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Speaker 1: Hello, Welcome to the Credit Edge, a Wiki markets podcast.

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Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg.

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Speaker 2: And I'm David Haven's, a senior analyst at Bloomberg Intelligence.

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Speaker 2: This week, we're very pleased to welcome Joel Holsinger, co

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Speaker 2: head of Arias Alternative Credit.

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Speaker 3: Joel, how are you doing great today?

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Speaker 4: Thank you?

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Speaker 2: Good to hear. Joel is also a member of the

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Speaker 2: Areas Operating Committee. Areas Alternative Credit tactically invests in scale

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Speaker 2: across assets based finance, and he serves as a member

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Speaker 2: of Areas Credit Group's Alternative Credit Executive Committee and Alternative

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Speaker 2: Credit Pathfinder and Pathfinder Core Investment Committees. Pathlind Fun Family

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Speaker 2: promotes giving through a pre defined structure of social purpose,

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Speaker 2: pledging to donate five to ten percent of the carried

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Speaker 2: interest profits to global health educational charities, and I think

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Speaker 2: we might be up to about twenty million dollars or

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Speaker 2: so of charitable contributions in the works already. Joel joined

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Speaker 2: Areas in twenty nineteen Fortress Investment Group, reserved on the

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Speaker 2: management committee there and co edit its ill Liquid Credit Group.

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Speaker 2: Needless to say, Joel, you have a fascinating credit background,

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Speaker 2: and it's incredibly topical because private asset back credit is

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Speaker 2: exploding in a good way. Numbers may vary, but more

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Speaker 2: than five trillion dollars globally and likely to tack on

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Speaker 2: another fifty percent by twenty twenty nine based on number

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Speaker 2: of estimates that are out there. The address bold market

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Speaker 2: tens of trillions of dollars in scale, and we seem

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Speaker 2: to have a few things we're starting to worry about

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Speaker 2: in private credit. So let's get on with it.

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Speaker 5: Thanks David.

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Speaker 1: I know we all want to talk about private markets

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Speaker 1: and asset based finance, but I do want to start

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Speaker 1: with a more broad question about corporate credit. After months

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Speaker 1: of very bullish sentiment and record type spreads, we are

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Speaker 1: starting to see some trouble, triggered by the collapse of

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Speaker 1: first brands and associated losses or some fairly large financial

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Speaker 1: institutions and investors have been quick to blame the tariffs.

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Speaker 5: There were other blow.

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Speaker 1: Ups in the auto sector, which is very exposed to

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Speaker 1: the trade wars. Most have dismissed the problem as idiosyncratic,

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Speaker 1: name specific, and unlikely to affect others, but we are

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Speaker 1: now seeing spreads widened significantly across the board, there's a

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Speaker 1: lot more scrutiny of weak companies that raise a lot

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Speaker 1: of debt during the good times. Third quarter earnings will

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Speaker 1: be the next big test, and some are even calling

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Speaker 1: it a wily coyote moment for credit. But what's your take, Joel,

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Speaker 1: How worried should we be about the outlook from here?

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Speaker 4: We're jumping right into it. Huh.

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Speaker 6: Look, I think it's There's been obviously a lot of

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Speaker 6: news and a lot of headlines around both First Brands

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Speaker 6: as well as treet Color, and I think that, you know,

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Speaker 6: there's a couple of things that are interesting if you

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Speaker 6: take a step back from that, and I think one

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Speaker 6: of my partners, Jenna, got quoted on something she spoke

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Speaker 6: at a conference recently, which is ironically, if you let's

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Speaker 6: take them each deal by deal. If you look at

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Speaker 6: First Brands, you know twelve billion dollars or so of

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Speaker 6: reported liabilities. Three billion or so of that is across

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Speaker 6: the broadly syndicated loan market, nine billion of that is

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Speaker 6: across kind of the trade, finance and other portions. And

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Speaker 6: if you look at that, most of that exposure is banks.

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Speaker 6: Most of that is kind of in traditional markets and

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Speaker 6: so the headlines have really been more towards the private

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Speaker 6: markets or private credit. The reality is is that you know,

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Speaker 6: in many ways, if it had been across the private market,

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Speaker 6: there probably would have been more ability to do some

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Speaker 6: of the work to unearth some of the stuff that

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Speaker 6: has been just that has been alleged, as well as

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Speaker 6: obviously you know, more extensive covenant packages and other things.

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Speaker 6: I mean, I always like to use the analogy if

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Speaker 6: you think of the liquid markets versus the private credit

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Speaker 6: markets is basically the difference between being a chef and

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Speaker 6: being a food critic. You know, when you're play in

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Speaker 6: the liquid markets, you can look at the meal, you

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Speaker 6: can decide if you're going to eat the meal, you

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Speaker 6: can take the meal, you can write about the meal.

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Speaker 6: But you're not a chef, and the reality is you're

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Speaker 6: limited on how many questions you can even ask and

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Speaker 6: how much work can be done. When you're a chef,

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Speaker 6: you're sitting there, you're buying the groceries, you're putting together

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Speaker 6: the menu, you're testing it out, you're rolling it out,

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Speaker 6: and you're dealing with it from beginning to end. And

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Speaker 6: it's really true in all private markets, whether it be

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Speaker 6: private equity, whether it be private credit or others. The

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Speaker 6: level and amount of work you can do from a

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Speaker 6: diligent standpoint is dramatically more extensive than what you can

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Speaker 6: in the liquid markets. And so the headlines have really

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Speaker 6: tried to speak about treek lore as well as first

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Speaker 6: brands as a private credit issue, but ninety five percent

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Speaker 6: or more of the exposure will effectively is being held

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Speaker 6: by banks and kind of liquid credit markets in some

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Speaker 6: form or fashion. And so, you know, I think from

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Speaker 6: our standpoint, look, we're constantly partnering with banks, We're constantly

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Speaker 6: working across what we do. But I look at it

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Speaker 6: from the standpoint of know the exposures and where the

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Speaker 6: exposures have actually been have been a little misreported with

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Speaker 6: regards to where that is held today. And you know,

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Speaker 6: if you spoke about earlier James about asset based finance,

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Speaker 6: trade finance has never really been part of asset based finance.

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Speaker 6: That's really if you think of asset based lending, which

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Speaker 6: is always inventory or commercial receivables. And I don't want

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Speaker 6: to geek out too much as it relates to this,

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Speaker 6: that's really its own separate world and has always played

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Speaker 6: and that is always played in a very different portion

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Speaker 6: of that. In ninety nine percent of trade finance is

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Speaker 6: a bank world, and it's normally done with IG counterparties

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Speaker 6: or others.

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Speaker 2: So, Jill, you guys are sitting on top of at

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Speaker 2: areas or sitting on top of hundreds of billions of

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Speaker 2: dollars of investments, primarily private investments. What you know that

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Speaker 2: there there are some fractures that have shown up in

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Speaker 2: the market. They might be one offs, like what we

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Speaker 2: were just talking about. I think there's a sense that

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Speaker 2: there might be a little bit more going on, maybe

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Speaker 2: that there's you know, some negative trends developing in credit

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Speaker 2: after a long run up. What are the soundings from

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Speaker 2: sort of the overall area's portfolio, from your portfolio companies,

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Speaker 2: What are you hearing back from them?

