Speaker 1: This is Mesters in Business with Very Results on Bloomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest.
Speaker 1: His name is Mark Jenkins. He's the head of Global
Speaker 1: Credit at Carlisle Group, which runs about three one billion
Speaker 1: dollars in assets. Mark manages about seventy three billion dollars
Speaker 1: in credit assets. He has a fascinating career doing all
Speaker 1: sorts of work across the credit universe, and there aren't
Speaker 1: very many people as knowledgeable as he is, uh in
Speaker 1: as many types of fixed income and credit investing as
Speaker 1: he is, whether it's aviation, real estate, liquid a liquid,
Speaker 1: private investments, um, distressed assets, really across the board. His
Speaker 1: focus on alternative credit assets is quite comprehensive. Carlyle is
Speaker 1: one of the fastest growing credit shops and private equity
Speaker 1: shops out there. They're probably traded and I just found
Speaker 1: this to be a master class in how to put
Speaker 1: capital at risk when you can't get a whole lot
Speaker 1: more than one and a half two percent and fixed
Speaker 1: income but you don't want to see the same sort
Speaker 1: of volatility and risk that you see in equity. What's
Speaker 1: the sweet spot in between the two? Really just an
Speaker 1: absolutely fascinating conversation and I learned a lot and I
Speaker 1: think you will also with no further ado, my conversation
Speaker 1: with Carlisle Groups Mark Jenkins. This is Masters in Business
Speaker 1: with Very Redults on Bloomberg Radio. My extra special guest
Speaker 1: this week is Mark Jenkins. He is the Managing Director
Speaker 1: and Head of Global Credit at Carlyle uh, the private
Speaker 1: credit and investing giant with over three billion dollars in
Speaker 1: assets under management. As head of the Global Credit Desk
Speaker 1: at Carlisle, Mark overseas seventy three billion dollars in assets
Speaker 1: under management. Previously, he led the Canada Pension Plan Investment
Speaker 1: Boards Global Private Investment Group, and prior to that, he
Speaker 1: was at Barclays, where he was Managing director and co
Speaker 1: head of Leverage Finance. Mark Jenkins, Welcome to bloom bark Berry.
Speaker 1: Thanks for having me. I appreciate it. I'm excited about this.
Speaker 1: This is an area that I don't think people understand
Speaker 1: or or hear enough about. It's usually all day long
Speaker 1: equities and I'm I'm excited to talk a little bit
Speaker 1: about the various types of credit you manage. But before
Speaker 1: we do that, let's get into your background a little bit.
Speaker 1: You attended Queen's University in Canada, where you earned a
Speaker 1: commerce degree. How does that translate into an interest in
Speaker 1: credit and investing? Yeah, sure, Verry, I think you know,
Speaker 1: when I grew up, I grew up in a town
Speaker 1: called Ashwood, just outside of Toronto, and um, you know,
Speaker 1: growing up, I didn't really have uh, any influences that
Speaker 1: were in the business side, and so as I was
Speaker 1: kind of progressing through my childhood and through high school,
Speaker 1: I sort of was very interested in commerce and how
Speaker 1: that works. So, you know, my first job really was
Speaker 1: working at a corner store where I used to stack
Speaker 1: what we would affectionately call in Canada pop bottles, but
Speaker 1: you called soda bottles that if you're in Minnesota, you
Speaker 1: might calm pop bottles as well. And I used to
Speaker 1: sweep out the parking lot as well. That was sort
Speaker 1: of my first job at thirteen, and I was very
Speaker 1: interested in how that gentleman ran that store. And my
Speaker 1: brother in law actually ran a small lumber yard in
Speaker 1: town that I worked at as well, and so I
Speaker 1: was very very interested in how business has worked, you know,
Speaker 1: how that operationally worked, not just the actual element of
Speaker 1: working at them. And so I kind of looked at
Speaker 1: people who had progressed into business, and most of them
Speaker 1: in Canada at least had commerce degrees. So that's how
Speaker 1: I went to Queen's Commerce. And you come out of school,
Speaker 1: you end up at Goldman Sachs prety early in your career, right, Yeah,
Speaker 1: Actually it took a bit of a short stop first.
Speaker 1: So I um, back in the day when I was
Speaker 1: sort of again trying to explore how to get into business,
Speaker 1: I noticed a lot of chief financial officers in Canada
Speaker 1: had a c p A or back then as c A,
Speaker 1: and so I actually spent two years at Cooper's and
Speaker 1: librand working on my CEA. In Canada, you have to
Speaker 1: intern at a at an accounting firm, so I worked
Speaker 1: there in corporate audit and business investigations, which basically back
Speaker 1: in did a lot of the bankruptcies in real estate.
Speaker 1: So in fact, one of my early experiences was working
Speaker 1: on the Olympian York bankruptcy with the Reichman brothers. So
Speaker 1: so I have to imagine that's a useful set of
Speaker 1: skills to have when you're trying to decide, hey, am
Speaker 1: I going to see a return of capital as well
Speaker 1: as return on capital? For this particular credit. Yeah, it's
Speaker 1: it's certainly taught me how to understand, like how you're
Speaker 1: gonna get your capital back if you will. I think that,
Speaker 1: you know that. I think my early formative years in
Speaker 1: terms of business was one of skepticism because eighty nine
Speaker 1: ninety was, at least in Canada was going through large,
Speaker 1: you know, recession, predominantly in real estate. Owen Y had
Speaker 1: overextended itself building out in Canary Wharf at the time.
Speaker 1: I recall cross collateralization. I was kept from all the banks,
Speaker 1: of course, which was part of what we discovered. And
Speaker 1: I think my formative years was started with a lot
Speaker 1: of skepticism, which probably led me into credit as a result.
Speaker 1: So so from Cooper's and libraries and and accounting, how
Speaker 1: do you make your way to fixed income and Goldman? Yeah? Sure,
Speaker 1: well I I realized that the accounting profession, probably long term,
Speaker 1: wasn't going to be for me, and most people would
Speaker 1: move on to something different. I had some friends who
Speaker 1: worked over Golden Sacks, which frankly I didn't know a
Speaker 1: lot about at the time. I walked across the street
Speaker 1: in Toronto, ended up working there and initially in um
Speaker 1: in controllers, but eventually worked my way into being a
Speaker 1: credit analyst there. Uh, and you know, very shortly thereafter,
Speaker 1: I moved down to New York and spent actually most
Speaker 1: of my career in New York working for Goldman uh
Speaker 1: and always on the credit side. So Goldman and then
Speaker 1: you end up at Barclays where you were co head
Speaker 1: of leverage product that that sounds like that's an aggressive portfolio,
Speaker 1: is it what it sounds like? Yeah, I you know,
Speaker 1: I'd spent over eleven years of Goldman. I learned a
Speaker 1: tremendous amount of that organization as it you know, transferred
Speaker 1: from transformed from basically being a partnership into a corporate
Speaker 1: uh and all the changes that go with it. But
Speaker 1: it was an extraordinarily um fertile time for me in
Speaker 1: terms of growth and development, in terms of just being
Speaker 1: very entrepreneurial and commercial. And I love that aspect of it.
Speaker 1: But Barkley's a couple of my friends had left Goldman
Speaker 1: to start up the leverage finance business there, and it
Speaker 1: really for me, it was it was an opportunity to
Speaker 1: learn how to build a business. I was, you know,
Speaker 1: spent all my years doing very highly structured transactions on
Speaker 1: the credit side, being a credit analyst, et cetera. But
Speaker 1: really what I hadn't learned as the business side of it,
Speaker 1: and that was a great, you know, formative time for me,
Speaker 1: which which kind of led me into my next move,
Speaker 1: which Canadian Pension Plan, which just sounds very different than
Speaker 1: prior experience. Yeah, very different, but but similar in that
Speaker 1: you know, um, my former boss used to joke when
Speaker 1: you hired me that basically I was joining a hundred
Speaker 1: billion dollar startup because the Canada Pension Plan Investment Board,
Speaker 1: in fact is manages what you would think of as
Speaker 1: in the U S terms excess contributions to social security
Speaker 1: if there was such a thing, which there isn't, um,
Speaker 1: but but that's effectively what you're doing. You're managing those
Speaker 1: excess contributions to the Canada Pension Plan. And for me,
Speaker 1: it gave me the ability to take all the knowledge
Speaker 1: I learned on the credit side, the business building opportunities,
Speaker 1: and transform that into a private credit UM direct private
Speaker 1: credit investment platform for c p p I B and
Speaker 1: later you know, as I progressed their stayed there. I
Speaker 1: guess if I ended up running private investments which include
Speaker 1: a private equity, infrastructure credit, energy credit, and some other assets.
