1 00:00:18,239 --> 00:00:20,760 Speaker 1: Hello, Welcome to the Credit Edge, a weekly markets podcast. 2 00:00:20,840 --> 00:00:23,880 Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg. 3 00:00:23,560 --> 00:00:27,000 Speaker 2: And I'm Totlu Alamutu as senior and list covering real 4 00:00:27,120 --> 00:00:30,920 Speaker 2: estate and some banks at Bloomberg Intelligence. This week, we 5 00:00:31,080 --> 00:00:35,080 Speaker 2: are very pleased to welcome Matthew Bass, who is the 6 00:00:35,120 --> 00:00:39,840 Speaker 2: head of Private Alternatives at Alliance Bernstein. How are you, Matt, 7 00:00:40,120 --> 00:00:40,680 Speaker 2: doing well? 8 00:00:40,960 --> 00:00:43,800 Speaker 3: Totally? Thanks for having me joined today, James, Great to 9 00:00:43,800 --> 00:00:44,800 Speaker 3: see you again as well. 10 00:00:45,440 --> 00:00:49,000 Speaker 2: Great to have you here, Matt. Matt is Alliance Bernstein's 11 00:00:49,040 --> 00:00:54,480 Speaker 2: head of Private Alternatives, overseeing assets under management of sixty 12 00:00:54,520 --> 00:00:58,360 Speaker 2: five billion dollars, part of the firm's total eight hundred 13 00:00:58,400 --> 00:01:05,080 Speaker 2: and nine billion dollars in aum. Private alternatives include corporate 14 00:01:05,080 --> 00:01:10,640 Speaker 2: direct lending, commercial real estate, asset based finance, and opportunistic investing. 15 00:01:11,000 --> 00:01:12,600 Speaker 1: Great, so, Matt, thanks for coming on the show. Just 16 00:01:12,600 --> 00:01:13,920 Speaker 1: to set the scene a little bit here before we 17 00:01:13,959 --> 00:01:17,240 Speaker 1: start talking. Markets are getting whipswored by trade wars, inflation 18 00:01:17,319 --> 00:01:19,319 Speaker 1: and growth fears, as well as a whole load of 19 00:01:19,360 --> 00:01:22,720 Speaker 1: alarming developments on the geopolitical front. Companies have got used 20 00:01:22,720 --> 00:01:24,880 Speaker 1: to paying more for their debt, higher for longer is 21 00:01:24,920 --> 00:01:27,160 Speaker 1: assumed at this point, but credit markets are pricing in 22 00:01:27,319 --> 00:01:29,920 Speaker 1: very low odds of a US recession, which is being 23 00:01:29,959 --> 00:01:32,440 Speaker 1: talked about a lot more now that consumers seem to 24 00:01:32,440 --> 00:01:36,000 Speaker 1: be weakening. Corporate debt spreads have widened over the last week, 25 00:01:36,160 --> 00:01:37,760 Speaker 1: just by a little bit, but they're still very well 26 00:01:37,800 --> 00:01:42,000 Speaker 1: below long term averages. Market pricing still projects a fair 27 00:01:42,000 --> 00:01:44,960 Speaker 1: amount of calm. Nothing much to worry about here, but 28 00:01:45,080 --> 00:01:49,400 Speaker 1: news headlines show the exact opposite, from radical policy shifts 29 00:01:49,400 --> 00:01:52,600 Speaker 1: by the US government to ongoing military conflict, stubborn inflation, 30 00:01:52,680 --> 00:01:55,760 Speaker 1: and sliding consumer confidence, plus a ton of uncertainty about 31 00:01:55,800 --> 00:01:58,560 Speaker 1: what the FED does next on rates. In the face 32 00:01:58,600 --> 00:02:00,960 Speaker 1: of that growing wall of worry, there does seem to 33 00:02:00,960 --> 00:02:03,920 Speaker 1: be complacency in markets, and we continue to see robust 34 00:02:04,200 --> 00:02:07,000 Speaker 1: investor demand for corporate bonds and loans, especially in the US, 35 00:02:07,280 --> 00:02:09,720 Speaker 1: and not a lot of net new supply that more 36 00:02:09,760 --> 00:02:12,240 Speaker 1: than anything, I think, is keeping spreads quite tight. And 37 00:02:12,280 --> 00:02:15,960 Speaker 1: then on the sidelines or maybe the star of the show, 38 00:02:15,960 --> 00:02:18,240 Speaker 1: the private credit golden aze, just seems to go on. 39 00:02:18,320 --> 00:02:20,919 Speaker 1: So Matt, what is your take. Should we focus more 40 00:02:20,960 --> 00:02:23,360 Speaker 1: on the pro growth talk of the new administration, or 41 00:02:23,400 --> 00:02:25,679 Speaker 1: do we need to worry about the trade wars, about 42 00:02:25,720 --> 00:02:28,360 Speaker 1: the policy shifts, about the geopolitical headwinds, and should those 43 00:02:28,440 --> 00:02:29,240 Speaker 1: be more in the price. 44 00:02:30,200 --> 00:02:32,320 Speaker 3: I think we've certainly got a lot in the press 45 00:02:32,400 --> 00:02:37,160 Speaker 3: now to talk about relating to the administration, tariffs, et cetera. Look, 46 00:02:37,639 --> 00:02:40,760 Speaker 3: I think there's a significant amount of uncertainty in the 47 00:02:40,760 --> 00:02:44,160 Speaker 3: market today. And look, you know, kind of stepping back, 48 00:02:44,400 --> 00:02:46,400 Speaker 3: you know, one of the you know, we've got a 49 00:02:46,440 --> 00:02:49,120 Speaker 3: business that we built at Alliance Bernstein really over the 50 00:02:49,160 --> 00:02:51,680 Speaker 3: past ten to fifteen years. It's kind of focused in 51 00:02:52,120 --> 00:02:56,040 Speaker 3: private credit across asset classes. You know, the reason we 52 00:02:56,120 --> 00:02:58,640 Speaker 3: built this. One of the main benefits of investing in 53 00:02:58,680 --> 00:03:02,800 Speaker 3: private credit, putting aside premium you could generate from a 54 00:03:02,840 --> 00:03:07,520 Speaker 3: yield perspective, is the direct origination and better risk control. 55 00:03:07,600 --> 00:03:11,000 Speaker 3: So even so, especially in environments like this, these are 56 00:03:11,360 --> 00:03:13,600 Speaker 3: situations where you want to be closer to the bar 57 00:03:13,840 --> 00:03:16,160 Speaker 3: or where you want to be able to conduct more 58 00:03:16,160 --> 00:03:19,600 Speaker 3: in depth due diligence, control your own destiny. Kind of 59 00:03:19,680 --> 00:03:22,600 Speaker 3: reasons to be investing in private markets right, speaking to 60 00:03:22,639 --> 00:03:23,560 Speaker 3: markets just like this. 61 00:03:23,560 --> 00:03:26,760 Speaker 2: Today, Matt, one of the issues you were talking about, 62 00:03:26,800 --> 00:03:30,520 Speaker 2: you know, changing environments and regulation and so on. As 63 00:03:30,720 --> 00:03:32,840 Speaker 2: regulation is one of the issues I think that is 64 00:03:33,600 --> 00:03:37,280 Speaker 2: coming up. So last week we saw some headlines about 65 00:03:37,560 --> 00:03:43,360 Speaker 2: the SEC looking into private credit ETFs. There's obviously a 66 00:03:43,440 --> 00:03:47,040 Speaker 2: number of issues around disclosure and liquidity and so on. 67 00:03:47,320 --> 00:03:53,240 Speaker 2: What's your view on potential increase in regulatory's scrutiny And 68 00:03:53,320 --> 00:03:57,240 Speaker 2: do you think that the growth of private credit will 69 00:03:57,280 --> 00:03:59,480 Speaker 2: come from retail or do you think it's more the 70 00:03:59,480 --> 00:04:03,840 Speaker 2: institutions assigning more to this asset class that will drive 71 00:04:04,840 --> 00:04:07,280 Speaker 2: the next sort of stage for this part of the 72 00:04:07,800 --> 00:04:08,720 Speaker 2: of our industry. 73 00:04:09,080 --> 00:04:11,520 Speaker 3: Yeah. Sure. Just to put in perspective, I think you've 74 00:04:11,560 --> 00:04:15,360 Speaker 3: got a longer broader secular trend in place, which is 75 00:04:15,400 --> 00:04:19,039 Speaker 3: really a share shift of how credit is provided in 76 00:04:19,080 --> 00:04:23,720 Speaker 3: the market globally between banks, capital markets, and private investors. 77 00:04:23,760 --> 00:04:28,760 Speaker 3: So what we've seen over time is an increased interest 78 00:04:29,839 --> 00:04:34,040 Speaker 3: behalf of private capital. So the reasons for that one 79 00:04:34,520 --> 00:04:38,680 Speaker 3: from a borrower perspective, You've got increased flexibility and certainty 80 00:04:38,680 --> 00:04:41,159 Speaker 3: of execution, and borrowers are willing to pay up for 81 00:04:41,320 --> 00:04:46,480 Speaker 3: access to that capital. So there's a real entrenched driver 82 00:04:46,680 --> 00:04:51,360 Speaker 3: in terms of the supply of private credit. The demand side, 83 00:04:51,560 --> 00:04:54,120 Speaker 3: as you asked about, you know, initially this was an 84 00:04:54,120 --> 00:04:58,080 Speaker 3: institutionally driven market. So let's put that in perspective. Pre 85 00:04:58,560 --> 00:05:02,640 Speaker 3: financial crisis, Global antil crisis, the market for corporate private 86 00:05:02,680 --> 00:05:05,160 Speaker 3: credit was about one hundred and fifty billion in size. 87 00:05:05,160 --> 00:05:08,200 Speaker 3: It's about a trillion and a half today, about the 88 00:05:08,200 --> 00:05:11,000 Speaker 3: same size as the high yield market and leverage loan market. 