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Speaker 6: Sure, and it's probably worth you speaking to the portfolio.

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Speaker 6: We're not a lender to Tree Color and we're not

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Speaker 6: a lender to first brands, but if you look at it,

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Speaker 6: you know, I'd say I can speak a lot more

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Speaker 6: to the assa based finance or alternative credit group than

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Speaker 6: I can to direct lending and some of the others.

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Speaker 6: But you know, if you look at direct lending, they

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Speaker 6: are continuing to see EBITAG growth, they are continue to

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Speaker 6: see revenue growth. And it really speaks to things you

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Speaker 6: see across all markets, which is even when you see

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Speaker 6: some things that cause signals or cause concerns across markets,

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Speaker 6: you really have to kind of go into the individual cohorts.

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Speaker 6: We learn that a lot in asse based finance, You're

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Speaker 6: you're digging through a lot of pools of data and

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Speaker 6: millions of underlying loans often and you're looking at things

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Speaker 6: and it's really interesting when you do that from the

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Speaker 6: standpoint of I remember a student loan related transaction I

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Speaker 6: did fifteen years ago. Probably at this point, I'm going

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Speaker 6: to age myself. And if you look at that, what's interesting,

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Speaker 6: and this is true in most asset classes, ninety percent

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Speaker 6: of your defaults will be in one sub segment. You

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Speaker 6: can almost always go to a cohort within a large

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Speaker 6: portfolio and you can find where most of those defaults were.

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Speaker 6: And student loans this portfolio I'm speaking to were really

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Speaker 6: for profit schools. Most of it was in for profit schools.

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Speaker 6: And the other thing that's interesting when you think of

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Speaker 6: cohorts and digging into the details, most of the defaults

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Speaker 6: are in the first eighteen months. You know, it's really

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Speaker 6: frontloaded defaults that kind of occurred, and what does that

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Speaker 6: speak to They never graduated, you know, they never finished college,

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Speaker 6: they never got through. So their ability to kind of

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Speaker 6: be able to service schools as well as you guys

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Speaker 6: know very well the for profit schools were a lot

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Speaker 6: of marketing to create those and so not necessarily that

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Speaker 6: when we think of a college education, the same necessarily

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Speaker 6: level that you would have had, and there's been a

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Speaker 6: lot of reforms to that space since then. I think

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Speaker 6: the same can be set today, which is there's clearly

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Speaker 6: sub segments or cohorts that are they're experiencing more concerns.

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Speaker 4: But if you look at it on a broad.

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Speaker 6: Basis, you continue to see the private credit market, if

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Speaker 6: you speak of direct lending as continuing to kind of

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Speaker 6: grow on revenue dy. But if you look at across

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Speaker 6: asset based finance, we are always looking at that analysis.

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Speaker 6: And what I mean there is we're very big unrelative value.

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Speaker 6: There are areas that are very interesting that become uninteresting

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Speaker 6: because a lot of people will pile into them. We've

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Speaker 6: been one of the more active players and we were

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Speaker 6: very busy early on with significant risk transfers or SRTs.

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Speaker 6: That's an area that a lot of money piled into,

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Speaker 6: and there's been headlines and reports around that. Frankly, there

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Speaker 6: hasn't been as much to do because what's happened is

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Speaker 6: you're pricing down, your risk went up in many of

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Speaker 6: those areas, and so where we've been playing is a

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Speaker 6: tiny little cohort where there's still some stuff to do

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Speaker 6: that has great risk. I won't say it publicly here

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Speaker 6: because we like that cohort, but ninety five ninety nine

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Speaker 6: percent of what's going on in SRTs we found wholly

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Speaker 6: an interesting even though we are very active on it.

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Speaker 6: If you go back too plus years ago, yes.

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Speaker 2: Maybe we should level set also because it seems like,

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Speaker 2: you know, private credit, it means a lot of different

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Speaker 2: things to a lot of different people because it's a

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Speaker 2: it's an enormously wide area that ranges all over the place.

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Speaker 2: So what does your overall Baileywick include when you're talking

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Speaker 2: about asset based private lending? What are you really looking at?

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Speaker 3: Like?

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Speaker 2: Where are you on that spectrum?

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Speaker 6: Yeah, and everything we're talking about is obviously looking backwards

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Speaker 6: right now because we are in public and we can't

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Speaker 6: talk to the forward earnings. But you know, when we

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Speaker 6: look a relative value of the most interesting what's really

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Speaker 6: been interesting for us? And it is unique and maybe

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Speaker 6: to take a step back, David, just to set the

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Speaker 6: table on asset based finance, because I think there's a

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Speaker 6: lot of people to talk about it, but there's there's

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Speaker 6: two real big parts of the market. Part one is insurance,

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Speaker 6: you know, and most of the capital that spoke about.

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Speaker 6: If you think of the forty trillion dollars or so

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Speaker 6: in that market, thirty trillion plus of it is insurance

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Speaker 6: capital of some form or fashion. And when you think

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Speaker 6: of that insurance, there has been a number of players

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Speaker 6: that have entered that market, obviously in scale, and there

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Speaker 6: is deals that are done and that market if you

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Speaker 6: think of insurance as traditionally bought corporate IG as well

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Speaker 6: as ASBAC securitizations, so the liquid ABS market, what's changed

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Speaker 6: in the last five years or less is a lot

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Speaker 6: of private IG. And it's simple as basis, because I

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Speaker 6: think sometimes it gets spoken about like there's this you know,

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Speaker 6: mirage of all these things going on. It's an ABAC

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Speaker 6: security ABS deal that's getting done on a private basis.

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Speaker 4: That's all that's happening.

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Speaker 6: The exact same pool of collateral, the exact same rating,

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Speaker 6: the exact same lookthrough. What's really happening is in your

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Speaker 6: basic taking some of the excess points or fees that

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Speaker 6: you might pay and putting it into the spread. So

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Speaker 6: you are picking up excess spread. But all of that's

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Speaker 6: done for insurance. And what does insurance need in the

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Speaker 6: United States, whether an annuity provider or your life insurance

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Speaker 6: or other insurance, you need a rating ninety percent plus

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Speaker 6: normally ninety five percent needs to be investment grade rating

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Speaker 6: or above. And so when you talk about ABF, a

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Speaker 6: lot of that is fixed income or as I like

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Speaker 6: to call it, fixed income plus because it is corporate IG,

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Speaker 6: it is ass of execurization market and now it's private IG.

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Speaker 4: That's the plus.

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Speaker 6: You are picking up extra spread, but it's a minimal amount,

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Speaker 6: but it has a big impact on the earnings of

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Speaker 6: an insurance company. The non insurance market, the non rated

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Speaker 6: is an area where effectively you need flexible capital. You

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Speaker 6: need flexible capital in scale, and we believe we are

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Speaker 6: a leader there. We believe we have the largest fund

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Speaker 6: that's been raised. And when we look at that, what

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Speaker 6: we see is a market where you have the ability

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Speaker 6: the relative value has been less asset class driven, and

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Speaker 6: it's actually been more scale driven because there won't be

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Speaker 6: one winner there and there won't be ten winners. There's

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Speaker 6: going to be four or five winners because you have

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Speaker 6: to sit on a big platform, you need to have

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Speaker 6: big infrastructure.