Speaker 1: But jen Away, I'm I'm a practitioner in the credit side.
Speaker 1: So when I was doing my research into your background,
Speaker 1: you have family members who were investment investors and pensioners
Speaker 1: into the Canadian pension Plan. How did that, police, teachers, pensioners,
Speaker 1: things like that. Did that impact how you thought about
Speaker 1: doing your job? For sure? For sure? I think that
Speaker 1: the greatest takeaway from me, and I take that to
Speaker 1: my job today is like, I know who you work
Speaker 1: for and for me of a ninety one year old
Speaker 1: mother and she would say to me every week when
Speaker 1: I talked to her, how are we doing? Because it's
Speaker 1: her money, right And so my my my mother, my
Speaker 1: brothers are about eighteen years older than me, so they
Speaker 1: take the Canadian pension Plan right now as well and
Speaker 1: my sister, so they're all beneficiaries of that. And and
Speaker 1: on top of that, my brother and my other brother
Speaker 1: they're both were one with a teacher, one with the policeman,
Speaker 1: so they also benefit from the Ontario Municipal Employee retirement
Speaker 1: Plan and Ontario teachers pension plans. So they're all beneficiaries
Speaker 1: of these large pension plans in Canada. And I think
Speaker 1: what it what it really did. Has made it real,
Speaker 1: made it real for me in terms of the money
Speaker 1: that I was investing the sacred trust were literally nineteen
Speaker 1: million people are giving you money to invest on their
Speaker 1: behalf is a sacred trust. And so I used to
Speaker 1: say to the team at c P P I B
Speaker 1: that that's a special place to be and that has
Speaker 1: a higher duty of care in my mind, because think
Speaker 1: about if you lose twenty million dollars, that's like the
Speaker 1: entire city of Peterborough contributing to CPP for a year.
Speaker 1: So that really puts things in perspective. And and I've
Speaker 1: taken that with me now because now I work on
Speaker 1: behalf of many beneficiaries and fiduciaries across the globe and
Speaker 1: I and I do still think it's a sacred trust
Speaker 1: and it's a privilege to manage money. Huh. Quite quite fascinating.
Speaker 1: Let's talk a little bit about credit and fixed income
Speaker 1: side for your career. What what led you to make
Speaker 1: that leap from from a credit analyst and a fixed
Speaker 1: income analy us to actually managing credit portfolios. Yeah, Barry,
Speaker 1: you know, when I think about just being in credit generally,
Speaker 1: people ask me that all the time, and I look
Speaker 1: back and my my my not illustrious sporting career, which
Speaker 1: was you know, soccer hockey, and I always played defense,
Speaker 1: so I never really played on the offense. I was
Speaker 1: always trying to keep the puck or the ball out
Speaker 1: of the net and helping people do that. And I
Speaker 1: think when you you think about credit, what you're looking
Speaker 1: to do is there's a contract between me and you,
Speaker 1: and I give you some money, and at the end
Speaker 1: of that term of the contract, you give me the
Speaker 1: money back. That's that's defense I'm not looking for. We're
Speaker 1: not looking for massive upside that you you know, shoot
Speaker 1: the lights out on the equity side. And so it
Speaker 1: always seemed to be very much a comfort zone for
Speaker 1: me that I could operate in an area where I
Speaker 1: could understand what was going to allow me to get
Speaker 1: my money back at the end of the day. And
Speaker 1: all that training at Goldman had taught me as a
Speaker 1: credit analyst, that's what I was always thinking about, is
Speaker 1: how will this obligore give us the money back at
Speaker 1: the end of the day, so that you know we're
Speaker 1: in a good position and we're minimizing our credit risks.
Speaker 1: I think the other thing that Goldman really taught me
Speaker 1: was how to mitigate risk and downside and really focus
Speaker 1: on the downside and a lot of situations. And so
Speaker 1: coming at investing from that perspective naturally led me to
Speaker 1: a better credit hat than it ever did equity. And
Speaker 1: in fact I did run equity private equity at at
Speaker 1: c P P I B. I think I was okay
Speaker 1: at it, but I definitely majored in in credit. UM.
Speaker 1: So that's the path I pursued and and it's been
Speaker 1: it's been fruitful, and I really find it fascinating. I
Speaker 1: know I'm a credit geek. If you will, you know,
Speaker 1: I'm intrigued. I love the soccer hockey metaphor. I have
Speaker 1: a friend who's fond of saying a bad year in
Speaker 1: fixed income is a bad afternoon and equity and and
Speaker 1: it's really kind of true. What's the worst year? High
Speaker 1: quality fixed income has not not that bad because of
Speaker 1: that return on of capital. Yeah, And I you know,
Speaker 1: I think for anybody who manages the portfolio and getting
Speaker 1: back to that, you know, managing large portfolios at a
Speaker 1: place like CPP I B, as you recognize we're just
Speaker 1: like one exposure in somebody's broad portfolio. So you've got
Speaker 1: to think about what you're meant to deliver into that portfolio,
Speaker 1: and that is a very stable, persistent return three cycles.
Speaker 1: And that's to me what credit encapsulates from an investor standpoint. So,
Speaker 1: so let's talk about some of those different silos of capital.
Speaker 1: You have a couple of different credit segments liquid credit,
Speaker 1: a liquid credit, real estate assets. Am I missing any
Speaker 1: or no, that's it. Those covers the big three. So
Speaker 1: break those down for us if you would. Yeah, So
Speaker 1: what we wanted to do and from my experience on
Speaker 1: the other side and experience that these other organizations was
Speaker 1: explaining credit which isn't really a monolithic asset class like
Speaker 1: it has a range of exposures and a range of
Speaker 1: expected outcomes you know through time that we really wanted
Speaker 1: to be able to deliver two investors that range of
Speaker 1: risk return outcomes. Right. And so if you think about,
Speaker 1: you know, non investment grade credit, you go from leverage
Speaker 1: liquid loans clos which is the liquid credit side of things,
Speaker 1: to direct lending, to opportunistic credit, to distress which is
Speaker 1: really private or a liquid credit because it doesn't trade.
Speaker 1: And then there's real asset credit, which involves assets like
Speaker 1: real estate infrastructure in our case, aircraft aviation where the
Speaker 1: underlying security and cash floads are determined on herd assets
Speaker 1: and all of those from ourn investor's perspective, allow you
Speaker 1: to um put together a portfolio that is diverse away
Speaker 1: from just single name credit. And I think that's what
Speaker 1: people like on the institutional side. I know that from experience,
Speaker 1: that's what we look to do in my portfolio, my
Speaker 1: former life, and that what people are doing today. So
Speaker 1: that was point one. We wanted to be relevant to
Speaker 1: our customer, if you want to call them that the investor.
Speaker 1: Number two, we've got to be relevant to the user
Speaker 1: capital right like it's by having a platform approach which
Speaker 1: really kind of covers that span, that broad span. We
Speaker 1: can be relevant to almost any borrower in the world
Speaker 1: for whatever they want to do. Right So they may
Speaker 1: have some real estate, they may have ongoing cash flow loans,
Speaker 1: but you can put them together and you can deliver
Speaker 1: an opportunity. Why is important because it allows us to
Speaker 1: have the widest funnel from an origination standpoint that we
Speaker 1: can and leverage that car Carlisle network where we're operating
Speaker 1: on a global basis. So that's that's really those three
Speaker 1: verticals really feed into what we're trying to accomplish from
Speaker 1: a platform perspective, So I understand real estate obviously is
Speaker 1: gonna be collateral in that space. When you talk about
Speaker 1: hard assets and aviation, you're referring to the actual aircraft.
Speaker 1: To the actual aircraft, I mean, the actual metal in
Speaker 1: the sky only has value to the extent you have
Speaker 1: a contract to lease it out. So it's not it's
Speaker 1: not just enough to have the airplanes. What's as important
Speaker 1: is to have the relationships with the D and ten
Speaker 1: plus airlines that we do on a global basis in
Speaker 1: some a D plus countries around the world, so we
Speaker 1: have that diversity and maintaining that long term contracts. So
Speaker 1: through this period of time which a lot of people
Speaker 1: would say, geez, it must have been a really tough
Speaker 1: time in global aircraft, which it has been. You know,
Speaker 1: we've been able to take advantage of restructuring and turning
Speaker 1: out our long term leases, which is good, gives us
Speaker 1: lots of optionality, but also take in more aircraft. So
Speaker 1: we've now actually risen from being I think it's the
Speaker 1: fifteenth largest lesser in the world to the sixth largest
Speaker 1: lesser in the world. As long as we close on Manchester,
Speaker 1: which was announced just before Christmas, So so we really
Speaker 1: leaned into something where the metal in the sky is relevant,
Speaker 1: but as relevant is are the long term contracts that
Speaker 1: you have with the with the airlines, and so essentially
Speaker 1: you're making a bet that we will eventually return to normal,
Speaker 1: travel will recover and and people will move about the
Speaker 1: country as they were the world as they as they
Speaker 1: were pre pandemic. Yeah, at a macro level, at solutely,
Speaker 1: I think that's true. I think the the other thing
Speaker 1: I would layer into that is there has been a
Speaker 1: shift in terms of the older aircraft that have been retired,
Speaker 1: so that the actual inventory has shrunk and the actual
Speaker 1: O E M s Airbus and Boeing have actually shrunk
Speaker 1: the number of planes a producing. So there is there's
Speaker 1: another technical factor going that you're having old aircraft retired
Speaker 1: because they're not economical to fly, and you have the
Speaker 1: O E M slowing down, so actually makes our midlife
Speaker 1: aircraft much more valuable. If you're trying to have a
Speaker 1: very economical asset in the sky to fly from, it
Speaker 1: makes sense you can strain supply with the same demand.
