 Speaker 4: is great. But i'd also think and I also say 116 00:05:31,040 --> 00:05:36,560 Speaker 4: that when you think about our dynamics going forward, being 117 00:05:36,640 --> 00:05:40,039 Speaker 4: away from tariffs versus the broadly syndicated market where you 118 00:05:40,080 --> 00:05:43,640 Speaker 4: have larger companies that have much more international exposure, makes 119 00:05:43,720 --> 00:05:45,800 Speaker 4: us more attractive on a relative basis as well. 120 00:05:45,920 --> 00:05:47,800 Speaker 2: Ken, one of the things that makes you unique is 121 00:05:47,800 --> 00:05:49,960 Speaker 2: that you're staying in middle markets because it feels like 122 00:05:50,080 --> 00:05:53,440 Speaker 2: every private credit company wants to get into big infrastructure 123 00:05:53,440 --> 00:05:56,400 Speaker 2: AI that they're all touting how great it is with 124 00:05:56,440 --> 00:06:00,600 Speaker 2: these blue chip IG companies. Is this also you may 125 00:06:00,600 --> 00:06:04,200 Speaker 2: be seeing risk in there participating in that mind yeh. 126 00:06:04,000 --> 00:06:04,760 Speaker 3: Know, it's a great question. 127 00:06:04,800 --> 00:06:07,640 Speaker 4: And actually I spoke with Romain about this at a 128 00:06:07,640 --> 00:06:10,040 Speaker 4: at a conference a few months ago. We actually there 129 00:06:10,040 --> 00:06:12,200 Speaker 4: was a panel talking about exactly. 130 00:06:11,760 --> 00:06:13,720 Speaker 3: That the the the. 131 00:06:13,960 --> 00:06:18,480 Speaker 4: Reindustrialization or the industrialization due to to the data centers 132 00:06:18,480 --> 00:06:20,680 Speaker 4: and how that's playing out. We did some research when 133 00:06:20,720 --> 00:06:22,760 Speaker 4: we when when when I met with him in advanced 134 00:06:23,000 --> 00:06:24,800 Speaker 4: because I always know what a great job he does 135 00:06:24,800 --> 00:06:28,600 Speaker 4: in all his researches, and what we found is that 136 00:06:28,640 --> 00:06:31,640 Speaker 4: we have about six billion dollars invested in our portfolio, 137 00:06:31,920 --> 00:06:35,400 Speaker 4: not in the data centers themselves, but in companies that 138 00:06:35,520 --> 00:06:39,039 Speaker 4: are mid market companies that are supporting data centers. So 139 00:06:39,680 --> 00:06:41,919 Speaker 4: I think that, you know, there's a misconception that is 140 00:06:42,040 --> 00:06:45,240 Speaker 4: just building these data centers that's driving the activity. The 141 00:06:45,320 --> 00:06:48,520 Speaker 4: reality is there are thousands of companies in the mid 142 00:06:48,560 --> 00:06:52,400 Speaker 4: market that are participating in that. We we finance, for example, 143 00:06:52,800 --> 00:06:57,040 Speaker 4: HVAC build out businesses right, Well, they're supporting data centers, 144 00:06:57,320 --> 00:07:00,920 Speaker 4: food service businesses that are actually supporting workers that are 145 00:07:00,920 --> 00:07:03,200 Speaker 4: working in the data center. So I think it's a 146 00:07:03,320 --> 00:07:05,960 Speaker 4: broad based benefit to the economy, and I think, well, 147 00:07:06,080 --> 00:07:08,120 Speaker 4: data centers are part of it, and obviously those are 148 00:07:08,120 --> 00:07:11,520 Speaker 4: the largest dollars. We're not financing data centers, but we 149 00:07:11,600 --> 00:07:15,600 Speaker 4: are financing the companies that are participating in that opportunity. 150 00:07:15,760 --> 00:07:19,840 Speaker 5: You mentioned fundraising is fantastic. What do you expect in 151 00:07:19,920 --> 00:07:22,960 Speaker 5: terms of growth? I know you have tens of billions 152 00:07:22,960 --> 00:07:25,600 Speaker 5: of dollars under management, you have two hundred employees. 153 00:07:25,640 --> 00:07:27,200 Speaker 3: What kind of growth do you expect. 