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Speaker 4: You have big scale.

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Speaker 6: But what we've really seen in the last eighteen months

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Speaker 6: is this shift where that ability to bring capital and

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Speaker 6: scale has really driven transactions as much as the asset class.

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Speaker 6: As the other David maybe to talk through is fun finance.

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Speaker 6: I mean, we've definitely seen a lot across fund finance.

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Speaker 1: Talk about asset based financer. Joe, what exactly are you

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Speaker 1: securitizing here? Is it car loans, students? What typically do

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Speaker 1: you repackage?

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Speaker 4: Sure?

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Speaker 6: I mean, at its simplest, there's the asset ex securitization market,

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Speaker 6: the liquid market everybody's familiar with, which includes consumer and

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Speaker 6: other things. But I always like to say everything's a portfolio.

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Speaker 6: Everything's loans, leases, and receivables, and it's financial receivables and

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Speaker 6: not commercial receivables. It can include royalties, and all of

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Speaker 6: them have contractual cash flows, So it's all the contractual

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Speaker 6: cash flows that are coming off these. There's a great

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Speaker 6: video we put together. It's a pretty abf one oh

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Speaker 6: one video, but there's a great video we put together

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Speaker 6: on LinkedIn and it's on our website. It's called a

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Speaker 6: Day in the Life. And the idea is you touch

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Speaker 6: our assets every day. Whether it's your auto, whether it's solar,

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Speaker 6: whether it's your credit cards, whether it's your residential mortgage,

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Speaker 6: whether it's your you know, buy now, pay later. All

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Speaker 6: of those areas drive into it. But it's even simpler

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Speaker 6: than that. It's really there's the ABS market and what

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Speaker 6: we do on the non insurance pool of capital is

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Speaker 6: everything we do. Everything that's in the ABS market done

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Speaker 6: on a private, direct basis. It's no different than fixed

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Speaker 6: income and leverage loans versus jrect lending. You're just doing

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Speaker 6: it on a direct basis with regards to those transactions.

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Speaker 5: And the pickup in spread.

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Speaker 1: We've had Blackstone on a recent show talking about one

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Speaker 1: hundred and fifty to two hundred basis points pick up

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Speaker 1: even for ig you said it's minimal.

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Speaker 5: I mean, how does how does it compare to what

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Speaker 5: Blackstone is see?

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Speaker 6: So yeah, So what you're talking about, James, is really

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Speaker 6: the insurance side. I was mentioning earlier, and that is

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Speaker 6: private IG. You are picking up one hundred and fifty

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Speaker 6: to two hundred. Part of that's, honestly, because corporate IG

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Speaker 6: is that tight right now. You're at thirty year tights

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Speaker 6: on corporate IG because you know there's nothing going on

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Speaker 6: in the world and everything's perfect. Obviously when you think

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Speaker 6: of thirty year tights on corporate IG, of course, of course,

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Speaker 6: I mean clearly. So you've seen that, You've seen that occur,

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Speaker 6: and part of that is, you know, we publish our

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Speaker 6: lessons learned in our newsletter in the gaps and we

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Speaker 6: have our top fifteen.

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Speaker 4: One of them has watched the flows.

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Speaker 6: There has been a lot of capital that has flown

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Speaker 6: into some of those areas, and that's driven down corporate

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Speaker 6: IG and it's driven down spreads into across the aspects

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Speaker 6: securitization market more so corporate I G.

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Speaker 4: When we talk.

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Speaker 6: About when you go away from that, you're talking more

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Speaker 6: opportunistic type returns, which would be more like credit opportunity

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Speaker 6: type funds or even on the lower end of private

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Speaker 6: equity funds as well as we kind of have in

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Speaker 6: the middle where you can play across that. But the

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Speaker 6: key is having all three buckets, whether it's insurance related

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Speaker 6: capital which we also manage, opportunistic or tactical on the side,

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Speaker 6: or the area in the middle that kind of sits

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Speaker 6: in between those.

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Speaker 2: So when when we're talking about sort of IG asset

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Speaker 2: back finance or other forms of asset back finance, you know,

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Speaker 2: it's always sort of interesting to figure out where where

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Speaker 2: sort of the equity portion of the risk resides. You know,

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Speaker 2: if you're doing an IG deal, I assume that it's

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Speaker 2: it's the borrower who sort of holds onto that equity

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Speaker 2: stake of the of the risk, or maybe maybe they

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Speaker 2: transferred somewhere else. It's not the insurance company that's buying it.

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Speaker 4: It can be both.

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Speaker 6: Actually, David, it's interesting because we call it horizontal or vertical.

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Speaker 6: You know, Horizontal is you're just owning the bonds and

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Speaker 6: then somebody else owns the reson or the equity. Vertical

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Speaker 6: means you're owning the whole thing you are seeing. And

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Speaker 6: this has always happened in insurance capital. If you think

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Speaker 6: of residential mortgages, insurance has generally held those residential mortgages

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Speaker 6: is vertically, they've held the whole thing because of the

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Speaker 6: treatment they get from from insurance, regulatory capital. But what

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Speaker 6: you're starting to see is whether it's across consumer lending,

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Speaker 6: whether it's across you know, equipment leases, whether it's across autos,

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Speaker 6: you're starting to see more vertical, especially as you've seen

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Speaker 6: some more scaled players with the ability to take that down.

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Speaker 6: So often you actually are seeing them hold the whole thing.

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Speaker 6: The difference is if ninety five percent or so of

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Speaker 6: it needs to be ig they're holding that last piece

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Speaker 6: and kind of their what they call their alts bucket

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Speaker 6: on that board, a bottom piece. Other times you're right,

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Speaker 6: it's just horizontal.

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Speaker 2: Yep.

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Speaker 1: Okay, we see something grow very quickly, and we think,

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Speaker 1: you know, potentially that there's the there's the chance that

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Speaker 1: something might get done that maybe shouldn't get done, that

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Speaker 1: there's pressure to deploy, that there's people not maybe scrutinizing

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Speaker 1: the work as much they should, and that you know,

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Speaker 1: recent blow ups in the in the in the food

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Speaker 1: critic area, as you put it, Joel, signs that you

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Speaker 1: know this, these are good time deals going bad because

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Speaker 1: not enough attention was paid. Surely the same thing's happening

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Speaker 1: in private market, isn't it?