Speaker 1: Prices are going to go up, So so let's focus
Speaker 1: within the ill liquid credit silo. Tell us a little
Speaker 1: bit about private credit, because I want to hear that phrase.
Speaker 1: I tend to think of merchant banking and the sort
Speaker 1: of mid level bank services that Wall Street has sort
Speaker 1: of grown out of and only focuses on the largest companies.
Speaker 1: But there is a lot of you know, really substantial
Speaker 1: amount of UM firms and activity in that space. It
Speaker 1: just doesn't seem to scale to public Wall Street activity. Yeah, Well,
Speaker 1: a little bit of history, I guess it is probably worthwhile.
Speaker 1: If you went back to oh eight oh nine, which
Speaker 1: you know, I was fortunate enough to be in the
Speaker 1: credit markets, sent to to to work through that, which
Speaker 1: was very, very interesting. What you found is the banks
Speaker 1: had already started to retrench from the lending market. I
Speaker 1: mean that in fact, it started well before oh eight
Speaker 1: o nine, and then late nineties more or less uh
Speaker 1: in the institutional market, specifically on the loan side, started
Speaker 1: to increase. And if you went from eight o eight
Speaker 1: oh nine to call it twenty if you saw the
Speaker 1: amount of credit inventory that banks were carrying to today,
Speaker 1: that's down, you know, And I put it in simple terms,
Speaker 1: is there no longer um They no longer hold inventory
Speaker 1: they're shippers at the risk right and in that void
Speaker 1: if you will. You had a couple of other things happening. One,
Speaker 1: you've got a thirty year decline in absolute interest rates,
Speaker 1: which we've all observed. And um, you've seen a rotation
Speaker 1: as a result of that of these larger institutional funds
Speaker 1: that have to make returns that are in the high
Speaker 1: single digits rotate into a liquid assets. The first phase
Speaker 1: of that that was in private equity. People looked and said,
Speaker 1: I can pick up five hundred extra basis points on
Speaker 1: average if I go into private equity, plus or minus
Speaker 1: a hundred here or there, and I don't want to
Speaker 1: be exact on that, but just approximate, and they made
Speaker 1: that rotation. That happened coming out of O eight oh nine,
Speaker 1: and we've seen that progression. The next wave is people
Speaker 1: who are in fixed income who are picking up two
Speaker 1: three in corporate bonds and rotating to the extent they
Speaker 1: can allow themselves to be more eliquid, picking up a
Speaker 1: hundred two hundred fifty basis points by going into privates.
Speaker 1: Now it's not obviously without risk because you want liquidity,
Speaker 1: but I think oh eight O nine showed us that
Speaker 1: you may be over paying for liquidity because I lived
Speaker 1: through that period of time and what you could sell
Speaker 1: was the best high quality liquid names and anything that
Speaker 1: wasn't high quality within all that liquids. So the risk,
Speaker 1: you know, premium you're paying for that was pretty substantial
Speaker 1: for for liquidity. So what we what we have today
Speaker 1: is a private credit market that's grown from three billion,
Speaker 1: it's over triple to one point one trillion today. Total
Speaker 1: alternative assets today as of the end of last year
Speaker 1: eight point nine trillion in a market where the combined
Speaker 1: fixed income and equity markets are two hundred and twenty
Speaker 1: nine trillion. So alternatives as a whole are pretty small
Speaker 1: in somebody's portfolio. Private credit is it's a one to
Speaker 1: nine ratio in terms of total alternatives on a path
Speaker 1: where we've tripled in size, over tripled in size since
Speaker 1: eight oh nine. And what we see because of all
Speaker 1: those dynamics, the banks retrenching the rotation into alternatives is
Speaker 1: a ten to twelve percent kagger over the next five years.
Speaker 1: So it's there's you know, we don't hear about it
Speaker 1: because it's relatively small, but it's it's a part of
Speaker 1: somebody's portfolio, and it's becoming increasingly more important. So you
Speaker 1: mentioned the um thirty plus year bull market and fixed
Speaker 1: income with rates falling from the early eighties and Paul
Speaker 1: Vulcar down to close to zero. What was it the
Speaker 1: bottom of the ten year about one something one two
Speaker 1: one one. Uh. It appears that that thirty five year
Speaker 1: market is coming to an end, and we're looking at
Speaker 1: a combination of both rising inflation and higher rates. How
Speaker 1: what sort of challenges does that present to you working
Speaker 1: in credit markets where hey, maybe rates are going up,
Speaker 1: maybe inflation is is going to impact our our real
Speaker 1: adjusted returns. How do you figure that into your Yeah, well,
Speaker 1: the early early returns are if you look at high yield,
Speaker 1: it's down four year to date. That's relative to the
Speaker 1: SMP five, down eight and a half percent year to date.
Speaker 1: Leverage land exactly. Leverage loans are flat. Now why is that?
Speaker 1: Because they're floating right zero like zero point five duration
Speaker 1: versus a longer duration fixed income on. So right now,
Speaker 1: it's pretty clear that the moving interest rates is impacting valuations, right,
Speaker 1: it's not. There's not been a fundamental shifting credit yet.
Speaker 1: Although default rates you'd imply with spreads right now that
Speaker 1: default rates went from the end of year at one
Speaker 1: point one to maybe one point to five, still very
Speaker 1: very low skill. So I think the early returns are
Speaker 1: um really indicative of interest rate moves, which, by the way,
Speaker 1: we should have expected. I mean, I don't know how
Speaker 1: long people thought the punch bowl was going to stay there,
Speaker 1: but we couldn't believe we're going to stay at that
Speaker 1: that level forever. So none of this is unexpected. I
Speaker 1: think the shock of the moves is always I find
Speaker 1: in the market unexpected by people, but it should have
Speaker 1: been expected. So as you think about investing, if you
Speaker 1: think about it from a return perspective, you've got that
Speaker 1: hedge if you want to call it, against rising rates.