89 00:05:11,040 --> 00:05:15,520 Speaker 3: They're all about equal, so that that growth has largely 90 00:05:15,600 --> 00:05:20,039 Speaker 3: been driven by institutional investors and increasingly retail investors. So 91 00:05:20,680 --> 00:05:23,840 Speaker 3: as you look at the the ETF Private credit ETF 92 00:05:23,880 --> 00:05:28,680 Speaker 3: as an example, it's another vehicle to utilize to expand 93 00:05:29,560 --> 00:05:34,920 Speaker 3: private credit delivery into a broader retail investor base. Now 94 00:05:35,720 --> 00:05:38,360 Speaker 3: they're they're positives of that, they're negatives of that. You know, 95 00:05:38,400 --> 00:05:42,680 Speaker 3: I always kind of anchor back to major concern being 96 00:05:42,960 --> 00:05:46,719 Speaker 3: a potential mismatch and liquidity. Right, as a private credit investor, 97 00:05:46,760 --> 00:05:51,200 Speaker 3: you have the benefit of being able to go really 98 00:05:51,200 --> 00:05:56,240 Speaker 3: deep from a due diligence perspective, structure appropriate covenants, and 99 00:05:56,560 --> 00:06:01,120 Speaker 3: have control of a transaction should things go. A key 100 00:06:01,240 --> 00:06:05,680 Speaker 3: part of that risk mitigation is also the longer term 101 00:06:05,800 --> 00:06:10,200 Speaker 3: nature of the investors and having long term locked up capital. 102 00:06:10,360 --> 00:06:14,719 Speaker 3: So to extent we go away from that into retail 103 00:06:14,800 --> 00:06:18,040 Speaker 3: offering liquidity. It's just a concern that I think market 104 00:06:18,040 --> 00:06:21,720 Speaker 3: participants need to be mindful of in terms of that mismatch. 105 00:06:21,920 --> 00:06:24,760 Speaker 2: Yeah, that was going to be my follow up question because, 106 00:06:25,600 --> 00:06:30,080 Speaker 2: as you mentioned, providing that liquidity at the retail level 107 00:06:30,680 --> 00:06:34,640 Speaker 2: might be an issue. But maybe we can talk about 108 00:06:34,680 --> 00:06:37,160 Speaker 2: the borrowers a little bit, because you've said that in 109 00:06:37,160 --> 00:06:38,920 Speaker 2: some cases they might want to go to the private 110 00:06:38,960 --> 00:06:43,240 Speaker 2: credit market and sort of shun all the scrutiny of 111 00:06:43,640 --> 00:06:46,080 Speaker 2: public credit markets. But one of the things that we've 112 00:06:46,120 --> 00:06:49,479 Speaker 2: seen in the last twelve to eighteen months is that 113 00:06:49,760 --> 00:06:53,719 Speaker 2: public markets have become much more receptive to even some 114 00:06:53,800 --> 00:06:56,240 Speaker 2: of the riskier borrowers. So we have a couple of 115 00:06:56,240 --> 00:06:59,279 Speaker 2: borrowers in European real estate, for instance, that wouldn't have 116 00:06:59,480 --> 00:07:02,280 Speaker 2: dreamt of coming back to the market eighteen months ago 117 00:07:02,400 --> 00:07:07,080 Speaker 2: because they are deeply high yield, highly levered, and so on. 118 00:07:07,160 --> 00:07:09,040 Speaker 2: But they've been able to come to the market this year. 119 00:07:09,080 --> 00:07:13,800 Speaker 2: So do you think that the demand from the borrowers 120 00:07:14,120 --> 00:07:18,800 Speaker 2: is still there even though public credit markets are less 121 00:07:18,800 --> 00:07:21,320 Speaker 2: strained than they were twelve eighteen months ago. 122 00:07:21,800 --> 00:07:24,560 Speaker 3: Sure, total, and you're talking to you know, their cyclical 123 00:07:24,840 --> 00:07:28,320 Speaker 3: and secular factors at play here. So from a cyclical perspective, 124 00:07:29,000 --> 00:07:34,240 Speaker 3: as public capital markets recover, as investor interest increases, right, 125 00:07:34,280 --> 00:07:36,560 Speaker 3: there will be kind of an ebb and flow there 126 00:07:36,720 --> 00:07:39,080 Speaker 3: on the public side, and public markets tend to get 127 00:07:39,080 --> 00:07:43,080 Speaker 3: more aggressive and more conservative, right, So you know that's 128 00:07:43,120 --> 00:07:46,280 Speaker 3: cyclical that that's going to remain kind of a key 129 00:07:46,280 --> 00:07:49,120 Speaker 3: component between what is the share shift between public and 130 00:07:49,160 --> 00:07:52,560 Speaker 3: private execution From from a secular perspective, you got to 131 00:07:52,600 --> 00:07:57,160 Speaker 3: anchor to, you know, what are the tangible benefits to 132 00:07:57,320 --> 00:08:01,960 Speaker 3: a borrower in diversifying its verses of financing. So you 133 00:08:02,080 --> 00:08:04,760 Speaker 3: take you look at what happened on the back of 134 00:08:04,760 --> 00:08:06,680 Speaker 3: the rapid rise in rates we saw a few years 135 00:08:06,680 --> 00:08:10,880 Speaker 3: ago and how that impacted various specially financed non bank 136 00:08:10,960 --> 00:08:15,600 Speaker 3: lenders that might have been really reliant on one source 137 00:08:15,640 --> 00:08:19,080 Speaker 3: of financing that is a securitization market. That market is fickle, 138 00:08:19,240 --> 00:08:22,000 Speaker 3: it shuts down, and they lose access to the lifeblood 139 00:08:22,040 --> 00:08:26,400 Speaker 3: of their business, which is capital. So from a you know, 140 00:08:26,440 --> 00:08:28,520 Speaker 3: from a secular long term perspective, that's one of the 141 00:08:28,560 --> 00:08:32,680 Speaker 3: roles private capital plays and allowing these borrowers to diversify 142 00:08:32,720 --> 00:08:37,240 Speaker 3: their sources of capital to become you know, again more 143 00:08:37,280 --> 00:08:40,800 Speaker 3: more steady access across across different parts of the market cycle. 144 00:08:41,000 --> 00:08:43,560 Speaker 2: Yeah. So one of the issues that's also come up, 145 00:08:43,559 --> 00:08:46,880 Speaker 2: and you sort of alluded to it earlier, was banks 146 00:08:46,920 --> 00:08:50,480 Speaker 2: as providers of capital. So we've seen headlines saying that 147 00:08:50,600 --> 00:08:55,760 Speaker 2: JP Morgan is assigning tens of billions to direct lending. 148 00:08:56,160 --> 00:09:00,360 Speaker 2: How do you view banks increased interest? I guess in 149 00:09:00,400 --> 00:09:02,319 Speaker 2: this part of the market, do you view them as 150 00:09:02,360 --> 00:09:05,640 Speaker 2: competitors or as collaborators. 151 00:09:05,400 --> 00:09:09,720 Speaker 3: It's a symbiotic relationship. So banks have been so what 152 00:09:09,760 --> 00:09:13,240 Speaker 3: you're talking about right now is specific to corporate private credits. 153 00:09:13,240 --> 00:09:18,840 Speaker 3: So banks have been lenders to corporates, you know, forever 154 00:09:19,240 --> 00:09:25,520 Speaker 3: now that that level of involvement started to decrease post 155 00:09:25,640 --> 00:09:29,520 Speaker 3: RTC and certainly post Financial Crisis, given the regulatory reform 156 00:09:29,559 --> 00:09:31,880 Speaker 3: that got put in place that led to the growth 157 00:09:31,960 --> 00:09:34,880 Speaker 3: of the corporate private credit market. That said, banks are 158 00:09:34,920 --> 00:09:39,400 Speaker 3: still active players in that market. In addition to providing loans, 159 00:09:39,400 --> 00:09:43,280 Speaker 3: they provide other variable, valuable ancillary services to these borrowers, 160 00:09:43,320 --> 00:09:47,439 Speaker 3: should be cash management, payroll, et cetera. I think what 161 00:09:47,440 --> 00:09:51,040 Speaker 3: you're seeing now is just an evolution of that relationship 162 00:09:51,080 --> 00:09:57,080 Speaker 3: where banks are increasingly partnering with private capital as a 163 00:09:57,080 --> 00:10:02,000 Speaker 3: way to diversify their source funding. Right, in addition to deposits, 164 00:10:02,320 --> 00:10:05,120 Speaker 3: let's partner with with private capital so we could provide 165 00:10:05,160 --> 00:10:08,320 Speaker 3: solutions to our borrowers. We might be able to provide 166 00:10:08,520 --> 00:10:11,920 Speaker 3: you know, public broadly syndicated loan execution on one hand, 167 00:10:12,000 --> 00:10:14,560 Speaker 3: let's let's also have a private solution as well, so 168 00:10:15,200 --> 00:10:16,760 Speaker 3: the partnership facilitates that. 169 00:10:17,080 --> 00:10:19,360 Speaker 1: But all this is not terribly new, is it. I mean, 170 00:10:19,480 --> 00:10:22,800 Speaker 1: you know, for years, large investment films have been sort 171 00:10:22,800 --> 00:10:25,600 Speaker 1: of almost going direct to borrows and you know, lending 172 00:10:25,640 --> 00:10:29,040 Speaker 1: them money. I mean, it's it's sort of old school lending. 173 00:10:29,120 --> 00:10:30,800 Speaker 1: But what seems we knew is in term sort of 174 00:10:30,800 --> 00:10:33,400 Speaker 1: growth in some cases rebranding of parts of the market 175 00:10:33,440 --> 00:10:37,720 Speaker 1: is private. I'm wondering, you know, given the huge growth 176 00:10:37,800 --> 00:10:41,560 Speaker 1: some of the guests called it at a thirty to 177 00:10:41,559 --> 00:10:44,560 Speaker 1: forty trillion dollar market, what are the risks in that? 178 00:10:44,600 --> 00:10:47,880 Speaker 1: I mean, anything that grows that big that first seems 179 00:10:47,880 --> 00:10:50,559 Speaker 1: to have risk. Are we missing something there? 