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Speaker 6: Well, you know, look, I think there's always the risk

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Speaker 6: of watching the flows when the money flows out. It's

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Speaker 6: the old Warren Buffet comment of you know, when the

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Speaker 6: tide goes out, you see who's naked. So it's obviously

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Speaker 6: there's always questions when you see some nudity without the

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Speaker 6: tide going out. You know, I would say, you know,

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Speaker 6: the only thing that is more conservative than a credit

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Speaker 6: journalists a credit investor. I've been doing this for twenty

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Speaker 6: eight years, and you know it's a good thing. This

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Speaker 6: is a podcast because you know, as I often say,

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Speaker 6: I have a face for podcasts, but those who know

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Speaker 6: me though, I have a fully silver head of hair

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Speaker 6: and I just turned fifty. So you know that comes

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Speaker 6: from investing in credit for twenty eight years. You go

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Speaker 6: through cycles, you go through all these period and you

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Speaker 6: end up with scars, and it makes you a better

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Speaker 6: investor if you learn your lessons along the way. I

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Speaker 6: think it really kind of goes to you should always

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Speaker 6: in credit invest like the GFC or the recession that's

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Speaker 6: happening tomorrow, you have to go into an assumption that

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Speaker 6: everything is going to go bad, and can you protect

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Speaker 6: yourself through your structure, through your cash flows. We like

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Speaker 6: to go for front load to cash flows, which comes

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Speaker 6: off of portfolios. One of the advantage of ABF is

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Speaker 6: everything is a portfolio, and what happens in portfolios. If

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Speaker 6: you think of individual loans and say the broadly syndicated market,

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Speaker 6: you're getting interest inri centrist principle at the end. And

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Speaker 6: if you think of private equity, you're getting nothing maybe

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Speaker 6: a recap you sell the company, you go public, so

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Speaker 6: that most of the valuations coming from the terminal value,

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Speaker 6: it's not coming from the contractual cash flows. And we

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Speaker 6: do something that I highly recommend to any investor, which

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Speaker 6: is we have a page in our memos we had

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Speaker 6: in this about four years ago whereas a page of

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Speaker 6: visualizing the cash flows actually see how the cash flows

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Speaker 6: come in on individual deal, but then off to the

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Speaker 6: right as a pie chart or as my partner Keith

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Speaker 6: Ashton says, a donut because donuts are better than pie,

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Speaker 6: and the donut chart it shows basically how much is

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Speaker 6: contractual how much is terminal value. And we generally like

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Speaker 6: front load to cash flows and you can get them

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Speaker 6: in asset based finance. The reason the lost histories have

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Speaker 6: been so low historically across the industry is because you

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Speaker 6: are getting principal and interest off a diverse portfolio. You're

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Speaker 6: not just getting interest, You're getting those dollars and it's

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Speaker 6: de risking. So when things go wrong, you've generally returned

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Speaker 6: a lot or all of your capital and it's more

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Speaker 6: of a slightly lower return versus a loss. Why do

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Speaker 6: people care about rates and inflation so much?

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Speaker 4: The V.

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Speaker 6: When you're getting terminal value at the end of an investment,

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Speaker 6: you really care about the valuation. Why is private equity

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Speaker 6: you know not has disappointed or as I call it,

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Speaker 6: disappointed performance since influenza, you know where they haven't returned

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Speaker 6: the cap. It's created an opportunity for us in fun finance,

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Speaker 6: tons of opportunities coming out of it.

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Speaker 4: But it's come.

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Speaker 6: Because of the V, which is you are more dependent

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Speaker 6: on that exit, that IPO, that sale, that other portion

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Speaker 6: and that return of capital. And obviously rates and inflation

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Speaker 6: can have a big impact on what that drives. So

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Speaker 6: so we look at it as assume the recession, look

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Speaker 6: for frontload cash flows, do things. Our pattern recognition is simple,

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Speaker 6: it's lost. It's lost curves. You know where we see

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Speaker 6: loss curves. Can it get to two to three x

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Speaker 6: and we're still protected versus what we underwrote. Can you

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Speaker 6: get to a recessionary type case and you're still protected

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Speaker 6: on your return of capital? That's when you know you

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Speaker 6: move forward. That's when you know you've got a deal

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Speaker 6: that kind of holds up. And then you debate on

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Speaker 6: whether you're getting paid enough for it or how it

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Speaker 6: looks unrelative value versus something else you're doing.

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Speaker 2: I've got sort of a two parter for you, which

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Speaker 2: I think a lot of you know, sort of casual

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Speaker 2: private credit observers might be trying to trying to get

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Speaker 2: their arms around. But what makes an asset back deal

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Speaker 2: or you know, an asset financing situation more applicable or

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Speaker 2: suitable to what you're doing versus a public market transaction.

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Speaker 2: And what safeguards or guardrails are you able to build

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Speaker 2: into the underwriting process. It may not be available in

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Speaker 2: sort of the more plain, vanilla part of the world.

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Speaker 6: Sure, I'll break it down. I'll start with the latter

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Speaker 6: part and come back to the other. The first is

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Speaker 6: the asmatic securitization market. Is that come in a heavy world.

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Speaker 6: You know, if you think of eligibility criteria, if you

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Speaker 6: think of overclaudalization, ratios. If you think of all of

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Speaker 6: the tests that go into whether it's a CLO and

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Speaker 6: aspects securitization or other market, there's there's a lot of

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Speaker 6: covenants that are kind of structured into the deals, and

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Speaker 6: it's done on a bankruptcy remote basis and a special

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Speaker 6: perpoc entity, so you don't go into a bankruptcy. You're

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Speaker 6: not sitting there fighting over the areas. It's a waterfall.

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Speaker 6: Everything goes to a waterfall based on the structures and

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Speaker 6: then it comes down and pays off that for that

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Speaker 6: generally holds out true in the private markets. But as

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Speaker 6: you can imagine, if you're already getting covenants in the

436
00:22:06,800 --> 00:22:09,399
Speaker 6: public markets, you of course get that and more in

437
00:22:09,440 --> 00:22:12,639
Speaker 6: the private markets. So you're able to get covenants away

438
00:22:12,640 --> 00:22:15,080
Speaker 6: from that that bankrupt remote. You might even get covenants

439
00:22:15,080 --> 00:22:17,360
Speaker 6: at the OpCo, you know, where you would never get

440
00:22:17,359 --> 00:22:19,760
Speaker 6: that in an aspect securitization world. You just get it

441
00:22:19,800 --> 00:22:24,040
Speaker 6: on your pool of assets. So the real advantage is

442
00:22:24,359 --> 00:22:27,120
Speaker 6: one like all things in private markets. You know, it's

443
00:22:27,240 --> 00:22:30,840
Speaker 6: like a Colombo. This is truly aging myself, so I

444
00:22:30,840 --> 00:22:34,000
Speaker 6: apologize for this, but you know it's Columbo is an

445
00:22:34,000 --> 00:22:38,520
Speaker 6: old detective show. Hell probably back in the eighties, seventies,

446
00:22:38,680 --> 00:22:42,040
Speaker 6: Is it really seventies? Well, I watched it on reruns,

447
00:22:42,800 --> 00:22:46,320
Speaker 6: but I will say the Colombo had this famous, you know,

448
00:22:46,440 --> 00:22:48,600
Speaker 6: detective thing where you'd be coming back and be like, oh,

449
00:22:48,920 --> 00:22:53,120
Speaker 6: just one more question, Just one more question. You're never

450
00:22:53,200 --> 00:22:56,000
Speaker 6: done until you're done, until the meal is cooked. You

451
00:22:56,040 --> 00:22:58,520
Speaker 6: always get to come back and ask for one more question,

452
00:22:58,640 --> 00:23:00,720
Speaker 6: and you always get to get all of that information

453
00:23:01,000 --> 00:23:03,320
Speaker 6: and you get to do levels of diligence because you're