Speaker 1: What we're not seeing yet, but this is what we
Speaker 1: I think we get paid for is the credit impact
Speaker 1: of a slowing economy with rising rates and inflation, and
Speaker 1: that you know, That's where I think we moved from
Speaker 1: two thousand and twenty one, which was I would say
Speaker 1: arguably a macro focus trade, if you want to call
Speaker 1: it that, even though we're long term investors, to very
Speaker 1: much focusing on the micro, which is security selection and
Speaker 1: portfolio construction. Because the one thing I've learned in thirty
Speaker 1: one years. Is the only thing that's protected us ever
Speaker 1: coming out of like a massive disruption in the marketplace
Speaker 1: is a high quality, diversified portfolio. So that's how we're
Speaker 1: focused today. Inflation isn't is not so much where we
Speaker 1: think rates go in terms of how I think about it,
Speaker 1: it's how does it impact the companies that we are
Speaker 1: lending to. So, for instance, we have a company recently
Speaker 1: um they call it like a staple food provider, white
Speaker 1: label it, and the biggest cost to them is the
Speaker 1: inputs of the food obviously gone up dramatically. We're our
Speaker 1: concern was was were they able to pass that on
Speaker 1: to the distributor large distributors you could think of of
Speaker 1: of food in in the United States, And the answer
Speaker 1: is they were, okay, So that's a good thing. What
Speaker 1: we're trying to do is look at portfolios were that
Speaker 1: ability to pass on costs or absorb costs is greater
Speaker 1: than things that are more sensitive to it, because we
Speaker 1: know that's going to hurt margins and EBITA growth, and
Speaker 1: that's that's what we're focused on right now as we
Speaker 1: think about inflation, not so much out it in effects
Speaker 1: interest rates. So that's interesting you're you're using that as
Speaker 1: a single example, because when I was learning about what
Speaker 1: you do with Carlisle, you know, sometimes I look at
Speaker 1: a particular manager and they're all about the selection. Other
Speaker 1: times and I'm gonna throw this to you, it's more
Speaker 1: about creating a platform that they can um opera raid
Speaker 1: off of, as opposed to being so focused on the
Speaker 1: granular single company selection. Tell us a little bit about
Speaker 1: the platform that you helped develop at Carlisle. Yeah, our
Speaker 1: platform approach is really informed by my time at c
Speaker 1: p P I B and what I learned there, where
Speaker 1: they were agnostic to product in silos. They were simply
Speaker 1: seeking at the best adjusted risk adjusted returns. And if
Speaker 1: you looked at the old days of oh eight oh nine,
Speaker 1: things are very silent, high yield leverage, loans, distress maybe
Speaker 1: special sits, but they were very specialized. And what we learned,
Speaker 1: or I learned at least with my team at cpp
Speaker 1: I B, is by having a broad platform that could
Speaker 1: connect to the information flows coming in from the public
Speaker 1: market side, coming in from the private equity side, you know,
Speaker 1: coming in from our infrastructure and real estate, helped inform
Speaker 1: opportunities and allowed us to move three cycles to where
Speaker 1: those opportunities were. So, for example today at Carlisle, what
Speaker 1: we were able to do is as we were going
Speaker 1: into we're obviously working across the platform and direct lending
Speaker 1: an opportunitisy to credit, not really need to stress doing
Speaker 1: really regular way performing deals. And when the market dislocated
Speaker 1: in April, March and April, it felt like eight o
Speaker 1: nine again, and we were able to go immediately to
Speaker 1: the secondary market and deploying the leverage loan market where
Speaker 1: things were trading off dramatically. So Charted Communications trading at
Speaker 1: seventy two, I didn't need to be a genius when
Speaker 1: I looked at the market cap of chart Communications Trading
Speaker 1: at seventy two to recognize I'm probably gonna get my
Speaker 1: money back, right. So if you don't have a platform
Speaker 1: that allows you to pivot, you can't take advantage of that.
Speaker 1: So what we've done deliberately is have this cross platform
Speaker 1: approach both in products set expertise, but geographically so that
Speaker 1: we can swing to where those opportunities are. So, for instance,
Speaker 1: in the past i'd say six months, we've seen a
Speaker 1: lot of opportunities coming out of Europe because the US
Speaker 1: capital markets tend to hear themselves a lot quicker and
Speaker 1: stabilize quicker. Europe because of the multiple different jurisdictions, tends
Speaker 1: to take a little bit longer. We're looking into Asia,
Speaker 1: we see opportunities, they're evolving. If you don't have a
Speaker 1: broad platform that's connected globally, it's very hard to take
Speaker 1: advantage of those opportunities to swing your capital to where
Speaker 1: those opportunities are really, really quite interesting. Let's talk a
Speaker 1: little bit about the state of credit today. You mentioned
Speaker 1: global credit um generally has grown. You've grown your platform
Speaker 1: um to seventy three billion dollars as of the end
Speaker 1: of one that's about two x what it was four
Speaker 1: years ago. Uh, and it's one of Carlisle's fastest growing segments.
Speaker 1: Tell us a little bit about what you're doing in
Speaker 1: terms of fundraising and how much of this is performance related. Well,
Speaker 1: you can't raise What I've learned is you can't raise
Speaker 1: money without performance. So one figure one that gets the other.
Speaker 1: I would say that what we're what we're wanting to
Speaker 1: do is I think that the thing that's really important
Speaker 1: as we've build up the platform is a lot of
Speaker 1: people say, you know, why do you why does scale matter?
Speaker 1: Will scale matters because it allows you to take advantage
Speaker 1: of the best opportunities on a global basis. So we
Speaker 1: want to be scalable so that we can do any
Speaker 1: transaction that we want to do globally period and that
Speaker 1: was the goal of getting to scale seventy billion, eighty billion,
Speaker 1: ninety billion, like you're in the snack bracket where you
Speaker 1: can do any transaction you want and being very selective.
Speaker 1: What that also leads to is that you know, each
Speaker 1: successor fund more people want to participate. So that is
Speaker 1: an ongoing growth trajectory that we just deal with. If
Speaker 1: you have poor performance, well guess what, people don't want
Speaker 1: to participate in your funds. So far, Touch would In
Speaker 1: the six years that I've been involved, our performance has
Speaker 1: been I think very good. But the most important thing,
Speaker 1: and I said this before, is that we're there to
Speaker 1: deliver an expected exposure into somebody's portfolio, consistent and persistent
Speaker 1: through time, and that is something you demonstrate over time
Speaker 1: and so far, I think with the team that's there,
Speaker 1: which is excellent by the way they have been delivering
Speaker 1: those returns over the past six years, even through the pandemic,
Speaker 1: which is really important. I think the next twelve to
Speaker 1: twenty four months. You know we're gonna we're gonna have
Speaker 1: some challenges. Everybody's gonna have challenges, and but I think
Speaker 1: that the portfolios are well positioned for that. But what
Speaker 1: it also means is when we talk to our investors
Speaker 1: is they need to invest capital like that doesn't stop
Speaker 1: just because the markets are volatile um and people are
Speaker 1: rotating more into private credits you and I discussed earlier,
Speaker 1: and so we're seeing that growth. So we're trying to
Speaker 1: balance our growth versus what the opportunity said is. And
Speaker 1: the one thing I had learned from my prior life
Speaker 1: is that you know there is a certain growth trajectory
Speaker 1: that if you get beyond that and I almost had
Speaker 1: infinite capital at my prior job, but you don't have
Speaker 1: infinite opportunities, and so you have to continually build the
Speaker 1: team in the platform that allows you to scale into
Speaker 1: the opportunity set to be able to prosecute if you
Speaker 1: can't esecute it, and then you may end up in
Speaker 1: a not a good place for your investors. And so
Speaker 1: we're very thoughtful about that. But the programs that we've
Speaker 1: built out have scaled mostly because we've been able to
Speaker 1: do those larger size transactions and control them on the
Speaker 1: front end. And I think, you know, we'll continue to
Speaker 1: to to leverage into those programs that we're being very successful.
Speaker 1: So you raise a really interesting point, which is there
Speaker 1: is only so far this can potentially scale. You were
Speaker 1: talking seven. I'm assuming that this can scale up some
Speaker 1: multiple of that. How large can private credit grow um
Speaker 1: even though it's such a relatively tiny portion of overall
Speaker 1: investable assets? Uh, where's the ceiling? Well, I don't I
Speaker 1: don't don't know if I can predict the ceiling, but
Speaker 1: I can tell you that our forecasts and belief is
Speaker 1: that it's it's growing at at least ten to twelve
Speaker 1: percent cager pery, or from a one point one trillion
Speaker 1: dollar base today. Right. I know it sounds ridiculous to
Speaker 1: say from that relatively mole base of just a trillion dollars,
Speaker 1: but in the grand scheme and thing, But if you
Speaker 1: think it's a percent of global asset, but if you
Speaker 1: think about it's very small part of a global ass
Speaker 1: that you're absolutely rights. But if you think about the participants,
Speaker 1: even the largest participants aren't greater than a hundred and
Speaker 1: fifty I mean, that sounds like a lot, I know,
Speaker 1: but in the context of that that there's not like
Speaker 1: a clustering at the very top yet. So I think,
Speaker 1: you know, we're going to grow with at least the
Speaker 1: market obviously, you know, stakeholders would like us to grow
Speaker 1: beyond that. I think if we do that in a
Speaker 1: very thoughtful, deliberate way, that's fine. The other thing we pursued,
Speaker 1: which is slightly different than maybe some of our peers,
Speaker 1: is we do have that three pillar approach across multiple strategies.
Speaker 1: So any of those strategies in and themselves can scale
Speaker 1: to ten or twenty billion, but if you you know,
Speaker 1: took that in totality across the platform, that adds up
Speaker 1: to a lot of money to manage, right, And so
Speaker 1: what we've really purposely tried to do is say, where
Speaker 1: are those veins that we think will expand infrastructure, real estate, credit, aviation,
Speaker 1: you know, corporate credit as a whole, obviously liquid credit.