180 00:10:50,920 --> 00:10:54,560 Speaker 3: Yes, large numbers have been have been cited, but let's 181 00:10:54,640 --> 00:10:57,800 Speaker 3: let's kind of step back right. First, it was the 182 00:10:57,920 --> 00:11:03,120 Speaker 3: corporate credit market, which was almost entirely bank intermediated, and 183 00:11:03,559 --> 00:11:06,800 Speaker 3: that market had a very small private footprint, you know, 184 00:11:06,960 --> 00:11:09,320 Speaker 3: pre financial crisis about one hundred and fifty billion. As 185 00:11:09,320 --> 00:11:13,000 Speaker 3: I mentioned, that's trullion and a half today. So that growth, 186 00:11:13,000 --> 00:11:16,560 Speaker 3: of course came with net new growth of debt capital, 187 00:11:16,600 --> 00:11:19,400 Speaker 3: but it was largely driven by a share shift from 188 00:11:19,520 --> 00:11:23,280 Speaker 3: bank and capital markets. That was you know, I think 189 00:11:23,320 --> 00:11:27,160 Speaker 3: of an initial phase of disintermediation and kind of rebalancing 190 00:11:27,200 --> 00:11:32,000 Speaker 3: of how companies finance themselves between bank capital markets and 191 00:11:32,080 --> 00:11:35,640 Speaker 3: private capital. It's only a small part of the overall economy. Right, 192 00:11:35,920 --> 00:11:39,959 Speaker 3: corporate credit, you're missing commercial real estate, residential real estate, 193 00:11:40,280 --> 00:11:44,320 Speaker 3: consumer finance. These are all asset classes that historically have 194 00:11:44,600 --> 00:11:48,640 Speaker 3: been financed by banks in the securitization market that's now 195 00:11:48,679 --> 00:11:52,240 Speaker 3: opening up to private capital. Right. Key driver of that 196 00:11:52,440 --> 00:11:56,200 Speaker 3: as well is insurance, and that many of these asset 197 00:11:56,240 --> 00:11:59,560 Speaker 3: classes are investment grade in nature and fit well on 198 00:11:59,640 --> 00:12:05,360 Speaker 3: insurance its balance sheet. So it's very natural for the 199 00:12:05,400 --> 00:12:09,079 Speaker 3: growth of the market to expand significantly because we're moving 200 00:12:09,120 --> 00:12:13,160 Speaker 3: beyond corporate private private credit. And whether it's forty billion, 201 00:12:13,559 --> 00:12:18,760 Speaker 3: twenty billion, the number is almost irrelevant. Trillion, it's forty trillion, 202 00:12:19,600 --> 00:12:22,040 Speaker 3: ten billion, the number is almost irrelevant. It's going to 203 00:12:22,080 --> 00:12:24,839 Speaker 3: it should be orders of magnitude larger than the corporate market, 204 00:12:24,880 --> 00:12:28,319 Speaker 3: which is consistent with its contribution to the overall economy. 205 00:12:28,400 --> 00:12:30,280 Speaker 1: I guess my question should then be more focused on 206 00:12:30,280 --> 00:12:34,000 Speaker 1: just direct lending and the excess demand for limited number 207 00:12:34,040 --> 00:12:36,960 Speaker 1: of deals. We've had conversations along the lines of, yes, 208 00:12:37,160 --> 00:12:38,400 Speaker 1: you know, as long as you are pro as long 209 00:12:38,440 --> 00:12:39,880 Speaker 1: as you've got some experience, you know what you're doing, 210 00:12:39,920 --> 00:12:41,960 Speaker 1: you'll be fine. But all this new money, you know, 211 00:12:41,960 --> 00:12:45,160 Speaker 1: this potentially tourist money, may not be doing those those 212 00:12:45,200 --> 00:12:47,600 Speaker 1: great deals. They may be getting themselves into trouble. Risk 213 00:12:47,720 --> 00:12:49,640 Speaker 1: could be building because it's private, we can't see it. 214 00:12:49,679 --> 00:12:51,000 Speaker 1: Is that Is that a concern futile? 215 00:12:51,760 --> 00:12:54,520 Speaker 3: There's definitely been significant flow of capital into the market 216 00:12:54,559 --> 00:12:57,640 Speaker 3: if you talk about corporate direct lending specifically, A lot 217 00:12:57,679 --> 00:13:00,400 Speaker 3: of that has gone into the upper part of the 218 00:13:00,400 --> 00:13:05,160 Speaker 3: middle market and issuers who have both public and private 219 00:13:05,200 --> 00:13:08,320 Speaker 3: execution alternatives. So I think you're going to see some 220 00:13:08,440 --> 00:13:11,920 Speaker 3: volatility of share shift between those markets based on how 221 00:13:12,040 --> 00:13:14,920 Speaker 3: open the public capital markets are. We're seeing that today 222 00:13:14,960 --> 00:13:18,600 Speaker 3: and a lot of deals that were done by private 223 00:13:18,640 --> 00:13:21,200 Speaker 3: credit over the past twelve months are being you know, 224 00:13:21,240 --> 00:13:23,959 Speaker 3: refinanced in the public market. So I think I think 225 00:13:23,960 --> 00:13:26,000 Speaker 3: you're gonna you're you're going to you're gonna see that 226 00:13:26,000 --> 00:13:30,120 Speaker 3: that's going to be relatively cyclical from a risk perspective. Look, 227 00:13:30,120 --> 00:13:33,720 Speaker 3: I think there are advantages that private capital has. One 228 00:13:35,080 --> 00:13:38,240 Speaker 3: locked up nature of the capital, right, the primary risk 229 00:13:38,920 --> 00:13:43,120 Speaker 3: outside of lending to good companies is effectively matching your 230 00:13:43,160 --> 00:13:47,800 Speaker 3: assets and liabilities private capital, given the structure of these funds, 231 00:13:47,840 --> 00:13:52,679 Speaker 3: even the retail funds having certain liquidity gates and tender mechanisms, 232 00:13:52,679 --> 00:13:55,679 Speaker 3: do pretty good job of matching assets and liabilities. If 233 00:13:55,720 --> 00:13:57,560 Speaker 3: you're able to do that, you could really focus on 234 00:13:57,679 --> 00:14:02,400 Speaker 3: making good loans to good companies. And another benefit in 235 00:14:02,400 --> 00:14:06,880 Speaker 3: that regard that that private credit investors have is is 236 00:14:06,960 --> 00:14:10,760 Speaker 3: just the the the fee structure, the incentive structure. Many 237 00:14:10,800 --> 00:14:15,760 Speaker 3: of these funds have incentive fees which naturally align compensation 238 00:14:16,440 --> 00:14:20,240 Speaker 3: and with performance and the underlying manager as well, which 239 00:14:20,440 --> 00:14:23,560 Speaker 3: you don't typically get at banks and or public market. 240 00:14:23,760 --> 00:14:25,720 Speaker 1: Okay, you're also kind of, you know, having to take 241 00:14:25,760 --> 00:14:28,560 Speaker 1: a long term view on these on these borrowers, which 242 00:14:28,720 --> 00:14:31,480 Speaker 1: for macro reasons that we've discussed you know, earlier in 243 00:14:31,720 --> 00:14:35,320 Speaker 1: the podcast, are quite difficult because of you know, the 244 00:14:35,440 --> 00:14:39,880 Speaker 1: very turbulent policymaking and and all the other things that 245 00:14:39,880 --> 00:14:43,680 Speaker 1: are going on. Is that complicating your your investment decisions 246 00:14:43,840 --> 00:14:46,280 Speaker 1: and the process around it, Like, how can you see 247 00:14:47,160 --> 00:14:49,040 Speaker 1: very far into the future given all of the all 248 00:14:49,080 --> 00:14:49,920 Speaker 1: of the volatility. 249 00:14:50,280 --> 00:14:53,479 Speaker 3: Yeah, we try to focus on on cash flows, fundamental 250 00:14:53,480 --> 00:14:57,080 Speaker 3: cash flows. So if that means on the corporate side, 251 00:14:57,360 --> 00:15:02,640 Speaker 3: focusing on companies that have very diversified revenue base, could 252 00:15:02,640 --> 00:15:06,120 Speaker 3: have long term contracts in place, high degree of recurring revenue, 253 00:15:06,360 --> 00:15:10,840 Speaker 3: predictable cost structures, less reliant on consumer spending, more reliant 254 00:15:10,920 --> 00:15:15,320 Speaker 3: on corporate op x as opposed to capex. So it 255 00:15:15,360 --> 00:15:17,440 Speaker 3: gets down to the nature of the cash flows that 256 00:15:17,440 --> 00:15:21,000 Speaker 3: we're underwriting outside of corporate. If you're looking at the 257 00:15:21,040 --> 00:15:26,480 Speaker 3: asset based space broadly, if that's residential, consumer, et cetera, 258 00:15:27,280 --> 00:15:31,080 Speaker 3: many of these cash flows are shorter duration in nature. 259 00:15:31,200 --> 00:15:36,120 Speaker 3: Their loan portfolios, they're amortizing rapidly, you're not depending on 260 00:15:37,000 --> 00:15:39,320 Speaker 3: sale of an asset to get your money back. So 261 00:15:39,360 --> 00:15:42,400 Speaker 3: I think these are these are benefits, the shorter duration, 262 00:15:43,640 --> 00:15:46,240 Speaker 3: the kind of nature of the revenue, the defense of 263 00:15:46,360 --> 00:15:47,240 Speaker 3: nature of the revenue. 