454
00:23:03,359 --> 00:23:06,760
Speaker 6: never done until you fund. And so from that situation,

455
00:23:07,280 --> 00:23:09,960
Speaker 6: that's the real advantage of private markets. And that's true

456
00:23:09,960 --> 00:23:12,399
Speaker 6: in private credit, on direct lending, it's true in asset

457
00:23:12,400 --> 00:23:16,920
Speaker 6: based finance versus other markets. But then also it's structure,

458
00:23:17,080 --> 00:23:19,359
Speaker 6: Like you know, the one of the other lessons learned

459
00:23:19,400 --> 00:23:22,239
Speaker 6: is alignment is key. Always putting yourself in the other

460
00:23:22,280 --> 00:23:25,240
Speaker 6: people's shoes and thinking through what they're trying to solve for,

461
00:23:25,760 --> 00:23:28,000
Speaker 6: and how can you build something that works for them

462
00:23:28,040 --> 00:23:30,280
Speaker 6: that also works really well for you. And if I

463
00:23:30,359 --> 00:23:34,120
Speaker 6: understand what you're trying to solve for, then generally it's

464
00:23:34,200 --> 00:23:38,600
Speaker 6: not just pricing on alignment, it's actually structure and downside

465
00:23:38,920 --> 00:23:42,480
Speaker 6: because if I understand good or bad intentions you may

466
00:23:42,480 --> 00:23:45,280
Speaker 6: have and what you're structuring for, I can then structure

467
00:23:45,320 --> 00:23:47,600
Speaker 6: it on the other side to offset that risk or

468
00:23:47,640 --> 00:23:50,560
Speaker 6: help to mitigate that risk in the future. So that's

469
00:23:50,600 --> 00:23:52,520
Speaker 6: the you know, there's a part of what we do

470
00:23:52,600 --> 00:23:55,719
Speaker 6: that's very much science there I have. You know, if

471
00:23:55,720 --> 00:23:57,960
Speaker 6: you look at our team, two thirds of them started

472
00:23:58,000 --> 00:24:00,360
Speaker 6: off as engineers and then change their majors or stat

473
00:24:00,400 --> 00:24:03,159
Speaker 6: as engineers, they're quants, they're others. We have a lot

474
00:24:03,240 --> 00:24:06,840
Speaker 6: of data analytics. We're doing all kinds of deep analysis.

475
00:24:06,880 --> 00:24:10,359
Speaker 6: That's the science. There's an art too. The art is

476
00:24:10,440 --> 00:24:12,320
Speaker 6: kind of how do you how do you figure out

477
00:24:12,320 --> 00:24:15,520
Speaker 6: the alignment? How do you structure your return? Especially when

478
00:24:15,520 --> 00:24:17,600
Speaker 6: you go away from the insurance side of the market,

479
00:24:18,760 --> 00:24:21,480
Speaker 6: that's where you start to see where the art come

480
00:24:21,520 --> 00:24:25,159
Speaker 6: in on how you're getting to return, whether it's contractual, upside, optionality,

481
00:24:25,240 --> 00:24:25,600
Speaker 6: or others.

482
00:24:26,000 --> 00:24:27,720
Speaker 1: The problem for me with that, Joe, is that there

483
00:24:27,720 --> 00:24:29,880
Speaker 1: seems to be across the board and credit way more

484
00:24:29,920 --> 00:24:33,160
Speaker 1: demand than supply. So you know, you're not the only

485
00:24:33,200 --> 00:24:35,000
Speaker 1: one looking for the best deals, the safest deals, the

486
00:24:35,040 --> 00:24:37,480
Speaker 1: highest quality deals. Everyone else is filing and there's probably

487
00:24:37,480 --> 00:24:39,080
Speaker 1: a guy that's standing next to you willing to write

488
00:24:39,119 --> 00:24:41,439
Speaker 1: a check there and then if you don't, so you know,

489
00:24:41,520 --> 00:24:44,239
Speaker 1: pressure to deploy. You've got cash coming in, you need

490
00:24:44,280 --> 00:24:45,120
Speaker 1: to do something with it.

491
00:24:46,200 --> 00:24:49,040
Speaker 5: What do you do? I mean, do you drop your standards?

492
00:24:49,080 --> 00:24:51,399
Speaker 5: Do you turn a blind? I mean? How do you

493
00:24:51,440 --> 00:24:53,360
Speaker 5: operate with all this pressure of demand?

494
00:24:54,560 --> 00:24:56,520
Speaker 4: Yeah? One one has been our fun structures.

495
00:24:56,560 --> 00:25:00,800
Speaker 6: We have specifically across what we've done, an alternative credit structure

496
00:25:00,920 --> 00:25:03,640
Speaker 6: that where we don't have the problem of money coming

497
00:25:03,640 --> 00:25:05,280
Speaker 6: in and we need to put it out right away.

498
00:25:05,400 --> 00:25:07,840
Speaker 4: It's all draw down and close in in others.

499
00:25:08,160 --> 00:25:11,720
Speaker 6: So that allows you to effectively to structure and manage

500
00:25:11,720 --> 00:25:14,720
Speaker 6: that so that you're not being a forced investor as

501
00:25:14,720 --> 00:25:18,040
Speaker 6: it goes. And there's no doubt we've seen pockets of

502
00:25:18,040 --> 00:25:20,440
Speaker 6: the world that have been frothy, where we've seen areas

503
00:25:20,440 --> 00:25:24,080
Speaker 6: and capital coming in. The real answer is relative value

504
00:25:24,440 --> 00:25:27,200
Speaker 6: and the relative value as well as tactical where are

505
00:25:27,240 --> 00:25:29,560
Speaker 6: you in this? Where are you in a cycle? Or

506
00:25:29,640 --> 00:25:31,800
Speaker 6: do you believe you're into cycle or not? We can

507
00:25:31,840 --> 00:25:34,640
Speaker 6: debate everything else. I think we can all agree we're

508
00:25:34,680 --> 00:25:36,719
Speaker 6: closer to the end of the cycle of the beginning, right,

509
00:25:37,200 --> 00:25:39,800
Speaker 6: We're at end of cycle with regards to behavior with

510
00:25:39,840 --> 00:25:43,600
Speaker 6: regards to credit markets, regards to others, and so you know,

511
00:25:43,600 --> 00:25:46,880
Speaker 6: when you're looking at that, you go in obviously rather

512
00:25:46,960 --> 00:25:49,119
Speaker 6: be under deployed than over risked. You want to make

513
00:25:49,160 --> 00:25:52,160
Speaker 6: sure that you're making good investments. Where we've really been

514
00:25:52,200 --> 00:25:57,280
Speaker 6: able to move on relative value is two simple things. One,

515
00:25:57,320 --> 00:26:00,480
Speaker 6: nothing stays interesting for five years in our space, always

516
00:26:00,560 --> 00:26:03,080
Speaker 6: pivoting more so than what you see in direct lending.

517
00:26:03,880 --> 00:26:07,200
Speaker 6: And so what I mean by that is we effectively

518
00:26:07,680 --> 00:26:10,439
Speaker 6: are able to whether it's three months or three years.