Speaker 1: You know today if you look at the leverage loan market,
Speaker 1: it's one point five trillion. It was less much less
Speaker 1: three to four times what it wasn't two thou two
Speaker 1: thousand and nine. So you know, we're trying to see
Speaker 1: in those large markets where there's scale and we can
Speaker 1: scale along with it. So I'm going to circle back
Speaker 1: to infrastructure and leverage loans. I want to refer to
Speaker 1: something that you guys said on your fourth quarter conference call,
Speaker 1: which was, as a firm, we expect to see Global
Speaker 1: Credit have a breakout year in um given all the
Speaker 1: turmoil we've seen and potentially rising rate environment in the
Speaker 1: face of inflation. Why should we expect to be a
Speaker 1: breakout year for Global Credit? Well, twofold one is I
Speaker 1: think you know that operating platform I talked about is
Speaker 1: in place, and so once you you put the operating
Speaker 1: structure in place, from an an investment in origination perspective,
Speaker 1: I mean, it really does allow you to scale and
Speaker 1: be much more efficient. So that's that's point one. We
Speaker 1: have multiple avenues when we raise capital. We've got c Tech,
Speaker 1: which is a which is a retail product that goes
Speaker 1: cuts across our entire platform, and that is very attractive
Speaker 1: for investors where they're getting, you know, a very current
Speaker 1: cash dividend and a high single digits and that feeds
Speaker 1: into our business. But then you've got these new verticals
Speaker 1: that you and I've talked about on the real asset side,
Speaker 1: which are growing probably faster than I would have thought
Speaker 1: because people are find that extremely interesting from a portfolio
Speaker 1: construction perspective. But then lastly, on the opportunity side, the
Speaker 1: volatility is a good thing for us because, as you
Speaker 1: and I talked about earlier, our ability to swing across
Speaker 1: the platform and take advantage of opportunities. Volatility is actually
Speaker 1: UM creates vast opportunity that was difficult I would say
Speaker 1: pre pandemic, and pre pandemic we were in a you know,
Speaker 1: pretty well priced market. We thought UM where it was
Speaker 1: it was tough, tough sledding for opportunities and very competitive.
Speaker 1: And now UM companies that would typically have access to
Speaker 1: the capital markets who may have more complicated story you
Speaker 1: get one speed bump in the market and some negative sentiment.
Speaker 1: There's still good companies in the long term. We're allowed,
Speaker 1: you know, we were allowed to kind of go in
Speaker 1: and do the work on a more complex situation and
Speaker 1: do that work that the capital markets won't do because
Speaker 1: they don't have access that information. And it creates opportunity
Speaker 1: for us. And and so we're always say excited, but
Speaker 1: we've been looking for some volatility in the marketplace UM
Speaker 1: for quite some time, and we're starting to see it.
Speaker 1: So I was kind of impressed with how selective you
Speaker 1: are in terms of originations, really close on relatively few,
Speaker 1: something like five percent of the companies you put through
Speaker 1: their paces. Tell us a little bit about that process,
Speaker 1: and is it just a target rich environment and you're
Speaker 1: taking the cream off the top or why so few
Speaker 1: UM actual closes given given you know, how many opportunities
Speaker 1: you see worldwide. Well, it's it's like anything right you
Speaker 1: want to have from the top level. The platform just
Speaker 1: really opens up a very broad funnel for opportunities. And
Speaker 1: and as a result of that, when you're in the market,
Speaker 1: you're scaled, you're known in the market, you get a
Speaker 1: lot of opportunities and they're coming in. You know, I say, left, right,
Speaker 1: and center, but it feels like that. Sometimes what we're
Speaker 1: looking to do is to pull together the most high quality,
Speaker 1: diverse portfolios that we can that we believe will weather
Speaker 1: through you know, three cycles. And so as a result
Speaker 1: of that, you know, we do have to be very
Speaker 1: selective as to what we're gonna put in there, and
Speaker 1: we also have to be thoughtful about the exposures right
Speaker 1: when you think about portfolio construction, there's kind of three things,
Speaker 1: right their security selection, you know you're picking that asset
Speaker 1: you're gonna put in there. That's the micro. There's portfolio construction,
Speaker 1: making sure you have a well balanced portfolio that's not
Speaker 1: highly correlated because that's not the exposure our investors are
Speaker 1: looking for. And then you you tilt those exposures depending
Speaker 1: on some conviction you may have. I think in this environment,
Speaker 1: the first two are really the most important. Tilts can
Speaker 1: can wipe out the first two very easily. So we
Speaker 1: tend not to have tilts. We tend to have well
Speaker 1: balanced portfolios that we believe the weather through um volatility
Speaker 1: in the market, which we think we're going to see
Speaker 1: more of in the next twelve to twenty four months,
Speaker 1: really really really interesting. So so let's talk about Carlisle.
Speaker 1: UM in general, you guys have been on a torrid
Speaker 1: asset raising pace. You've been breaking categories, as has private
Speaker 1: credit also, so you're in the right place at the
Speaker 1: right time. Um, why is this so hot right now?
Speaker 1: Is it just as simple as there is no alternative?
Speaker 1: Yields are so low on the fixed income so I
Speaker 1: it and you guys can deliver consistent returns without a
Speaker 1: whole lot of risk and volatility. Aka, you step back
Speaker 1: and think about it from the average institutional investor and
Speaker 1: what they're trying to achieve, and you know it'll it'll vary,
Speaker 1: but let's use this as a starting point. Let's let's
Speaker 1: assume that on average, most institutional investor over the long
Speaker 1: terms trying to achieve seven percent for the beneficiaries in
Speaker 1: a call it, you know, a negative real rate environment
Speaker 1: with you know, equity returns have been I think fifteen
Speaker 1: percent over the since O nine roughly. If you get
Speaker 1: thirteen plus last year plus something like that, Well, where
Speaker 1: where is your long term forecast for equity? I mean
Speaker 1: a lot of people would probably tell you public equity
Speaker 1: long term forecast is probably in the six to seven
Speaker 1: percent range, maybe lower, I don't know. You do the
Speaker 1: math on that over a ten year horizon, it's very
Speaker 1: hard to get seven percent. So you take six percent,
Speaker 1: five percent from public equity, and you add in two
Speaker 1: percent from fixed income, and you blended itself. And you've blended.
Speaker 1: That's the secret. You can't average and you got it.
Speaker 1: Got to add them and that's how you get to
Speaker 1: see that they didn't teach that math in Canada. Maybe
Speaker 1: that's maybe how our education system was different. That that's
Speaker 1: the that's the problem with expected returns is we've been
Speaker 1: hearing forecasted lower expecteds. Hey, markets are high, valuations are high.
Speaker 1: We've had to we long term returns or eight percent.
Speaker 1: We've been thirteen. That was before last year's nearly pent
Speaker 1: on the equity side. So you should ratch it down
Speaker 1: your expectations after you hear that, so long, people sort
Speaker 1: of stop paying attention to it. This is probably the
Speaker 1: year where they should be paying attention. And I and
Speaker 1: I think here's here's a good thing I think about
Speaker 1: the institutional investor at large is that they generally are
Speaker 1: pretty thoughtful and long term thinkers. I mean, I think
Speaker 1: that you know, sometimes us on the manager side think
Speaker 1: we have all the answers. But I would say they're
Speaker 1: pretty smart people that are managing broad, diversified port folios.
Speaker 1: And I and I believe what they recognize is as
Speaker 1: a producier. You can't you hope isn't a strategy. You know,
Speaker 1: I hope I keep getting the same returns in public equities.
Speaker 1: That's a great that's a great thought. But I don't
Speaker 1: know if that delivers. And so what people have been
Speaker 1: doing is there is a trend, demonstrable trend of putting
Speaker 1: some of your cash if you can be liquid, into alternatives,
Speaker 1: private equity, real estate, credit, infrastructure, and that trend is
Speaker 1: just going to continue as we continue to be in
Speaker 1: this lower rate environment. I know rates are going up,
Speaker 1: but like historically, they're still very low, and I could
Speaker 1: they could go up, you know, four or five increases
Speaker 1: and you're still historically low. Yes, I mean, do you
Speaker 1: remember when library was like six percent? Yeah? I do.
Speaker 1: I remember when my parents had a mortgage that was
Speaker 1: eighteen percent. So I remember when my father in law's
Speaker 1: New York City General obligation bonds from the seventies that
Speaker 1: we're yielding eight came up and he said, what can
Speaker 1: you get me? Like, I could get you six percent
Speaker 1: in you and four percent in unis or six percent
Speaker 1: you know, longer term bonds. He's like six percent? Who
Speaker 1: the hell wants six percent? And that was I don't know,
Speaker 1: twenty years ago. So and you would you'd kill for
Speaker 1: that right now? Six percent? Oh my goodness, how do
Speaker 1: I get six percent? Yeah? I remember, as off topic,
Speaker 1: but I remember I was I was talking to a
Speaker 1: guy who asked me, said, you know, I'm looking at
Speaker 1: these Ontario zero coupons at like, what do you think
Speaker 1: I said, Oh, I think they're going to go higher.