264 00:15:47,600 --> 00:15:49,800 Speaker 2: One of the issues that we're facing in the public 265 00:15:49,840 --> 00:15:54,320 Speaker 2: market is that yields have basically come down a lot, 266 00:15:54,400 --> 00:15:59,200 Speaker 2: what spreads have tightened a lot as well? In I 267 00:15:59,240 --> 00:16:04,400 Speaker 2: guess return in the private credit market aren't maybe as 268 00:16:04,400 --> 00:16:07,520 Speaker 2: significant as they were a couple of years ago. So 269 00:16:07,840 --> 00:16:11,200 Speaker 2: can you maybe talk about what type of returns you're 270 00:16:11,760 --> 00:16:15,360 Speaker 2: expecting this year? And so linked to that has been 271 00:16:15,400 --> 00:16:20,680 Speaker 2: the issue of a potential rise in defaults because rates 272 00:16:20,720 --> 00:16:24,640 Speaker 2: stay higher for longer. Is that a concern in the 273 00:16:24,680 --> 00:16:28,720 Speaker 2: issuers that you look at or does private credit allow 274 00:16:28,840 --> 00:16:33,160 Speaker 2: you to manage those potential defaults in a different way. 275 00:16:33,640 --> 00:16:38,160 Speaker 3: Yeah? Sure, So let's hit the default credit quality point second. 276 00:16:38,160 --> 00:16:40,640 Speaker 3: But I want to address your question on spread. So 277 00:16:42,120 --> 00:16:45,720 Speaker 3: private market will follow public markets. So just that we've 278 00:16:45,760 --> 00:16:49,400 Speaker 3: seen significant spread compression in public markets, private markets are 279 00:16:49,440 --> 00:16:51,520 Speaker 3: not immune. You know, if you look at the corporate 280 00:16:51,720 --> 00:16:57,240 Speaker 3: middle market direct lending pricing there. I look at our business, 281 00:16:57,320 --> 00:17:02,360 Speaker 3: our portfolio, we're roughly one hundred base points inside of 282 00:17:02,360 --> 00:17:04,439 Speaker 3: of where we were at this time last year, just 283 00:17:04,480 --> 00:17:08,080 Speaker 3: looking at overall spread on new investments. Of course you 284 00:17:08,160 --> 00:17:11,399 Speaker 3: have SOFA coming down as well. You put the two together, 285 00:17:11,480 --> 00:17:15,200 Speaker 3: what might have been an unlevered twelve percent gross return 286 00:17:15,320 --> 00:17:19,080 Speaker 3: is probably closer to ten today, Still very attractive double 287 00:17:19,119 --> 00:17:22,520 Speaker 3: digit return profile relative to what you can get in 288 00:17:22,560 --> 00:17:26,080 Speaker 3: the public markets. Plus you have that the downside protection 289 00:17:26,280 --> 00:17:32,080 Speaker 3: from direct origination, ability to structure documents, get covenant protection, 290 00:17:34,800 --> 00:17:38,600 Speaker 3: et cetera. So you know, pricing pricings certainly come in 291 00:17:39,880 --> 00:17:42,440 Speaker 3: and you know there will be a floor in many 292 00:17:42,480 --> 00:17:46,040 Speaker 3: instances because not all of these borrowers have access to 293 00:17:46,600 --> 00:17:49,439 Speaker 3: the public markets. So I see, you know, you're seeing 294 00:17:49,520 --> 00:17:54,159 Speaker 3: probably more extreme spread compression at the larger end of 295 00:17:54,200 --> 00:17:57,119 Speaker 3: the middle market where many of these borrowers have access 296 00:17:57,240 --> 00:18:00,280 Speaker 3: open access to the broadly syndicated loan markets, so that 297 00:18:00,280 --> 00:18:03,040 Speaker 3: that will put more pressure on pricing. 298 00:18:03,000 --> 00:18:05,119 Speaker 2: And then on defaults. You are going to talk about 299 00:18:05,119 --> 00:18:05,760 Speaker 2: those yep. 300 00:18:06,080 --> 00:18:09,960 Speaker 3: Yeah, look from from a default perspective, I look at 301 00:18:10,000 --> 00:18:13,080 Speaker 3: the past five years, and it hasn't been an environment 302 00:18:13,160 --> 00:18:17,200 Speaker 3: without stress. Right. We went through COVID. We know what 303 00:18:17,200 --> 00:18:20,920 Speaker 3: what impact that had on commercial real estate, hospitality assets 304 00:18:20,960 --> 00:18:24,679 Speaker 3: as an example, and we went through, you know, an 305 00:18:24,720 --> 00:18:28,040 Speaker 3: extremely rapid rise in rates from zero to five hundred 306 00:18:28,080 --> 00:18:30,840 Speaker 3: basis points and the impact that had on you know, 307 00:18:30,920 --> 00:18:34,560 Speaker 3: cost of borrowing, cap rates, and valuations and commercial real 308 00:18:34,680 --> 00:18:37,480 Speaker 3: estate in particular. So you know, there have been pockets 309 00:18:37,560 --> 00:18:40,280 Speaker 3: of severe stress over the past five years. I think 310 00:18:40,280 --> 00:18:44,639 Speaker 3: it's tested the market. Look, look, ultimately you will have 311 00:18:44,720 --> 00:18:48,920 Speaker 3: issuers with with borrowers, and that's why you're set up 312 00:18:50,160 --> 00:18:54,080 Speaker 3: much more effectively to proactively manage those risks as a 313 00:18:54,080 --> 00:18:59,440 Speaker 3: private investor. So getting access one to information ahead of time, 314 00:18:59,480 --> 00:19:03,280 Speaker 3: so you can identify where stresses might be emerging or 315 00:19:03,320 --> 00:19:05,760 Speaker 3: could be emerging in the future. Right should that be 316 00:19:06,040 --> 00:19:10,080 Speaker 3: you know the impact of higher rates on companies borrowing costs. 317 00:19:10,119 --> 00:19:14,359 Speaker 3: Being able to use that information to engage with a 318 00:19:14,400 --> 00:19:19,199 Speaker 3: sponsor or owner in advance of of of really an 319 00:19:19,240 --> 00:19:22,600 Speaker 3: issue becoming to the point where there's a you know, 320 00:19:22,680 --> 00:19:25,680 Speaker 3: payment default as an example. So you know we're able 321 00:19:25,680 --> 00:19:28,840 Speaker 3: to get ahead of issues, right, you can't. You can't 322 00:19:28,880 --> 00:19:32,520 Speaker 3: necessarily avoid it. You try to make good credit decisions. 323 00:19:32,600 --> 00:19:35,840 Speaker 3: But if you're able to do that with good access 324 00:19:35,840 --> 00:19:39,520 Speaker 3: to information to get ahead of potential credit issues, engage 325 00:19:39,520 --> 00:19:44,800 Speaker 3: with the owner. And two very important is as I 326 00:19:44,840 --> 00:19:49,280 Speaker 3: mentioned earlier, the patience you have. You're not a forced seller, 327 00:19:49,359 --> 00:19:52,600 Speaker 3: So anything you do from a fun structure perspective that 328 00:19:52,880 --> 00:19:55,479 Speaker 3: could put you into a position where you might have 329 00:19:55,560 --> 00:19:59,920 Speaker 3: to sell assets to repay to source liquidity for redeeming 330 00:20:00,080 --> 00:20:02,560 Speaker 3: investors or repay leverage is what you need to avoid 331 00:20:02,560 --> 00:20:05,160 Speaker 3: in these situations. If you have the time and you've 332 00:20:05,200 --> 00:20:08,280 Speaker 3: made good credit decisions, you're going to be able to 333 00:20:08,400 --> 00:20:10,960 Speaker 3: work through assets, especially as a creditor with a you know, 334 00:20:11,000 --> 00:20:12,720 Speaker 3: significant equity cushion below you. 335 00:20:13,200 --> 00:20:15,800 Speaker 1: So in direct lending right now to a US corporation, 336 00:20:16,040 --> 00:20:18,760 Speaker 1: how much more would you get by doing it private 337 00:20:18,840 --> 00:20:20,920 Speaker 1: as an investor compared to public markets. 338 00:20:21,280 --> 00:20:25,320 Speaker 3: Yeah, Look, there's a pretty persistent illiquidity premium one hundred 339 00:20:25,359 --> 00:20:29,440 Speaker 3: and fifty two hundred basis points. And even as rates 340 00:20:29,680 --> 00:20:33,320 Speaker 3: both spreads base rates have come in that premiums remain 341 00:20:33,800 --> 00:20:37,720 Speaker 3: fairly persistent historically. Now, now that's just the gross premium 342 00:20:37,760 --> 00:20:40,640 Speaker 3: you're going to get, you know, I do want you've 343 00:20:40,680 --> 00:20:46,600 Speaker 3: got to focus on the downside protection as well. And look, 344 00:20:46,840 --> 00:20:51,000 Speaker 3: the data proves it out from a historical default perspective 345 00:20:51,080 --> 00:20:54,920 Speaker 3: and recoveries, defaults being low, recoveries being higher. Investing in 346 00:20:55,680 --> 00:21:00,359 Speaker 3: privately versus public markets. But intuitively that makes sense. You 347 00:21:00,440 --> 00:21:04,280 Speaker 3: are able to conduct much more robust diligence, You're able 348 00:21:04,280 --> 00:21:07,360 Speaker 3: to have much better access to management. Right you are 349 00:21:07,400 --> 00:21:11,720 Speaker 3: typically the only lender, if not member of a smaller 350 00:21:12,200 --> 00:21:15,240 Speaker 3: like minded club of lenders as opposed to a large syndicate. Right, 351 00:21:15,320 --> 00:21:17,159 Speaker 3: that all is very beneficial from us that. 352 00:21:17,240 --> 00:21:19,600 Speaker 1: Some people would say that the default cycle hasn't really 353 00:21:19,760 --> 00:21:21,360 Speaker 1: you know, you haven't had one that hasn't been the test. 354 00:21:21,520 --> 00:21:24,359 Speaker 1: You haven't had a recession. So how can you prove 355 00:21:24,400 --> 00:21:26,320 Speaker 1: that data? I mean, are you going to find out 356 00:21:26,320 --> 00:21:28,680 Speaker 1: when when the economy turns down? Yeah? 357 00:21:28,760 --> 00:21:30,199 Speaker 3: No, I mean it's back to my point. I think 358 00:21:30,240 --> 00:21:33,000 Speaker 3: the past five years you've had some real pockets of stress. 