519
00:26:10,520 --> 00:26:12,520
Speaker 6: We kind of pivot in and out of some areas

520
00:26:12,600 --> 00:26:15,600
Speaker 6: at times as too much money comes into an area

521
00:26:15,720 --> 00:26:18,240
Speaker 6: and does exactly what you're concerned about, James, which is

522
00:26:18,280 --> 00:26:20,920
Speaker 6: kind of just makes it not interesting for that. So one,

523
00:26:20,960 --> 00:26:23,080
Speaker 6: you have that flexible capital that allows you to do

524
00:26:23,119 --> 00:26:25,080
Speaker 6: that you don't want to have, as I call them,

525
00:26:25,119 --> 00:26:26,359
Speaker 6: widget manufacturer funds.

526
00:26:26,400 --> 00:26:27,000
Speaker 4: You don't want to have.

527
00:26:27,040 --> 00:26:29,440
Speaker 6: All I do is X, and I'm going to manufacture

528
00:26:29,440 --> 00:26:31,000
Speaker 6: those widgets no matter what you put.

529
00:26:30,800 --> 00:26:31,280
Speaker 4: In front of me.

530
00:26:31,760 --> 00:26:33,919
Speaker 6: And honestly, in direct lending and private equity you do

531
00:26:34,000 --> 00:26:36,600
Speaker 6: the same thing. It's just called industries. You know, you

532
00:26:36,720 --> 00:26:40,840
Speaker 6: rotate on industries and other areas. The other part of

533
00:26:40,880 --> 00:26:43,000
Speaker 6: it is size. You know, one of the advantages of

534
00:26:43,000 --> 00:26:45,199
Speaker 6: sitting on a big platform is your ability to do

535
00:26:45,320 --> 00:26:48,919
Speaker 6: deals larger than almost anybody else can do. Does really

536
00:26:48,960 --> 00:26:52,680
Speaker 6: allow you to do some transactions that others can't, and

537
00:26:52,720 --> 00:26:54,919
Speaker 6: that in itself gets you out of the noise. You know,

538
00:26:54,960 --> 00:26:58,359
Speaker 6: a lot of the capital that's been raised is stararting

539
00:26:58,400 --> 00:27:00,760
Speaker 6: on the very small side. So for us on the

540
00:27:00,800 --> 00:27:03,760
Speaker 6: non insurance side, that'd be a fifty million dollar transaction.

541
00:27:04,600 --> 00:27:06,720
Speaker 6: Well that's kind of where we start, but we can

542
00:27:06,720 --> 00:27:09,040
Speaker 6: go up to a billion, and that allows you to

543
00:27:09,080 --> 00:27:12,000
Speaker 6: do transactions. What we are seeing for sure right now

544
00:27:12,480 --> 00:27:15,879
Speaker 6: is our most interesting transaction start at one hundred and

545
00:27:15,880 --> 00:27:19,480
Speaker 6: two hundred million in larger transactions where a lot of

546
00:27:19,520 --> 00:27:22,520
Speaker 6: them are proprietary and the ones that aren't proprietary are

547
00:27:22,560 --> 00:27:24,920
Speaker 6: limited process where they're going to two or three parties

548
00:27:25,320 --> 00:27:27,200
Speaker 6: and that's it. And we see that be a very

549
00:27:27,280 --> 00:27:29,919
Speaker 6: large percentage of what we do across the non insurance side,

550
00:27:30,240 --> 00:27:32,480
Speaker 6: because there's only a few people they can go to.

551
00:27:32,680 --> 00:27:35,639
Speaker 6: It's a very short list, and we believe we have

552
00:27:35,720 --> 00:27:39,119
Speaker 6: the largest capital on that space on the non insurance

553
00:27:39,320 --> 00:27:41,800
Speaker 6: which allows us to do some stuff no others can.

554
00:27:43,240 --> 00:27:46,600
Speaker 2: Maybe you could clue the legion listening in on this

555
00:27:46,640 --> 00:27:51,960
Speaker 2: podcast on maybe some of the more interesting transactions you've

556
00:27:51,960 --> 00:27:53,920
Speaker 2: worked on recently. It as much as you can get

557
00:27:53,920 --> 00:27:57,800
Speaker 2: into specifics like what's cool, what's intellectually engaging that you've

558
00:27:57,840 --> 00:27:59,320
Speaker 2: looked at that you're like, you know, I just worked

559
00:27:59,320 --> 00:28:01,240
Speaker 2: on a really cool thing. Let me tell you about it.

560
00:28:02,080 --> 00:28:03,399
Speaker 4: Well, I'd say two things.

561
00:28:03,440 --> 00:28:05,760
Speaker 6: I mean, so one, you know, some of what we

562
00:28:05,880 --> 00:28:09,080
Speaker 6: do is less cool, it's more of the same, and

563
00:28:09,119 --> 00:28:11,920
Speaker 6: you know, and obviously it's incumbency and it's that ability

564
00:28:11,960 --> 00:28:14,600
Speaker 6: for people to come back and do transactions with them again.

565
00:28:14,640 --> 00:28:17,160
Speaker 6: So the thing that's exciting often on that first part

566
00:28:17,320 --> 00:28:20,040
Speaker 6: is just growing with people. You know, they start off

567
00:28:20,080 --> 00:28:23,119
Speaker 6: on a smaller transaction and they're getting to scale, and

568
00:28:23,160 --> 00:28:25,960
Speaker 6: then you see them institutionalize an asset class that hadn't

569
00:28:25,960 --> 00:28:30,720
Speaker 6: really been fully institutionalized before. I'd say the others probably honestly,

570
00:28:30,760 --> 00:28:34,600
Speaker 6: fun finance. You know, what we've seen is, you know,

571
00:28:34,840 --> 00:28:38,600
Speaker 6: the pressure that that private equities having from LPs has

572
00:28:38,680 --> 00:28:42,040
Speaker 6: led to It started off in one area, which was

573
00:28:42,120 --> 00:28:46,840
Speaker 6: really navelending in Europe because banks and the Boslin game

574
00:28:46,920 --> 00:28:48,600
Speaker 6: kind of pushed that out of a lot of what

575
00:28:48,640 --> 00:28:51,120
Speaker 6: can get done on European banks a little less so

576
00:28:51,200 --> 00:28:53,600
Speaker 6: in the US. Frankly, so there's been more opportunity in

577
00:28:53,640 --> 00:28:57,000
Speaker 6: the Europe. There's still some opportunity and changes in the US,

578
00:28:57,760 --> 00:29:00,840
Speaker 6: and so that led to navelending, which then has led

579
00:29:00,880 --> 00:29:03,200
Speaker 6: to you know, you start to see rate and no

580
00:29:03,280 --> 00:29:06,080
Speaker 6: feeders and CFOs. You start to see things like GP

581
00:29:06,240 --> 00:29:09,880
Speaker 6: structure transactions. All of them are the same in different forms.