Speaker 1: I would buy them. He didn't work out. Well, he
Speaker 1: didn't buy him, and he's mad at me to this day.
Speaker 1: So anyway, but but you know, you go back to
Speaker 1: this and you and you say to yourself, why is
Speaker 1: it these really smart institutional investors? Right? They're not? You know,
Speaker 1: they are smart people who are are investing money on
Speaker 1: behalf of a lot of people rotating into alternatives. And
Speaker 1: and the singular reason is is because they're looking for
Speaker 1: a pickup in a liquidity that they're getting from being
Speaker 1: in that asset class. And my prior employers, C P, P,
Speaker 1: I B they recognize because of the long live of
Speaker 1: the asset base for them, which is they looked seventy
Speaker 1: five years forward. You could be a hundred percent equities
Speaker 1: if you wanted to be. Now, the volatility of that
Speaker 1: I don't think stakeholders could handle, but today they're there.
Speaker 1: Allocation is equities. So if you can layer on top
Speaker 1: of that, alternatives would give you a premium and you
Speaker 1: can bear the whether the volatility, then actually you're probably
Speaker 1: gonna return more for your beneficiaries than if you just
Speaker 1: stayed in public assets. But I think a lot of
Speaker 1: investors forget the illiquidity premium is there for a reason,
Speaker 1: and if you don't have a need for that liquidity,
Speaker 1: you're effectively getting a discount in public fixed income markets.
Speaker 1: So if you don't need that liquidly, why not take
Speaker 1: the additional hundreds of two hundred bases points and returns correct.
Speaker 1: And I think that that's that is what you're seeing,
Speaker 1: and that's what you're driving it right now. I mean,
Speaker 1: the conversations we have with institutional investors with consultants today
Speaker 1: is very much in that vein, which is, you can
Speaker 1: afford to have this much of alloquidity in your portfolio,
Speaker 1: you should tuck that away, and you should pick up
Speaker 1: that illiquidity premium. And and there's other you know, all
Speaker 1: the academic studies say there's illiquidity, there's complexity, and there's
Speaker 1: a lot of other things in there. But you know,
Speaker 1: when you can pick up a hundred to five basis points,
Speaker 1: which is kind of the range, that's pretty attractive, especially
Speaker 1: relative to under two points on on a tenure. So
Speaker 1: So back to the question on scale, where does this
Speaker 1: top top out? Are we still very early days in
Speaker 1: the growth of all these different types of private credit transactions.
Speaker 1: The way I maybe think about it in terms of
Speaker 1: growth is there's there's over one point three trillion of
Speaker 1: dry powder and private equity today, and it's probably much
Speaker 1: higher than that, and there's a lot of people out
Speaker 1: there raising money. If you think about how much financing
Speaker 1: that will drive, that drives at least another multiple of it,
Speaker 1: right two to three times. You know, two point six
Speaker 1: billion trillion plus of just financing there alone. And that's
Speaker 1: just in the biout market. That doesn't include any corporate activity.
Speaker 1: That doesn't include um, you know, other special situations that
Speaker 1: you know, we just don't even account for in that number.
Speaker 1: So I think the growth is really driven by the
Speaker 1: fact that the third thing that we didn't talk about
Speaker 1: is the number of public companies today is about half
Speaker 1: of what it was over ten years ago. There's more
Speaker 1: companies stay in private for longer. I don't know if
Speaker 1: the whole spack thing is going to change that a bit,
Speaker 1: although the run on that's not been great, but I
Speaker 1: would say people are staying in private for longer and
Speaker 1: as a result of that, the need for our capital
Speaker 1: is greater than it probably was ten or fifteen years ago.
Speaker 1: So I I think the tail winds are there for
Speaker 1: you know, the next five plus years for sure. So
Speaker 1: so let's drill down to different types of of UM credit. Uh.
Speaker 1: And you mentioned infrastructure investments as a sizeable piece of
Speaker 1: the portfolio. Uh, let's talk a little bit about infrastructure.
Speaker 1: What areas are you investing in? Walk us through the
Speaker 1: typical credit investment in in infratray. Yeah. Well, infrastructure as
Speaker 1: a as a strategy kind of came to me really
Speaker 1: from my experience at c P P I B where
Speaker 1: when I was running the infrastructure equity business, I looked
Speaker 1: at where the credit financing was coming from, even though
Speaker 1: we're putting equity in and a lot of the deals
Speaker 1: where we would put twenty to equity and required massive
Speaker 1: amounts of credit. Now banks generally would provide a lot
Speaker 1: of that. US banks don't provide anything to infrastructure, very little.
Speaker 1: They it's just not something because of the long term
Speaker 1: nature of it. Canadian banks to a decent amount, but
Speaker 1: guess what, there's not that many Canadian banks, and then
Speaker 1: the Europeans. But then with some of the financial regulations
Speaker 1: that limited how long that duration could be. So my
Speaker 1: thought was always going to be that the capital markets
Speaker 1: would become a more relevant part of infrastructure finance, and
Speaker 1: that was kind of the thesis. So when I came
Speaker 1: to Carlisle, what I started with on day one is
Speaker 1: I want to find a team that could help build
Speaker 1: out that business. And we found a very very experienced
Speaker 1: individual and who had worked at a number of places
Speaker 1: on the infrastructure side, most recently black Rock and UM
Speaker 1: He had been very successful and built up a very
Speaker 1: very large portfolio. So we hired him and we've been
Speaker 1: building out this business and I can see this being
Speaker 1: a very substantial part of our overall portfolio going forward,
Speaker 1: tent of our overall portfolio, and there's such a great
Speaker 1: need for it. So when you think about what does
Speaker 1: that mean specifically, I mean they're really I would say,
Speaker 1: assets that have an underlying rate or regulatory charge that
Speaker 1: allows you to have more confidence in the stability of
Speaker 1: the return on that asset than you would in a
Speaker 1: normal corporate asset. And as a result of that, they
Speaker 1: can also be longer duration, and a lot of insurance companies,
Speaker 1: for instance, who are trying to match duration. Look at
Speaker 1: these assets and see them as being very valuable and
Speaker 1: a diversify in your overall corporate portfolio. And when we
Speaker 1: talk about infrastructure assets, so we're talked me about ports
Speaker 1: and rails and partways or rails, um, transit energy, transportation, pipelines, pipelines. Yeah, um,
Speaker 1: it could be transmission lines, it could be toll roads.
Speaker 1: I mean it has various natures. But anything where there
Speaker 1: is an overriding charge to use that asset that is
Speaker 1: disassociated with the price or volume that's going through, it
Speaker 1: makes sense. We talked about aviation as a hard asset,
Speaker 1: but we really didn't get into real assets. Let's let's
Speaker 1: talk a little bit about real estate and what you're
Speaker 1: seeing in that space. Yeah, I think in real estate
Speaker 1: right now, what is really really interesting to us is
Speaker 1: uh and it was you know, as a result of
Speaker 1: some of the dislocation we're seeing is really in the
Speaker 1: opportunistic real estate space. So we're we're providing you know,
Speaker 1: mezzanine and sort of um completion capital if you will.
Speaker 1: You know, the banks are very efficient further up the
Speaker 1: capital stack and can provide that, but it's really that
Speaker 1: completion capital and we're seeing that in very unique and
Speaker 1: interesting assets. I think the ice Star asset that we
Speaker 1: just announced several weeks ago is interesting to us because
Speaker 1: of the triple net least component really is underlying credit
Speaker 1: and it's a very diversified portfolio between commercial, office and entertainment.
Speaker 1: And I read those about three billion dollars three billion,
Speaker 1: and it's it's a business we want to grow. So
Speaker 1: there's a team there that's well known to us, an
Speaker 1: asset base that's well known to us. UM. Roger Cozy,
Speaker 1: who we hired, actually used to work at I Star
Speaker 1: and helped develop that original portfolio. So we're we're quite
Speaker 1: excited about that in our ability to grow that over time. Uh.
Speaker 1: And as as as as everything we try to grow into,
Speaker 1: we wanted to be a ten billion dollar plus type
Speaker 1: business because that gives us a scale advantage. Huh. And
Speaker 1: we haven't really talked about distressed assets, which I would imagine,
Speaker 1: having worked your way through on O eight oh nine
Speaker 1: must have been a another target rich in environment. Yeah.
Speaker 1: I think the stress has has gone through an evolution. UM.
Speaker 1: I believe if you think about distress twenty years ago, UM,
Speaker 1: there's fewer people doing it. I think that the the
Speaker 1: efficiency was it was a less efficient market. Fewer participants
Speaker 1: made it less efficient. So there are you know, bigger
Speaker 1: outsized excess returns to make. I think today, given there's
Speaker 1: a larger number of participants with a lot of cash,
Speaker 1: it makes it less efficient. Uh, and it makes it
Speaker 1: less scalable quite frankly, Um, there's a lot of crowding
Speaker 1: around the larger opportunities, so and everybody piles into them.