154 00:07:26,920 --> 00:07:31,200 Speaker 4: Well, we just finished our annual investor meeting, this week. 155 00:07:31,280 --> 00:07:34,000 Speaker 4: I think we had something like, you know, fifteen trillion 156 00:07:34,080 --> 00:07:37,920 Speaker 4: dollars of investors participating in the meeting, So I got 157 00:07:37,920 --> 00:07:40,840 Speaker 4: lots of feedback on what we anticipate. And look, I 158 00:07:40,880 --> 00:07:44,000 Speaker 4: think I think certainly our investors are looking for a 159 00:07:44,040 --> 00:07:48,040 Speaker 4: more conservative profile. You know, there's always the risk of 160 00:07:48,440 --> 00:07:52,080 Speaker 4: recessionary dynamics from tariffs, and we haven't seen that at 161 00:07:52,080 --> 00:07:54,559 Speaker 4: this point in our portfolio. But I think they're looking 162 00:07:54,600 --> 00:07:57,240 Speaker 4: for us to stick to our knitting. I think, you know, 163 00:07:57,280 --> 00:08:00,680 Speaker 4: five six years ago, investors, I don't think fully appreciated 164 00:08:00,720 --> 00:08:04,560 Speaker 4: all these differentials within private credit. Today, they like the 165 00:08:04,600 --> 00:08:07,200 Speaker 4: middle market and they want us to stay there, right so, 166 00:08:08,440 --> 00:08:09,960 Speaker 4: you know, they don't want to see us, you know, 167 00:08:10,320 --> 00:08:12,480 Speaker 4: venturing off into some of these other areas, and we 168 00:08:12,520 --> 00:08:14,040 Speaker 4: have absolutly no intention of doing that. 169 00:08:14,280 --> 00:08:16,640 Speaker 3: But I think sticking to our knitting is important right now. 170 00:08:16,640 --> 00:08:19,040 Speaker 2: There's been a real big conversation that the reason you've 171 00:08:19,040 --> 00:08:20,880 Speaker 2: seen a lot of the giants of this space go 172 00:08:20,960 --> 00:08:23,520 Speaker 2: into other areas is because there's been real fee compression, 173 00:08:23,880 --> 00:08:26,160 Speaker 2: and then in order to succeed, you need to asset 174 00:08:26,200 --> 00:08:29,240 Speaker 2: gather when fees aren't as robust as they once work. Yes, 175 00:08:29,640 --> 00:08:31,800 Speaker 2: is that a troubling trend if we are moving into 176 00:08:31,880 --> 00:08:34,480 Speaker 2: the commoditization of private capital. 177 00:08:35,040 --> 00:08:37,640 Speaker 4: I think where you're seeing more of that is in 178 00:08:37,679 --> 00:08:40,679 Speaker 4: the BSL market, right in the large cap companies that 179 00:08:41,200 --> 00:08:45,679 Speaker 4: now have a syndicated option and a broadly and a 180 00:08:45,679 --> 00:08:46,560 Speaker 4: private credit option. 181 00:08:46,720 --> 00:08:47,719 Speaker 3: Right, So the. 182 00:08:47,720 --> 00:08:50,760 Speaker 4: Private credit lenders that are moving into that space are 183 00:08:50,800 --> 00:08:53,840 Speaker 4: actually competing with the syndicated loan market. So you've seen 184 00:08:53,880 --> 00:08:57,440 Speaker 4: compression in spreads in the large cap market today, core 185 00:08:57,520 --> 00:09:00,360 Speaker 4: middal market, what we do in traditional private credit has 186 00:09:00,400 --> 00:09:02,320 Speaker 4: about a two to two hundred and fifty basic point 187 00:09:02,480 --> 00:09:04,760 Speaker 4: advantage over the syndicated market, and I think a big 188 00:09:04,800 --> 00:09:07,520 Speaker 4: reason for that is that compression of spreads we're seeing 189 00:09:07,559 --> 00:09:10,840 Speaker 4: in the BSL world. So we like our space better, 190 00:09:10,880 --> 00:09:13,920 Speaker 4: I would say overall. But you're right, the largest private 191 00:09:13,960 --> 00:09:17,360 Speaker 4: credit managers that are going into that space are competing 192 00:09:17,400 --> 00:09:20,840 Speaker 4: with the syndicated loan market. Therefore there's a lot more 193 00:09:20,960 --> 00:09:23,920 Speaker 4: there's a lot more competitive dynamics that they're running into 194 00:09:24,000 --> 00:09:28,000 Speaker 4: versus the core direct lending market where frankly, delivering three 195 00:09:28,040 --> 00:09:31,000 Speaker 4: four five hundred million dollars solutions, there are fairly limited 196 00:09:31,040 --> 00:09:32,760 Speaker 4: number of firms that can do that, So We like 197 00:09:32,800 --> 00:09:34,800 Speaker 4: our space a lot, but you're right, as you get 198 00:09:34,800 --> 00:09:38,480 Speaker 4: into the larger deals, it's a much much more competitive dynamic. 199 00:09:38,720 --> 00:09:42,040 Speaker 5: Ken, we appreciate you joining us on open interest, even 200 00:09:42,040 --> 00:09:45,680 Speaker 5: on a day when Romaine is here. Romaine Boston actually 201 00:09:45,679 --> 00:09:48,160 Speaker 5: saw him earlier, so they'll be anchoring. They'll be anchoring 202 00:09:48,160 --> 00:09:50,199 Speaker 5: the close at three pm show you don't want to miss. 203 00:09:50,240 --> 00:09:52,880 Speaker 5: Ken can sell there of Churchill Asset Management.