359 00:21:33,040 --> 00:21:37,560 Speaker 3: It hasn't been a traditional garden variety recession. You know, 360 00:21:37,560 --> 00:21:39,840 Speaker 3: we had COVID and we had a rapid rise in raids. 361 00:21:39,960 --> 00:21:42,440 Speaker 3: But you know what, what did the impact of those 362 00:21:42,480 --> 00:21:46,120 Speaker 3: two events had one? You know, the source of revenue 363 00:21:46,280 --> 00:21:49,439 Speaker 3: for many borrowers shut off overnight if you're you know 364 00:21:49,920 --> 00:21:53,720 Speaker 3: a hotel as an example, right, and you know cost 365 00:21:53,800 --> 00:21:57,960 Speaker 3: of borrowing cash flow, you know, massive impact given the 366 00:21:58,040 --> 00:21:59,440 Speaker 3: rise in rates. I think we've been through a pretty 367 00:21:59,440 --> 00:22:00,320 Speaker 3: stressful ironment. 368 00:22:00,480 --> 00:22:02,880 Speaker 1: Okay, And so this one fifty to two hundred base 369 00:22:02,880 --> 00:22:05,919 Speaker 1: point premium for private against public do you think that 370 00:22:05,960 --> 00:22:09,440 Speaker 1: holds on the liquidity premium alone? Do you think we're 371 00:22:09,480 --> 00:22:12,119 Speaker 1: going to get squashed as everyone pals in more with 372 00:22:12,160 --> 00:22:12,840 Speaker 1: the private side. 373 00:22:13,000 --> 00:22:17,320 Speaker 3: Look, I think there's an element of if that premium 374 00:22:17,600 --> 00:22:22,200 Speaker 3: gets too small, then as an investor, you're going to 375 00:22:22,240 --> 00:22:25,240 Speaker 3: start to question why am I locking my capital up? 376 00:22:25,560 --> 00:22:28,400 Speaker 3: So I think there's a self correcting mechanism. 377 00:22:28,600 --> 00:22:28,800 Speaker 1: Yeah. 378 00:22:28,920 --> 00:22:32,160 Speaker 3: Probably. One of the reasons it's been so historical, been 379 00:22:32,200 --> 00:22:34,600 Speaker 3: so you know, consistent historically, is. 380 00:22:34,520 --> 00:22:36,479 Speaker 1: That one hundred basis points that's too low. I mean, 381 00:22:36,520 --> 00:22:38,359 Speaker 1: what's what's the level that people jump out to. 382 00:22:38,760 --> 00:22:42,080 Speaker 3: Yeah, no, I think that one hundred and fifty to 383 00:22:42,119 --> 00:22:45,560 Speaker 3: two hundred basis point level is good. Now that that's 384 00:22:45,680 --> 00:22:52,080 Speaker 3: only for now. Private credit the universe and the definition 385 00:22:52,160 --> 00:22:55,000 Speaker 3: of what is private credit is expanding, you reference, you know, 386 00:22:55,040 --> 00:22:57,920 Speaker 3: some of those large numbers earlier. Key driver behind the 387 00:22:57,960 --> 00:23:01,080 Speaker 3: growth of the market is also the expansion of investment 388 00:23:01,119 --> 00:23:04,800 Speaker 3: great private credit, where in some instances you're getting a 389 00:23:04,800 --> 00:23:07,240 Speaker 3: fifty basis point pick up to what you can get 390 00:23:07,240 --> 00:23:10,400 Speaker 3: in the corporate high yield market and higher. So as 391 00:23:10,400 --> 00:23:13,840 Speaker 3: you move up quality, that that that premium that that 392 00:23:13,920 --> 00:23:14,439 Speaker 3: you need. 393 00:23:15,119 --> 00:23:17,800 Speaker 1: Well, so sorry, this one fifty that applies to just 394 00:23:18,359 --> 00:23:19,240 Speaker 1: high yield, is it? 395 00:23:19,480 --> 00:23:21,879 Speaker 3: I'm thinking of that as in the context of corporate 396 00:23:21,920 --> 00:23:25,800 Speaker 3: direct lend and what that spread premium has been historically interesting. 397 00:23:26,000 --> 00:23:31,600 Speaker 2: Okay, Matt, you mentioned the pandemic, and definitely it did 398 00:23:32,280 --> 00:23:37,639 Speaker 2: lead to some almost shocking or valuations in real estate 399 00:23:37,920 --> 00:23:43,200 Speaker 2: in particular, which you've also mentioned, not just hotels or offices, 400 00:23:43,240 --> 00:23:46,000 Speaker 2: but even residential even though we stay safe as houses 401 00:23:46,040 --> 00:23:49,520 Speaker 2: and so when we've seen some residential landlords come under 402 00:23:49,760 --> 00:23:54,440 Speaker 2: very significant strain. Looking at the real estate sector now 403 00:23:54,480 --> 00:23:58,880 Speaker 2: at Alion Spernstein, do you still see opportunity given how 404 00:23:59,000 --> 00:24:01,439 Speaker 2: much of a recovery we've seen, at least in the 405 00:24:01,440 --> 00:24:05,480 Speaker 2: public market, or do you think that it's run its 406 00:24:05,520 --> 00:24:08,199 Speaker 2: course and it's time to be looking at other sectors. 407 00:24:08,280 --> 00:24:10,000 Speaker 2: Now that's for real estate in general, and I have 408 00:24:10,800 --> 00:24:12,840 Speaker 2: another question on offices after maybe. 409 00:24:13,080 --> 00:24:16,760 Speaker 3: Yeah. So commercial real estate is a global markets, very 410 00:24:16,800 --> 00:24:19,840 Speaker 3: local market, so you really can't paint it with one 411 00:24:19,880 --> 00:24:26,000 Speaker 3: broad brush. So, plus, there are differences in investment opportunities, 412 00:24:26,119 --> 00:24:28,920 Speaker 3: ranging from on the credit side, on the dead side, 413 00:24:28,960 --> 00:24:35,000 Speaker 3: financing cash flowing stabilized core properties, all through investing in 414 00:24:35,040 --> 00:24:39,520 Speaker 3: opportunistic assets, buying assets at a discount, et cetera. So 415 00:24:39,560 --> 00:24:44,480 Speaker 3: from a market perspective, we're certainly a bottoming in a recovery. 416 00:24:45,000 --> 00:24:47,920 Speaker 3: Right you look at how open. The capital markets are 417 00:24:48,040 --> 00:24:51,240 Speaker 3: for financing commercial real estate, in particular high quality assets. 418 00:24:51,640 --> 00:24:55,520 Speaker 3: You look at transaction volume, you look at property valuations. 419 00:24:56,359 --> 00:25:00,359 Speaker 3: Really across asset classes where we're seeing a recovery, you 420 00:25:00,480 --> 00:25:03,480 Speaker 3: kind of step back and look under the hood. There. 421 00:25:03,640 --> 00:25:07,320 Speaker 3: You take office as an example, there still is a 422 00:25:08,119 --> 00:25:12,560 Speaker 3: bifurcation in terms of in that asset class. You have 423 00:25:13,359 --> 00:25:19,320 Speaker 3: high quality, new vintage, highly immanetized buildings, which are highly 424 00:25:19,320 --> 00:25:24,200 Speaker 3: financible capital markets today, public and private. You compare that 425 00:25:24,240 --> 00:25:27,960 Speaker 3: with with older office buildings, which still might be in 426 00:25:28,000 --> 00:25:32,119 Speaker 3: a challenging situation from a leasing current future leasing perspective, 427 00:25:32,119 --> 00:25:33,640 Speaker 3: that will continue to have challenges. 428 00:25:34,080 --> 00:25:39,720 Speaker 2: You basically sound quite positive on the outlook for select 429 00:25:40,320 --> 00:25:42,840 Speaker 2: office real estate, if I can say that. But one 430 00:25:42,840 --> 00:25:46,280 Speaker 2: of the issues I guess with those high quality, super 431 00:25:46,320 --> 00:25:51,600 Speaker 2: efficient newer buildings is that everyone seems to be looking 432 00:25:51,640 --> 00:25:55,960 Speaker 2: at them. So the margins, I guess might be squeezed, 433 00:25:56,240 --> 00:26:00,480 Speaker 2: the returns might be much lower. So at what point 434 00:26:00,520 --> 00:26:02,760 Speaker 2: do you think people will start to look at those 435 00:26:03,040 --> 00:26:08,639 Speaker 2: sort of see lower tier offices and other real estate 436 00:26:09,600 --> 00:26:14,040 Speaker 2: because the returns on the top tier are so squeezed. 437 00:26:14,440 --> 00:26:18,600 Speaker 3: Yeah, I mean, look from our perspective, We've got a 438 00:26:18,720 --> 00:26:22,720 Speaker 3: global strategy. We've got a footprint in the US and Europe, 439 00:26:22,960 --> 00:26:28,520 Speaker 3: so we finance across property types, and we also have 440 00:26:28,560 --> 00:26:35,359 Speaker 3: the flexibility to provide both on the performing, high quality 441 00:26:35,600 --> 00:26:39,159 Speaker 3: you know, core core plus type of financing all the 442 00:26:39,160 --> 00:26:42,080 Speaker 3: way through opportunistic. So I think important in the market 443 00:26:42,160 --> 00:26:46,520 Speaker 3: particular today is having a broad strategy. You're not focused 444 00:26:46,560 --> 00:26:50,080 Speaker 3: on one particular asset class, where you could really pivot 445 00:26:50,119 --> 00:26:52,120 Speaker 3: to where where the opportunity is and where you see 446 00:26:52,119 --> 00:26:53,760 Speaker 3: the best relative value for your investors. 