Speaker 1: And then if you look at um, the smaller opportunities
Speaker 1: are just really hard. I liken it to uh private
Speaker 1: equity light. I mean, really, if you do true distress
Speaker 1: for control or you're gonna take over a company, you
Speaker 1: really have to have a post acquisition value creation plan,
Speaker 1: which is really private equity. You've got to you know,
Speaker 1: run the board, you've gotta you know, oversee the management team,
Speaker 1: and you've got a great value. Uh. And that look,
Speaker 1: I think our private equity guys do that really really well.
Speaker 1: I think credit people are okay at it um, but
Speaker 1: I think we're probably more interested in what we've been
Speaker 1: doing lately, which I would call structured equity minority equity opportunities,
Speaker 1: which give you kind of that higher return something that
Speaker 1: I wouldn't call opportunistic where we're in that mid mid
Speaker 1: team type range, but higher higher return perhaps with some
Speaker 1: you know, higher risk of course, but where we're working
Speaker 1: with really good companies and really good management teams, where
Speaker 1: we have really good governance structures, but we don't have control.
Speaker 1: So so what does structured equity actually mean. Is this
Speaker 1: a sort of hybrid of equity And it could be
Speaker 1: a minority interest position. We've got one where we have
Speaker 1: a we have a minority interest position where we have
Speaker 1: some downside protection in terms of excess collateral and the shares.
Speaker 1: So that to me is, you know, we've limited a
Speaker 1: bit of our upside, but we've also taken a big
Speaker 1: cushion on the downside. It could be prefect equity that's
Speaker 1: deeper into the capital structure than we normally would do
Speaker 1: um because of some views that we have on the company.
Speaker 1: When you say deeper, you mean lower in who gets
Speaker 1: paid in banquet? Correct? Correct? You know, like through through
Speaker 1: the capital structure, where we've created at a much lower
Speaker 1: area in the capital structure. The other thing I would
Speaker 1: I would say, what makes us gives us an advantage
Speaker 1: there to a great degree is being integrated with Carlisle
Speaker 1: as a global platform, and I think that's the one
Speaker 1: thing that really turns the wheel for our platform today
Speaker 1: is that connectivity with Carlisle, who has been in business
Speaker 1: for over thirty years, owning companies, realizing on them on
Speaker 1: a global basis, boots on the ground not only in
Speaker 1: the US, Europe, but Asia in particular, which is a
Speaker 1: great growth area I think for us UH and having
Speaker 1: that experience and experience with management teams, countries and companies,
Speaker 1: you know, it's it's unbelievable how much origination it helps
Speaker 1: us with. But also when we're making an investment, the
Speaker 1: different points of intersection that we can get from our
Speaker 1: colleagues in the private equity side, it's kenn and put
Speaker 1: a price on that. The the complementary nature of marrying
Speaker 1: global credit to private equity seems to be, Hey, how
Speaker 1: come we didn't do this before? It really seems to
Speaker 1: have worked out nicely for you guys. Yeah. There, we're like,
Speaker 1: think of us as solution providers, right, Like I mean,
Speaker 1: if you're a management team, you're and you're looking to expand,
Speaker 1: you either sell control equity or you look for some
Speaker 1: sort of structured solution. You come to Carlisle. You can
Speaker 1: go to our biogroup it does control equity, or you
Speaker 1: can come to our group and we will do some
Speaker 1: sort of structured solution that will help you achieve your
Speaker 1: growth objectives. As a combination. That's a powerful outcome because
Speaker 1: you get all the benefits of both those groups in
Speaker 1: one package to help those teams grow. Right. Really, if
Speaker 1: no matter what your needs are, and I don't want
Speaker 1: to sound like I'm doing a commercial for you, you you know,
Speaker 1: not at all, but but you can. But it seems
Speaker 1: like there it's kind of amazing to think back ten
Speaker 1: twenty years ago when in a lot of private equity
Speaker 1: shops nobody was thinking in terms of credit. And really
Speaker 1: it makes in hindsight, it makes perfect sense to marry
Speaker 1: you know, It's like marrying a fixed income and equity together.
Speaker 1: It makes a lot of sense. Yeah, And I think
Speaker 1: look culturally as an organization. I mean, we didn't talk
Speaker 1: about this, but culture matters a lot. And culture matters
Speaker 1: a lot to me. I mean, I left a great
Speaker 1: organization with a great culture and I'm not you know,
Speaker 1: I'm not at the beginning of my career. So I
Speaker 1: need to go to a place where I thought the
Speaker 1: culture is gonna fit for me, and Carlisle is a
Speaker 1: very collaborative, very supportive environment. Is known as a good
Speaker 1: partner in the marketplace, and that's that's worth a lot.
Speaker 1: So when you're talking to a management team, you bring
Speaker 1: that with you and they know if they're dealing with
Speaker 1: Carlisle Global Credit or Carlisle Private Equity, they're getting that
Speaker 1: same partnership approach, and that's extremely valuable, especially when you're
Speaker 1: in competition for assets. So so let's talk a little
Speaker 1: bit about that for a second. And I'm not asking
Speaker 1: the name names, but who are your your clients? What
Speaker 1: sort of entities are Carlyle's clients? Who who do we
Speaker 1: think of? Um? Are they? Are they pension funds? Are they? Yeah?
Speaker 1: I mean at amends? What what sorts? What sort of
Speaker 1: entities are carlisles Claus Sure I would say that, Um,
Speaker 1: you know, we have all the traditional institutional investors in
Speaker 1: anybody else is going to have. You're gonna have your
Speaker 1: traditional state pension plans. You're gonna have your you know,
Speaker 1: non Canadian or sorry, non US pension plans, whether that
Speaker 1: be in Canada or Europe or Australia. You're gonna have
Speaker 1: sovereign wealth funds, which are a big component of that.
Speaker 1: And you're gonna have insurance companies. I mean, those would
Speaker 1: be the major institutional side. Then we've got high net worth.
Speaker 1: Really yeah. High net worth is for us in credit
Speaker 1: in particular, that's a growing How do you define high
Speaker 1: net worth because every entity has a different line fift yeah,
Speaker 1: I mean I don't so much define it as to
Speaker 1: how much they have, but as how big of a ticket.
Speaker 1: And for for now we go all the way down
Speaker 1: to where I think we can take tickets in that
Speaker 1: are as low as ten thousand dollars really yeah, yeah,
Speaker 1: uh so, I know I only have you for a
Speaker 1: limited amount of time. Let's jump to our favorite questions.
Speaker 1: Ask all of our guests all starting with let's talk
Speaker 1: about what what you were doing to keep yourself entertained
Speaker 1: during lockdown? What were you watching? Streaming, listening, streaming? Okay, well,
Speaker 1: the two things that I one i've finished and one
Speaker 1: I'm still watching. One is called it's called the Bureau
Speaker 1: or the Bureau, which is it's subtitles, but it's French
Speaker 1: and it's really about the French intelligence agency and their
Speaker 1: operations in the Middle East and um Northern Africa, and
Speaker 1: it's fascinating because of you know, really, what you do
Speaker 1: is you have these relatively normal people leading these clandestine
Speaker 1: lives to affect change and all the complications that go
Speaker 1: with it, and it's you know, it's complicated, but it's subtle.
Speaker 1: It's it's really worth watching. It's probably the best thing
Speaker 1: I have watched in a long time. Really, these five
Speaker 1: seasons fantastic, the one, the other and the other one.
Speaker 1: And listen. I'm even though I'm Canadian and I did
Speaker 1: take French for twelve years, I'm really not proficient at it.
Speaker 1: So I do read. I watch these with subtitles Call
Speaker 1: my Agent fantastic hilarious. So so every time I discussed
Speaker 1: call my Agent with friends, I always have to tell
Speaker 1: them in France it's called ten, not called called my Agent.
Speaker 1: And all of the actors playing actors are actually the
Speaker 1: very famous French actors that if you're an American you
Speaker 1: may or may not recognize them. Um, but that was
Speaker 1: such a great show. I really enjoyed. I've not done
Speaker 1: it yet, but I quite enjoy It's my fun place
Speaker 1: to go. So so I'm gonna check out the bureau
Speaker 1: and you're already onto ont call my agent. UM, let's
Speaker 1: talk about mentors who helped to shape your career. Yeah,
Speaker 1: I I would call them mentor facilitators if you which
Speaker 1: were people who not so much mentored me, but but
Speaker 1: put pushed me in certain directions. And I'd say the
Speaker 1: one there's probably three of them, and the one who
Speaker 1: initially think of as a guy, Tim Hodson and him
Speaker 1: and I worked at Tim and I worked at Golden Sacks.