582
00:29:09,920 --> 00:29:12,880
Speaker 6: And what I mean by that is they're all basically

583
00:29:12,960 --> 00:29:15,840
Speaker 6: how do I return capital LPs or how do I

584
00:29:15,880 --> 00:29:19,480
Speaker 6: help with the next fundraise by writing a larger check

585
00:29:19,520 --> 00:29:21,880
Speaker 6: into it or increasing the size of the fund as

586
00:29:21,920 --> 00:29:25,240
Speaker 6: they're doing, and all of those kind of You get

587
00:29:25,240 --> 00:29:28,800
Speaker 6: to truly create your own weather. You get to sit there.

588
00:29:29,360 --> 00:29:31,600
Speaker 6: I know there's a Nor'eastern going through New York today,

589
00:29:31,600 --> 00:29:34,560
Speaker 6: but you know, you get to create your own weather

590
00:29:34,640 --> 00:29:38,640
Speaker 6: from the standpoint of you get to sit there and say, Okay,

591
00:29:38,680 --> 00:29:40,240
Speaker 6: what do we want to solve for? What are they

592
00:29:40,280 --> 00:29:43,960
Speaker 6: trying to solve for? Nothing's really been predetermined. Let's just

593
00:29:44,000 --> 00:29:46,360
Speaker 6: come up with a structure and let's go back and

594
00:29:46,400 --> 00:29:49,480
Speaker 6: forth and do something that's there that hasn't been necessarily

595
00:29:49,520 --> 00:29:53,240
Speaker 6: done before. Within this within the waterfall within the structure.

596
00:29:53,280 --> 00:29:56,200
Speaker 6: So I think that stuff is always interesting. The last part,

597
00:29:56,640 --> 00:29:58,520
Speaker 6: you know, and we can we can talk about it

598
00:29:58,600 --> 00:30:00,960
Speaker 6: near the end of wherever you want to is, frankly,

599
00:30:01,040 --> 00:30:03,680
Speaker 6: what we're doing on the fill philanthropy side of things.

600
00:30:03,840 --> 00:30:07,280
Speaker 6: Nothing gets me more excited and the fuel that goes

601
00:30:07,320 --> 00:30:09,560
Speaker 6: into my engine that keeps me doing what I do

602
00:30:09,600 --> 00:30:11,920
Speaker 6: every day. I love investing is you probably can hear.

603
00:30:12,560 --> 00:30:15,160
Speaker 6: But it's the ability to invest as well as our

604
00:30:15,240 --> 00:30:17,920
Speaker 6: charitable tie in which you hit up top. You know,

605
00:30:17,960 --> 00:30:20,680
Speaker 6: it's it's interesting you were quoting. I think an older

606
00:30:20,680 --> 00:30:24,120
Speaker 6: bio is twenty million dollars. It's over forty million dollars

607
00:30:24,160 --> 00:30:28,200
Speaker 6: we've already accrued. It happens pretty quickly. If you drive

608
00:30:28,280 --> 00:30:32,760
Speaker 6: great results for your investors, we're driving even better, better

609
00:30:33,120 --> 00:30:35,800
Speaker 6: dollars to philanthropy and charity, which is a pretty amazing

610
00:30:35,840 --> 00:30:36,320
Speaker 6: tool we have.

611
00:30:38,280 --> 00:30:39,720
Speaker 1: I do want to come back to that, but I

612
00:30:39,760 --> 00:30:42,520
Speaker 1: do before that, we've talked for more than half now

613
00:30:42,560 --> 00:30:46,280
Speaker 1: without even saying the words AI, the letters AI, AI

614
00:30:46,280 --> 00:30:47,080
Speaker 1: and data centers.

615
00:30:47,120 --> 00:30:49,320
Speaker 5: Everyone's very, very excited about funding those.

616
00:30:49,920 --> 00:30:52,680
Speaker 1: We're talking you know, toens of billions, if not trillions

617
00:30:52,720 --> 00:30:55,760
Speaker 1: of dollars in terms of opportunity for investors.

618
00:30:55,760 --> 00:30:59,040
Speaker 5: Where does that fit into what you're doing job well.

619
00:30:59,240 --> 00:31:03,520
Speaker 6: I think the interesting side of data centers specifically an

620
00:31:03,520 --> 00:31:06,240
Speaker 6: AI and you could even go broader with power because

621
00:31:06,280 --> 00:31:09,720
Speaker 6: you can't have data centers without power. Is it's not

622
00:31:09,800 --> 00:31:13,280
Speaker 6: an asset based finance opportunity, it's not a real estate opportunity,

623
00:31:13,280 --> 00:31:17,320
Speaker 6: it's not an infrastructure opportunity. It's at everybody opportunity. The

624
00:31:17,400 --> 00:31:19,600
Speaker 6: scale of it, from the size of the projects, the

625
00:31:19,640 --> 00:31:23,720
Speaker 6: size of what's being done has impacts. And we collaborate,

626
00:31:23,800 --> 00:31:27,479
Speaker 6: partner across the organization and what you'll see is, you know,

627
00:31:27,880 --> 00:31:29,960
Speaker 6: you know as much as there can only be four

628
00:31:30,040 --> 00:31:32,040
Speaker 6: or five winners. I think one thing that is very

629
00:31:32,120 --> 00:31:35,000
Speaker 6: unique with areas is the collaboration. We're not siloed. We

630
00:31:35,080 --> 00:31:37,880
Speaker 6: are working with each other all the time on transactions,

631
00:31:38,400 --> 00:31:41,400
Speaker 6: either on just shared collaboration or IP or as well

632
00:31:41,440 --> 00:31:44,680
Speaker 6: as frankly large transactions where we can partner together in

633
00:31:44,760 --> 00:31:47,440
Speaker 6: pools of capital. And it's going to take everybody, you know,

634
00:31:47,480 --> 00:31:49,160
Speaker 6: it's going to take a village when it comes to

635
00:31:49,200 --> 00:31:52,760
Speaker 6: the size of it. What are we focused on? What's

636
00:31:52,840 --> 00:31:55,680
Speaker 6: our main focus at areas across data centers. It's simple

637
00:31:55,720 --> 00:31:58,480
Speaker 6: it's credit, you know, it's what we're core DNA is.

638
00:31:58,520 --> 00:32:00,200
Speaker 6: It's what we're known for. It's where we have the

639
00:32:00,240 --> 00:32:02,960
Speaker 6: largest pools of capital. And honestly, I think it's one

640
00:32:02,960 --> 00:32:05,920
Speaker 6: of the most interesting parts of data centers because when

641
00:32:05,920 --> 00:32:08,720
Speaker 6: you think of twelve or fifteen year leases from mag

642
00:32:08,840 --> 00:32:12,200
Speaker 6: seven and great counterparties, you know, taking five or seven

643
00:32:12,280 --> 00:32:16,040
Speaker 6: years against diversified portfolios of those, that's great risk, that's

644
00:32:16,040 --> 00:32:19,160
Speaker 6: great risk adjustion returns. There's other forms you can do

645
00:32:19,200 --> 00:32:22,520
Speaker 6: in partnering with banks and bank partnerships with regards to

646
00:32:22,600 --> 00:32:25,600
Speaker 6: risk retention and other things they're trying to do. There's

647
00:32:25,600 --> 00:32:29,560
Speaker 6: also some opportunities on the development side that is getting

648
00:32:29,600 --> 00:32:32,120
Speaker 6: done by our real estate in our data center group

649
00:32:32,560 --> 00:32:34,880
Speaker 6: that are separate and apart from that, to kind of

650
00:32:34,880 --> 00:32:38,360
Speaker 6: take advantage of you can still build these at cap

651
00:32:38,440 --> 00:32:41,000
Speaker 6: rates and sell them at lower cap rates in the future.