447 00:26:54,040 --> 00:26:58,000 Speaker 2: Another question, also focused on real estate. You mentioned obviously 448 00:26:58,040 --> 00:27:02,520 Speaker 2: you are a truly global player, but a lot of 449 00:27:02,520 --> 00:27:05,680 Speaker 2: the comparison this day these days has been US versus 450 00:27:05,760 --> 00:27:09,159 Speaker 2: the rest of the world. So considering the real estate sector, 451 00:27:09,160 --> 00:27:12,720 Speaker 2: where do you think the greater opportunity is within the 452 00:27:12,840 --> 00:27:17,520 Speaker 2: US or maybe there are other geographies where people should 453 00:27:17,600 --> 00:27:20,399 Speaker 2: be looking at private credit real estate. 454 00:27:20,800 --> 00:27:22,720 Speaker 3: Yes, so on the real estate side, again, I would 455 00:27:22,720 --> 00:27:28,640 Speaker 3: anchor back to the markets being extremely local. Local location matters, 456 00:27:29,640 --> 00:27:31,760 Speaker 3: But I think Europe is an interesting place to be 457 00:27:31,880 --> 00:27:36,080 Speaker 3: right now from a commercial real estate debt perspective. It 458 00:27:36,200 --> 00:27:39,800 Speaker 3: is a market that is less efficient than the US 459 00:27:40,440 --> 00:27:43,200 Speaker 3: in terms of providers of capital right, So you get 460 00:27:43,200 --> 00:27:47,400 Speaker 3: a benefit there. Now, I think you've still given that 461 00:27:48,160 --> 00:27:51,760 Speaker 3: smaller you know, kind of universe of private capital suppliers 462 00:27:52,000 --> 00:27:55,600 Speaker 3: you can you know, on the margin those transactions, you know, 463 00:27:55,680 --> 00:27:59,640 Speaker 3: get get better structure, get better terms, better covenants in place. 464 00:27:59,640 --> 00:28:03,200 Speaker 3: Again a supply demand dynamic which makes you know you're 465 00:28:03,320 --> 00:28:06,440 Speaker 3: particularly attractive. You know that that's that that's that's one. 466 00:28:06,520 --> 00:28:07,480 Speaker 3: That's one perspective. 467 00:28:07,800 --> 00:28:12,720 Speaker 2: And just within Europe, are there specific countries that ALIGNE 468 00:28:12,720 --> 00:28:16,560 Speaker 2: spent ting has been looking at or sub sectors maybe. 469 00:28:16,640 --> 00:28:21,199 Speaker 2: I mean we've seen quite a significant recovery in the 470 00:28:21,280 --> 00:28:24,160 Speaker 2: more sector in shopping for instance, and we even had 471 00:28:24,200 --> 00:28:26,879 Speaker 2: one issue where upgraded recently. Is that an area that 472 00:28:26,920 --> 00:28:30,000 Speaker 2: you're looking at or is it more at the offices 473 00:28:30,040 --> 00:28:31,160 Speaker 2: that we mentioned. 474 00:28:31,560 --> 00:28:35,239 Speaker 3: Yeah, I would say, just stepping back, we we do 475 00:28:35,320 --> 00:28:37,720 Speaker 3: have a broad mandate in terms of end market. It's 476 00:28:37,760 --> 00:28:40,719 Speaker 3: one of the areas that we we have found attractive 477 00:28:40,760 --> 00:28:45,040 Speaker 3: continue to find attractive. You know, speaking of Europe, is 478 00:28:45,040 --> 00:28:50,200 Speaker 3: is in multifamily particular assisted living. So you've got real 479 00:28:50,280 --> 00:28:57,400 Speaker 3: benefit you know, tailwind aging population as individuals move from 480 00:28:57,440 --> 00:29:02,280 Speaker 3: single family homes, uh and and progress. Right, there's there's 481 00:29:02,320 --> 00:29:05,840 Speaker 3: an attractive supply demand imbalance and the assisted living side. 482 00:29:05,880 --> 00:29:08,440 Speaker 3: We think that's an interesting space from a commercial real 483 00:29:08,560 --> 00:29:09,280 Speaker 3: estate perspective. 484 00:29:09,520 --> 00:29:13,680 Speaker 2: And within assisted living, are there specific countries that you 485 00:29:13,760 --> 00:29:17,640 Speaker 2: think offer greater opportunity than others. The other issue with 486 00:29:17,760 --> 00:29:20,680 Speaker 2: assisted living is the amount of regulation of course, so 487 00:29:20,960 --> 00:29:24,080 Speaker 2: there are standard of course in terms of the type 488 00:29:24,080 --> 00:29:27,480 Speaker 2: of facility and so on, and sometimes I guess that 489 00:29:27,600 --> 00:29:30,480 Speaker 2: can affect your margins. Is that a concern when you're 490 00:29:30,480 --> 00:29:34,520 Speaker 2: looking at these social housing? Were those types of housing provided? 491 00:29:34,880 --> 00:29:38,560 Speaker 3: Yeah, all all concerns. Look in terms of all things 492 00:29:38,560 --> 00:29:41,720 Speaker 3: we focus on. In terms of the markets, I would say, 493 00:29:41,760 --> 00:29:46,000 Speaker 3: you know, UK is the largest, but we gotta we 494 00:29:46,040 --> 00:29:49,600 Speaker 3: have a full European footprint. We actively look at opportunities 495 00:29:49,600 --> 00:29:50,640 Speaker 3: in the continent as well. 496 00:29:51,040 --> 00:29:54,120 Speaker 1: How do you stay ahead of the competition? What's your 497 00:29:54,600 --> 00:29:57,960 Speaker 1: edge in terms of you know, private alternatives because everyone 498 00:29:58,000 --> 00:30:01,440 Speaker 1: wants to be there. I think Globin Lusty said that 499 00:30:01,480 --> 00:30:05,160 Speaker 1: there's any going to be ten players left. After all 500 00:30:05,240 --> 00:30:08,760 Speaker 1: it gets shaken out and everybody's acquiring and everybody's you know, 501 00:30:09,120 --> 00:30:09,960 Speaker 1: trying to scale up. 502 00:30:10,160 --> 00:30:13,440 Speaker 3: What do you do and look, it starts with the 503 00:30:13,480 --> 00:30:16,480 Speaker 3: experience we have in the market, so you know our business, 504 00:30:17,960 --> 00:30:21,560 Speaker 3: you know We largely built that from scratch over a 505 00:30:21,560 --> 00:30:25,680 Speaker 3: period of fifteen years through a combination of team liftouts, 506 00:30:26,280 --> 00:30:31,160 Speaker 3: build outs, main acquisition. About two years ago, Carballe Investors 507 00:30:31,200 --> 00:30:35,320 Speaker 3: rebranded ab Carbal Investors. So it starts with having kind 508 00:30:35,320 --> 00:30:40,760 Speaker 3: of the quality of the team investment process, your ability 509 00:30:40,760 --> 00:30:44,600 Speaker 3: to source differentiated transactions and kind of execute them on 510 00:30:44,640 --> 00:30:48,640 Speaker 3: a consistent basis. So, you know, having that team focus 511 00:30:48,720 --> 00:30:52,200 Speaker 3: and that that coverage across markets, right, that allows us 512 00:30:52,280 --> 00:30:57,400 Speaker 3: to you know, grow our relationship with borrowers, execute on 513 00:30:57,880 --> 00:31:02,280 Speaker 3: repeat business and grow the business. Right the reality is over. 514 00:31:02,360 --> 00:31:05,760 Speaker 3: You know, from time to time transactions we're looking at 515 00:31:06,320 --> 00:31:13,600 Speaker 3: will will rhyme. We'll see similar types of companies, issuers, industries, controversies, 516 00:31:13,640 --> 00:31:17,800 Speaker 3: and our experience gives us an edge in the market, 517 00:31:18,000 --> 00:31:20,000 Speaker 3: right in terms of past transactions. 518 00:31:20,520 --> 00:31:23,400 Speaker 2: In that context, do you still think that there's room 519 00:31:23,560 --> 00:31:26,800 Speaker 2: for so called niche or small players, because I guess 520 00:31:26,800 --> 00:31:30,640 Speaker 2: one of the issues with being an asset manager of 521 00:31:30,680 --> 00:31:36,640 Speaker 2: your size approaching a trillion a UM, potentially one of 522 00:31:36,680 --> 00:31:40,240 Speaker 2: the issues might be that you can't be as nimble 523 00:31:40,520 --> 00:31:45,320 Speaker 2: as some others, and perhaps in terms of the size 524 00:31:45,360 --> 00:31:48,440 Speaker 2: of the opportunity for an opportunity to really make a 525 00:31:48,480 --> 00:31:52,400 Speaker 2: difference to your overall return, it has to be quite 526 00:31:52,760 --> 00:31:55,920 Speaker 2: a significant one. So do you think there's there's still 527 00:31:55,960 --> 00:31:59,520 Speaker 2: a room for these niche asset manager or do you 528 00:31:59,560 --> 00:32:03,520 Speaker 2: think we'll continue to see consolidation in the sector. 529 00:32:04,480 --> 00:32:06,360 Speaker 3: I always think that. I think you're always going to 530 00:32:06,440 --> 00:32:11,720 Speaker 3: have certain asset classes that are more niche, more limited 531 00:32:11,720 --> 00:32:16,160 Speaker 3: capacity in nature that you know, warrant smaller specialist firms. 