Speaker 1: He was the CEO of Golden Sacks Canada for a while.
Speaker 1: He's he's now the chair of Ontario Hydro one I
Speaker 1: believe called the utility up in Canada. Now. He's also
Speaker 1: on the board of PSP, which is the UM the
Speaker 1: sister pension plan to c p P I B. So
Speaker 1: he you know, he's a great guy and he really
Speaker 1: um pushed me to do different things. He actually is
Speaker 1: the person who encouraged me to go to c PP
Speaker 1: I B. But I think the biggest thing he did
Speaker 1: for me is give me perspective. And I think that's
Speaker 1: especially when you're younger. I think you need that in
Speaker 1: perspective and some empathy. I put yourself in somebody else's
Speaker 1: shoes and replay back what you said to that person
Speaker 1: or how you act in that situation, and that that
Speaker 1: had profound impact on how I operate today. And and
Speaker 1: I give him a lot of credit for things that
Speaker 1: I've been able to do in my career. The other one,
Speaker 1: the other two people are really UM David Dennis and
Speaker 1: who's a former CEO c p P I B, and
Speaker 1: Mark Wiseman, who who became the the CEO c p
Speaker 1: P I B. And they they stood behind me at
Speaker 1: a time when I started a private credit business during
Speaker 1: the financial crisis of oh eight oh nine. They bought
Speaker 1: into that long term strategy that I had UM not
Speaker 1: dissimilar to the platform approach we have here today at
Speaker 1: Carlisle and UH at a time where we're going through
Speaker 1: the deepest, what we thought was the deepest, darkest crisis
Speaker 1: we've ever seen. UH, they got behind me and and
Speaker 1: rallied board support to get that program going and really
Speaker 1: gave me the lane way to do what was what
Speaker 1: turned out to be a very successful program for c
Speaker 1: p P I B. And then finally I would say, UM,
Speaker 1: you know my current boss, Quson Lee. UH, he kind
Speaker 1: of found me at a time where I was really
Speaker 1: considering UM starting my own fund and uh and somehow
Speaker 1: found me just before I had left to start my
Speaker 1: own fund and convinced me to come to Carlisle, uh
Speaker 1: and really gave me again the lane way, the opportunity
Speaker 1: to build what we've done so far, and we've got
Speaker 1: a lot more to do. But I but I I
Speaker 1: you know, I think they're facilitators in many respects. They've
Speaker 1: they've listened to what I've had to say and given
Speaker 1: me some guidance, but but more or less have cleared
Speaker 1: the lanes to to allow me to do what I
Speaker 1: think is the right thing to get to business going
Speaker 1: really really quite interesting. Let's talk about books. What are
Speaker 1: some of your favorites? What are you what are you reading? Right?
Speaker 1: You know what books are like music? To me? I
Speaker 1: listened everything right, So I listened to rap, I listened
Speaker 1: to nineties rock, I listened to pop, I listened to jazz,
Speaker 1: I listened to classical and country, and like, you can't
Speaker 1: really pin me down. And books are kind of the same.
Speaker 1: I go through periods where I want to understand something,
Speaker 1: so um, some of the greats I was just thinking
Speaker 1: about it before I came in here were you know,
Speaker 1: as we moved to the U S. I didn't do
Speaker 1: a lot of US history, so I read a lot
Speaker 1: about you know, U S history. So some of the
Speaker 1: ones that stand out, Team of Rivals, doors, good and fantastic.
Speaker 1: Um ron Cher now has got some great books. I
Speaker 1: read Alexander Hamilton's before it became like a play, and
Speaker 1: I thought, how do you make a play out of that?
Speaker 1: But like, fantastic book on somebody who was so prolific
Speaker 1: in a very short period of time and had such
Speaker 1: a large, profound impact on America. I think that's fascinating. Grant.
Speaker 1: I mean, you know chur Now another one there where
Speaker 1: you know there's a flawed man who who had his
Speaker 1: moment in history. Uh, you know, fantastic. And then you know,
Speaker 1: just recently I read, uh, Ladies and gentlemen, the Bronx
Speaker 1: is Burning, which is uh, you know, politics, sports and
Speaker 1: sort of merging New York in nineteen seventy seven, where
Speaker 1: you had the Yankees, Reggie Jackson, you had the mayor race,
Speaker 1: and you had you know, the Blackouts of nineteen seventy seven,
Speaker 1: a cross all five boroughs. I mean, it's fascinating, So
Speaker 1: I really I really enjoy those things. And then I
Speaker 1: love reading about people who who are flawed but have achieved,
Speaker 1: you know, in history great things. So Churchill, for instance, Um,
Speaker 1: you know, I read the Robert Carol book recently, The
Speaker 1: Power Broker, which is like massive but like you know,
Speaker 1: power crops, absolute, power crops, absolutely, And and now I'm
Speaker 1: I'm in the process of reading Partying the Waters, which
Speaker 1: is at Taylor Branch book on on Martin Luther King
Speaker 1: sort of in the early civil rights movement. So I
Speaker 1: like a lot of different things. Which Churchill book will you?
Speaker 1: I think the best ones if you want to read,
Speaker 1: if you just say I want to read one, the
Speaker 1: definitive ones are by Roy Jenkins, no relation to me.
Speaker 1: And then Andrew Roberts wrote one recently, and I think
Speaker 1: that one's a pretty good one. It has some new
Speaker 1: material and really shows a flawed individual for sure, as
Speaker 1: we all are, not all of us accomplished. What what
Speaker 1: folks like Churchill did? Um, let's talk about advice. What
Speaker 1: would you tell a recent college grad who was interested
Speaker 1: in a career in either credit or investment management? Yeah,
Speaker 1: I you know, I get this question a lot from
Speaker 1: junior people. They asked, what what should I do? And
Speaker 1: I think it applies to a lot of things, not
Speaker 1: just investment management. I think the biggest thing you can
Speaker 1: do is is to be obsessively curious, because if you're impassionate,
Speaker 1: if you're not curious about things like I don't know
Speaker 1: how you'll learn frankly, and so be early on. You
Speaker 1: have the ability to be curious in an uninhibited way
Speaker 1: because nobody expects you to know anything. I mean, you
Speaker 1: might be brilliant, you might have come out of great school,
Speaker 1: but nobody really expects you to know much. And so
Speaker 1: that's a great time to be curious about what you're
Speaker 1: interested in. Right. So, if it's finance, be curious about that.
Speaker 1: If it's investing, be curious about that and ask a
Speaker 1: lot of questions because that ultimately is what's going to
Speaker 1: drive you through. And a final question, what do you
Speaker 1: know about the world of credit and investing uh today
Speaker 1: that you wish you knew years ago or so when
Speaker 1: you were first starting out? Yeah, you know, I'd say
Speaker 1: the biggest thing that I've I've come to realize is
Speaker 1: that um change is constant. Change is constant, and I
Speaker 1: think in investing we sometimes fall back on history, we
Speaker 1: fall back on what we know, but change is constant.
Speaker 1: Some people say it's circular, but I think it's it
Speaker 1: evolves as opposed to circular. And I think that change
Speaker 1: has increased dramatically in the thirty years that I've been
Speaker 1: involved in finance and investing, and if I had a
Speaker 1: thought about that, I think from an investing standpoint, it
Speaker 1: which some In some ways, it's influenced how I think
Speaker 1: about investing today compared to thirty years ago. For sure
Speaker 1: quite fascinating. Thanks Mark for being so generous with your time.
Speaker 1: We have been speaking with Mark Jenkins, managing director and
Speaker 1: head of Global Credit at Carlisle Group. If you enjoy
Speaker 1: this conversation, well be sure and check out any of
Speaker 1: the previous I don't know three nine we've had over
Speaker 1: the past eight years. You can find those at iTunes, Spotify,
Speaker 1: wherever you purchase your favorite podcasts. We love your comments,
Speaker 1: feedback and suggestions right to us at m IB podcast
Speaker 1: at Bloomberg dot net. Sign up from my daily reads
Speaker 1: at Richaltz dot com. Follow me on Twitter at ritalts.
Speaker 1: I would be remiss if I did not thank the
Speaker 1: crack staff that helps put these conversations together each week.
Speaker 1: Sean Russo is my researcher. Paris Wald is my producer.
Speaker 1: Attika val Bronn is our project manager. Mark Siniscalci is
Speaker 1: my audio engineer. I'm Barry Ritalts. You've been listening to
Speaker 1: Masters in Business on Bloomberg Radio.