532 00:32:16,200 --> 00:32:18,400 Speaker 3: I think that's going to remain true. I think the 533 00:32:18,720 --> 00:32:21,720 Speaker 3: other trend that you have in the market is, you know, 534 00:32:21,720 --> 00:32:24,680 Speaker 3: as we talked about, one of the key drivers of 535 00:32:24,720 --> 00:32:27,440 Speaker 3: the growth in private credit broadly and the growth of 536 00:32:27,480 --> 00:32:31,520 Speaker 3: corporate private credit, the expansion beyond corporate private credit to 537 00:32:31,600 --> 00:32:36,280 Speaker 3: asset based finance is you know, growth in retail and 538 00:32:36,320 --> 00:32:42,560 Speaker 3: particular growth in uh A insurance capital. So the insurance 539 00:32:42,600 --> 00:32:45,720 Speaker 3: side in particular, given that you're focused on investment grade 540 00:32:45,800 --> 00:32:47,960 Speaker 3: private credit and it's a larger part of the overall 541 00:32:48,000 --> 00:32:53,320 Speaker 3: capital structure, leads to larger scale and to be a 542 00:32:53,440 --> 00:32:56,360 Speaker 3: relevant provider of capital in that market. I do think 543 00:32:56,400 --> 00:32:58,600 Speaker 3: you need you need to be larger. Right You're providing 544 00:32:59,240 --> 00:33:03,640 Speaker 3: solutions to borrowers that include everything from investment grade execution 545 00:33:03,800 --> 00:33:06,600 Speaker 3: through opportunistic, and I think that that does lead to 546 00:33:07,560 --> 00:33:11,800 Speaker 3: needing a larger platform to stay competitive. So I think 547 00:33:11,840 --> 00:33:14,640 Speaker 3: you can have both trends, Like you're still going to 548 00:33:14,720 --> 00:33:19,160 Speaker 3: have very successful specialist niche firms that stick to their 549 00:33:20,000 --> 00:33:24,320 Speaker 3: domain focus manage capacity effectively, and on the other end, 550 00:33:24,360 --> 00:33:28,280 Speaker 3: you're going to have growth of larger private credit firms 551 00:33:28,360 --> 00:33:32,200 Speaker 3: across asset classes with the client base from you know, 552 00:33:32,360 --> 00:33:38,440 Speaker 3: insurance through through institutional and investment grade through opportunistic, which 553 00:33:38,840 --> 00:33:43,000 Speaker 3: necessitates I think the larger scale to compete effectively. 554 00:33:43,680 --> 00:33:46,040 Speaker 1: Then going back to where we started about ETFs, do 555 00:33:46,120 --> 00:33:48,480 Speaker 1: they really make sense for this? I mean there's no liquidity, really, 556 00:33:48,520 --> 00:33:51,160 Speaker 1: no daily liquidity, So how can an ETF work in 557 00:33:51,320 --> 00:33:51,960 Speaker 1: private credit? 558 00:33:52,360 --> 00:33:58,720 Speaker 3: The ETF rapper has various advantages, Now, how successful will 559 00:33:58,720 --> 00:34:02,040 Speaker 3: it be in private credit? I think that's an open question. 560 00:34:02,200 --> 00:34:08,440 Speaker 3: One concern I have as you start to introduce more 561 00:34:08,480 --> 00:34:13,160 Speaker 3: and more liquidity to private credit, to illiquid investments, and 562 00:34:13,280 --> 00:34:16,160 Speaker 3: the provider of that liquidity is going to need to 563 00:34:16,200 --> 00:34:20,640 Speaker 3: be compensated, how much of that illiquidity premium gets eroded? 564 00:34:21,000 --> 00:34:25,040 Speaker 3: And then just from an investor's perspective, are you better 565 00:34:25,080 --> 00:34:27,880 Speaker 3: off in that vehicle or are you better off taking 566 00:34:27,920 --> 00:34:32,800 Speaker 3: public exposure in a pure form. So we talked about 567 00:34:32,800 --> 00:34:36,799 Speaker 3: what is the right Where does the illiquidity premium settle out? 568 00:34:37,920 --> 00:34:40,480 Speaker 3: I think it's going to be determined by the end investor, 569 00:34:40,560 --> 00:34:44,360 Speaker 3: and what extra form of compensation in terms of yielder 570 00:34:44,440 --> 00:34:48,440 Speaker 3: return you need to generate for locking your capital up. 571 00:34:48,560 --> 00:34:51,840 Speaker 2: I think there's a view I guess that the lines 572 00:34:51,920 --> 00:34:54,960 Speaker 2: might become increasingly bled between public and private, which goes 573 00:34:55,000 --> 00:35:00,359 Speaker 2: to your point about being adequately compensated to go from 574 00:35:00,360 --> 00:35:04,640 Speaker 2: one to the other. So maybe maybe that's sort of 575 00:35:04,920 --> 00:35:09,560 Speaker 2: one of the risks. But what would you say keeps 576 00:35:09,840 --> 00:35:14,600 Speaker 2: you up at night most looking at alternative credit? Would 577 00:35:14,640 --> 00:35:18,400 Speaker 2: it be that, as in bloodlines between private and public 578 00:35:18,600 --> 00:35:21,759 Speaker 2: or are there other risks that you think that one 579 00:35:21,760 --> 00:35:22,520 Speaker 2: should be aware of. 580 00:35:23,040 --> 00:35:25,680 Speaker 3: Yes, so we talk a lot. There is a lot 581 00:35:25,719 --> 00:35:28,600 Speaker 3: of talk about the blurring line between public and private. 582 00:35:28,640 --> 00:35:35,560 Speaker 3: That the reality for issuers of a certain size, you 583 00:35:35,719 --> 00:35:40,760 Speaker 3: always had that alternative right to choose between public execution 584 00:35:40,880 --> 00:35:45,200 Speaker 3: and private execution. So what we've seen over the past 585 00:35:45,560 --> 00:35:48,279 Speaker 3: three or so years at the large end of the 586 00:35:48,320 --> 00:35:52,320 Speaker 3: corporate private credit market is an example of that. Issuers 587 00:35:52,400 --> 00:35:57,040 Speaker 3: have access to both broadly syndicated markets, private markets, and 588 00:35:57,600 --> 00:36:01,600 Speaker 3: you know, while there are benefit fits to private execution 589 00:36:01,760 --> 00:36:06,360 Speaker 3: in terms of speed, certainty, structural flexibility, when the public 590 00:36:06,440 --> 00:36:10,279 Speaker 3: capital markets are open, the investor demand is there and 591 00:36:10,920 --> 00:36:16,200 Speaker 3: the pricing makes sense, those issuers will make logical economic decisions. 592 00:36:16,239 --> 00:36:21,960 Speaker 3: So I think that that blur, that that gray space continues, 593 00:36:22,200 --> 00:36:25,000 Speaker 3: in particular for larger issuers. We saw it in corporate, 594 00:36:25,440 --> 00:36:29,160 Speaker 3: You're going to see it in other forms of asset 595 00:36:29,239 --> 00:36:32,719 Speaker 3: that asset based finance. You know, if it's a non bank, 596 00:36:32,840 --> 00:36:37,440 Speaker 3: specially finance company looking to finance its origination, do you 597 00:36:37,480 --> 00:36:43,280 Speaker 3: focus on the capital markets, curitization markets, private financing, bank financing, 598 00:36:43,320 --> 00:36:46,439 Speaker 3: It's probably a combination of all three different percentages based 599 00:36:46,480 --> 00:36:49,759 Speaker 3: on where you are in the cycle. So I think 600 00:36:49,800 --> 00:36:51,360 Speaker 3: that I think that continues. 601 00:36:52,040 --> 00:36:54,560 Speaker 1: What kind of questions your clients ask you when you're fundraising? 602 00:36:54,760 --> 00:36:56,640 Speaker 1: I mean, what do they do they get private credit? Now? 603 00:36:56,719 --> 00:36:59,120 Speaker 1: Is it so well known that I mean, I still 604 00:36:59,160 --> 00:37:01,000 Speaker 1: get a lot of confusion, and so what kind of 605 00:37:01,040 --> 00:37:01,960 Speaker 1: questions are they asking you? 606 00:37:02,040 --> 00:37:04,560 Speaker 3: Yeah, no, look to to the to the earlier point. 607 00:37:05,120 --> 00:37:07,120 Speaker 3: We do get the question what what keeps you up 608 00:37:07,160 --> 00:37:11,040 Speaker 3: at nights? A natural question, I think, you know, for 609 00:37:11,040 --> 00:37:17,240 Speaker 3: for me, it gets back to UH, liquidity and ensuring 610 00:37:17,360 --> 00:37:22,040 Speaker 3: that you know, we as private investors are effectively matching 611 00:37:22,640 --> 00:37:25,800 Speaker 3: assets and liability. That the beauty of this asset class 612 00:37:25,920 --> 00:37:29,719 Speaker 3: is the time it gives you right to work out 613 00:37:29,719 --> 00:37:33,600 Speaker 3: of issues should should should they come to should should 614 00:37:33,680 --> 00:37:37,799 Speaker 3: you have them on the credit side. So as as 615 00:37:37,840 --> 00:37:40,800 Speaker 3: we're growing in retail, look, by the way, there there 616 00:37:40,840 --> 00:37:44,000 Speaker 3: the retail vehicles that we have today, the interval funds, 617 00:37:44,440 --> 00:37:50,760 Speaker 3: public non traded BDCs. They have the structural features in place, 618 00:37:50,840 --> 00:37:54,480 Speaker 3: if it's maximum percentage of shares that could be tendered, 619 00:37:54,800 --> 00:37:59,640 Speaker 3: or quarterly gates that are designed to protect existing investors. 620 00:37:59,680 --> 00:38:01,640 Speaker 3: And if we if we look at what happened with 621 00:38:01,760 --> 00:38:06,560 Speaker 3: b read as an example, you know, the the vehicle 622 00:38:06,719 --> 00:38:12,080 Speaker 3: kind of proved its efficacy. Now uh, you know, the 623 00:38:12,400 --> 00:38:15,239 Speaker 3: vehicle proved its efficacy and in terms of protecting and 624 00:38:16,239 --> 00:38:19,400 Speaker 3: the current investors and and gating at the appropriate level 625 00:38:20,640 --> 00:38:24,000 Speaker 3: in terms of other themes as we engage with clients 626 00:38:24,080 --> 00:38:27,040 Speaker 3: that there's definitely uh, there has been a shift in 627 00:38:27,120 --> 00:38:30,879 Speaker 3: focus on liquidity, right that that's not new, what's been 628 00:38:30,880 --> 00:38:35,839 Speaker 3: with us for some time and and and really focusing 629 00:38:35,960 --> 00:38:41,040 Speaker 3: on distributions or or dp I. In addition, to I 630 00:38:41,280 --> 00:38:43,719 Speaker 3: r R as a return metric. So in addition the 631 00:38:43,760 --> 00:38:46,640 Speaker 3: I r R this investment is generated, which may not 632 00:38:46,760 --> 00:38:50,759 Speaker 3: be realized. What are the cash distributions relative to the 633 00:38:50,760 --> 00:38:54,360 Speaker 3: capital I've paid in that I'm seeing? So, uh, we're 634 00:38:54,520 --> 00:38:56,759 Speaker 3: you know, institutional investors are a lot more focused on 635 00:38:56,800 --> 00:39:00,440 Speaker 3: liquidity as transaction volumes have slowed down, repaid inments have 636 00:39:00,520 --> 00:39:04,160 Speaker 3: slowed down, realizations have slowed down. So that's a big, 637 00:39:04,760 --> 00:39:07,320 Speaker 3: a large area of focus. The other the other area 638 00:39:08,200 --> 00:39:13,759 Speaker 3: in private credit broadly would be, you know, one, as 639 00:39:13,800 --> 00:39:17,880 Speaker 3: institutions look to grow their core corporate private credit allocation, 640 00:39:18,320 --> 00:39:21,160 Speaker 3: how do I continue to grow that allocation and do 641 00:39:21,239 --> 00:39:24,320 Speaker 3: in a way that's diversifying. This is where asset based 642 00:39:24,320 --> 00:39:28,040 Speaker 3: finance comes into play, where you can generate comparable returns, 643 00:39:28,680 --> 00:39:32,480 Speaker 3: but generate those returns by taking totally different risks consumer 644 00:39:32,600 --> 00:39:36,640 Speaker 3: versus corporate as an example, do it on a shorter 645 00:39:36,760 --> 00:39:41,720 Speaker 3: duration as well. So you know, the notion of asset 646 00:39:41,760 --> 00:39:45,880 Speaker 3: based finances diversifier a corporate private credit is coming through 647 00:39:45,920 --> 00:39:47,560 Speaker 3: a lot of client conversations as well. 648 00:39:48,080 --> 00:39:49,680 Speaker 1: Can I ask you, Matt, why you think the best 649 00:39:49,719 --> 00:39:51,560 Speaker 1: relative value is right now? In terms of you know, 650 00:39:51,680 --> 00:39:54,520 Speaker 1: everything you look at there's a ton of stuff. It's 651 00:39:54,560 --> 00:39:56,920 Speaker 1: a huge question. But and with near the end of 652 00:39:56,960 --> 00:39:59,160 Speaker 1: the podcast, but where is the relative value? 653 00:39:59,200 --> 00:39:59,239 Speaker 2: What? 654 00:39:59,440 --> 00:40:01,120 Speaker 1: What do people where should they go? 655 00:40:01,840 --> 00:40:04,600 Speaker 3: Yeah, so I'll answer that question first the kind of 656 00:40:04,600 --> 00:40:09,480 Speaker 3: preface of you know, our strategies we're typically deploying over 657 00:40:09,520 --> 00:40:14,120 Speaker 3: a two to three year period, so given that we're 658 00:40:14,120 --> 00:40:17,640 Speaker 3: not making a specific relative value call at the moment, 659 00:40:18,520 --> 00:40:23,440 Speaker 3: we're looking for good companies, good borrowers, good industries, good 660 00:40:23,680 --> 00:40:26,280 Speaker 3: stable cash flow profiles, and we get our arms around. 661 00:40:28,000 --> 00:40:30,799 Speaker 3: So with that as kind of a background to how 662 00:40:30,800 --> 00:40:33,760 Speaker 3: we're operating and how we're investing. Look, I think parts 663 00:40:33,760 --> 00:40:36,520 Speaker 3: of the private credit market are interesting now in asset 664 00:40:36,520 --> 00:40:43,600 Speaker 3: based finance where we have there there are still you know, 665 00:40:43,719 --> 00:40:48,680 Speaker 3: if it is banks, you know, even an environment where 666 00:40:49,080 --> 00:40:55,520 Speaker 3: regulations will probably become more less restrictive, not more restrictive 667 00:40:55,520 --> 00:40:57,760 Speaker 3: in the US certainly, maybe less so in Europe. Banks 668 00:40:57,800 --> 00:41:03,280 Speaker 3: are increasingly looking for partners that their model is continuing 669 00:41:03,280 --> 00:41:06,480 Speaker 3: to transition to a more capital light originate and distribution 670 00:41:06,880 --> 00:41:11,800 Speaker 3: originate to distribute models. So that's creating interesting opportunities in 671 00:41:12,040 --> 00:41:16,320 Speaker 3: asset based finance for lenders who have a long standing 672 00:41:16,320 --> 00:41:20,719 Speaker 3: footprint in the market. Who understand the underlying asset classes. 673 00:41:20,760 --> 00:41:22,880 Speaker 3: So I think that's a that's a space that we're 674 00:41:22,920 --> 00:41:29,640 Speaker 3: focused on broadly, if it's residential, mortgage, consumer transportation SLTS 675 00:41:29,680 --> 00:41:35,319 Speaker 3: as well, you know SRTs, you know, is we think 676 00:41:35,360 --> 00:41:40,000 Speaker 3: of that as a tool, right, and you know, various 677 00:41:40,040 --> 00:41:43,200 Speaker 3: tools we have to craft a solution for a bank 678 00:41:43,280 --> 00:41:46,319 Speaker 3: or a non bank financial institution. Could be acquiring an 679 00:41:46,320 --> 00:41:50,200 Speaker 3: existing portfolio, could be partnering on future forward flow. It 680 00:41:50,239 --> 00:41:53,239 Speaker 3: could be you know, significant risk transfer SRT. It could 681 00:41:53,320 --> 00:41:57,680 Speaker 3: be you know, executing on a cash basis a securitization 682 00:41:57,800 --> 00:42:02,280 Speaker 3: that allows the bank to to kind of deconsolidate the position. 683 00:42:02,360 --> 00:42:05,400 Speaker 3: So there are a lot of tools not uh, you 684 00:42:05,440 --> 00:42:10,040 Speaker 3: know what you know, our role is is to figure 685 00:42:10,080 --> 00:42:13,279 Speaker 3: out what tool is right to use at at the 686 00:42:13,320 --> 00:42:13,839 Speaker 3: current time. 687 00:42:14,000 --> 00:42:16,319 Speaker 1: Right Where do you think you're being contrarian? Right now? 688 00:42:16,560 --> 00:42:19,480 Speaker 3: Where do I think I'm being contrarian? I don't know 689 00:42:19,480 --> 00:42:23,439 Speaker 3: if it's a contrarian view at at the moment certainly now, 690 00:42:23,480 --> 00:42:28,920 Speaker 3: but you know we are you know, positioning for a 691 00:42:29,239 --> 00:42:34,320 Speaker 3: higher for longer environment from a rate perspective. Now, certainly, 692 00:42:34,360 --> 00:42:37,399 Speaker 3: what what the market has been, you know, pricing in 693 00:42:37,800 --> 00:42:40,160 Speaker 3: has has decreased over time, compared to where we were 694 00:42:40,200 --> 00:42:43,440 Speaker 3: six months ago. But you know, as we look at 695 00:42:43,960 --> 00:42:47,799 Speaker 3: our existing portfolio new investments, we're certainly uh, you know, 696 00:42:47,880 --> 00:42:51,080 Speaker 3: preparing for you know, an environment where rates you know, 697 00:42:51,160 --> 00:42:55,400 Speaker 3: continue to be relatively high for the foreseeable future. 698 00:42:55,520 --> 00:42:57,040 Speaker 1: Do you expect any cuts this year? 699 00:42:57,960 --> 00:42:59,399 Speaker 3: You know, I think, you know, we we we look 700 00:42:59,440 --> 00:43:03,799 Speaker 3: at what the markets implying, it looks pretty modest at 701 00:43:03,840 --> 00:43:04,279 Speaker 3: this point. 702 00:43:04,760 --> 00:43:06,399 Speaker 1: Chance for hike potentially a. 703 00:43:06,440 --> 00:43:10,200 Speaker 3: Hike that would certainly be a surprise and could have 704 00:43:10,239 --> 00:43:13,000 Speaker 3: impacts on the market from a liquidity perspective. 705 00:43:13,680 --> 00:43:16,760 Speaker 1: Great Steff Matt Bess, head of Private Alternatives at Alliance Bernstein. 706 00:43:16,800 --> 00:43:18,359 Speaker 1: It's been a pleasure having you on the credit edge. 707 00:43:18,360 --> 00:43:20,359 Speaker 3: Many thanks great, thank you for having me. 708 00:43:20,520 --> 00:43:22,640 Speaker 1: And of course we're very grateful to Tolu ala Mutu 709 00:43:22,640 --> 00:43:24,560 Speaker 1: from Bloomberg Intelligence. Thanks for joining us again. 710 00:43:24,719 --> 00:43:26,600 Speaker 2: Thank you James, and thank you Matt as well. 711 00:43:26,640 --> 00:43:29,520 Speaker 1: Thanks Toler for more credit analysis. Read all of Tolu's 712 00:43:29,560 --> 00:43:32,200 Speaker 1: great work on the Bloomberg terminal. Bloomberg Intelligence is part 713 00:43:32,200 --> 00:43:35,279 Speaker 1: of our research department, with five hundred analysts and strategists 714 00:43:35,320 --> 00:43:38,640 Speaker 1: working across all markets. Coverage includes over two thousand equities 715 00:43:38,680 --> 00:43:41,319 Speaker 1: and credits and outlooks on more than ninety industries and 716 00:43:41,440 --> 00:43:45,760 Speaker 1: one hundred market industries, currencies and commodities. Please do subscribe 717 00:43:45,760 --> 00:43:48,760 Speaker 1: to the Credit Edge. We're on all good podcast providers, Apple, 718 00:43:48,840 --> 00:43:51,359 Speaker 1: Spotify and all the others. Give us a review, tell 719 00:43:51,400 --> 00:43:54,160 Speaker 1: your friends, or email me directly at jcrombe eight at 720 00:43:54,160 --> 00:43:57,400 Speaker 1: Bloomberg dot net. I'm James Cromby. It's been a pleasure 721 00:43:57,440 --> 00:44:16,800 Speaker 1: having you join us again next week on the Credit Edge.