652
00:32:41,080 --> 00:32:43,800
Speaker 6: So there is that arbitrage that kind of exists across that.

653
00:32:44,520 --> 00:32:47,760
Speaker 6: I think that where it goes, we'll see. I think

654
00:32:47,760 --> 00:32:49,840
Speaker 6: it's why you have to go in with a credit mentality,

655
00:32:49,840 --> 00:32:51,960
Speaker 6: at least on the way we approach it. For ABF,

656
00:32:52,400 --> 00:32:54,640
Speaker 6: we only do it when it's a diversified portfolio. We're

657
00:32:54,640 --> 00:32:59,720
Speaker 6: not doing single name project finance assets. We're less equity

658
00:32:59,840 --> 00:33:02,840
Speaker 6: or unless it's a diverse portfolio of some form or fashion.

659
00:33:03,760 --> 00:33:06,680
Speaker 6: And we're taking that cautious piece because you know, the

660
00:33:06,720 --> 00:33:11,360
Speaker 6: thing that concerns me is two things. One, what's going

661
00:33:11,440 --> 00:33:13,640
Speaker 6: to power all of this from a growth standpoint and

662
00:33:13,680 --> 00:33:17,480
Speaker 6: the infrastructure that goes with it. And power projects take

663
00:33:18,080 --> 00:33:22,480
Speaker 6: decades not years to get going, and frankly, there's only

664
00:33:22,520 --> 00:33:25,360
Speaker 6: one reasonably clean way to do it, and it's nuclear,

665
00:33:26,640 --> 00:33:28,680
Speaker 6: and that in itself is hard because your base load

666
00:33:28,800 --> 00:33:31,120
Speaker 6: can't be all renewables and solar, right, You're going to

667
00:33:31,200 --> 00:33:31,800
Speaker 6: have to kind.

668
00:33:31,640 --> 00:33:32,320
Speaker 4: Of supplement that.

669
00:33:33,000 --> 00:33:36,080
Speaker 6: The second is making sure that the structure of the

670
00:33:36,160 --> 00:33:39,280
Speaker 6: leases and the credit lens occurs and that there isn't

671
00:33:39,320 --> 00:33:41,800
Speaker 6: too much capital chasing it where people are taking in

672
00:33:41,920 --> 00:33:45,360
Speaker 6: the lease risk, you know, and and I think actually,

673
00:33:46,160 --> 00:33:48,840
Speaker 6: as we see the structures change, you'll start to see

674
00:33:48,880 --> 00:33:52,040
Speaker 6: these leases get longer and longer, which is good they

675
00:33:52,120 --> 00:33:55,760
Speaker 6: need to be because I think that that more aligns

676
00:33:55,800 --> 00:33:58,280
Speaker 6: with what that risk is. But I think we're well

677
00:33:58,320 --> 00:34:01,480
Speaker 6: positioned as we have tools of capital across the firm

678
00:34:01,520 --> 00:34:03,840
Speaker 6: that can invest in it. We're well positioned because most

679
00:34:03,840 --> 00:34:06,160
Speaker 6: of what we're looking at is frankly on the credit side,

680
00:34:07,000 --> 00:34:08,919
Speaker 6: but there's still I think a lot to shake out

681
00:34:09,040 --> 00:34:12,399
Speaker 6: broadly as it relates to that and how that plays out.

682
00:34:12,800 --> 00:34:15,680
Speaker 1: Are there risks of obsolescence or you know, any concerns

683
00:34:15,719 --> 00:34:17,879
Speaker 1: about how fast this is taking off because we really

684
00:34:17,920 --> 00:34:20,160
Speaker 1: are going, you know, without any roadmap. We don't know

685
00:34:20,640 --> 00:34:22,839
Speaker 1: where this should go, how big it should be, and

686
00:34:22,880 --> 00:34:23,960
Speaker 1: what the end result is.

687
00:34:24,880 --> 00:34:27,080
Speaker 6: Yeah, I agree, I think that's the thing is that

688
00:34:27,280 --> 00:34:31,319
Speaker 6: you know, look when in the end I make the

689
00:34:31,360 --> 00:34:35,000
Speaker 6: comparison sometimes to lending on the data centers, similar to

690
00:34:36,040 --> 00:34:38,920
Speaker 6: net lease or sale lease backs. You know, if you

691
00:34:38,960 --> 00:34:42,239
Speaker 6: think of net lease, it's often misunderstood because people want

692
00:34:42,239 --> 00:34:44,040
Speaker 6: to say, is it a real estate asset or it

693
00:34:44,120 --> 00:34:46,080
Speaker 6: is it a corporate And the answer.

694
00:34:45,880 --> 00:34:49,480
Speaker 4: Is no, it's neither. It's both. It's a hybrid. You know.

695
00:34:49,680 --> 00:34:52,120
Speaker 6: I always use the analogy of if you and it's

696
00:34:52,120 --> 00:34:54,560
Speaker 6: perfect for data centers because it applies to that. On

697
00:34:54,600 --> 00:34:58,440
Speaker 6: the mag seven, if you have a copier and you

698
00:34:58,520 --> 00:35:01,120
Speaker 6: have an equipment lease on a copier to Apple, you

699
00:35:01,160 --> 00:35:04,160
Speaker 6: don't really care about the equipment, right, You don't care

700
00:35:04,200 --> 00:35:06,560
Speaker 6: how old the copier is because you've got Apple paining

701
00:35:06,560 --> 00:35:08,480
Speaker 6: you on that lease and you're gonna get payment on it.

702
00:35:08,800 --> 00:35:11,640
Speaker 6: On the other end of the spectrum, if David starts

703
00:35:11,640 --> 00:35:15,799
Speaker 6: a sandwich shop and he wants a copier, I want

704
00:35:15,800 --> 00:35:17,919
Speaker 6: to make sure I can sell that copier to somebody else,

705
00:35:18,040 --> 00:35:20,080
Speaker 6: just in case he's not a great chef and it

706
00:35:20,120 --> 00:35:21,120
Speaker 6: doesn't go very well.

707
00:35:21,520 --> 00:35:26,000
Speaker 3: Hey hey, hey see now I'm going David. Now, now,

708
00:35:26,520 --> 00:35:29,400
Speaker 3: now you're getting a better rate. So you know, when

709
00:35:29,480 --> 00:35:32,160
Speaker 3: you think of that, that's that's that lease. And and

710
00:35:32,160 --> 00:35:34,200
Speaker 3: and honestly, I think a lot of data centers are

711
00:35:34,239 --> 00:35:36,920
Speaker 3: the same, which is what you don't want to do

712
00:35:37,120 --> 00:35:38,919
Speaker 3: is a lease is not a lease is a lease,

713
00:35:39,000 --> 00:35:40,920
Speaker 3: and the asset is an asset. That is an asset.

714
00:35:41,080 --> 00:35:44,080
Speaker 6: Like when you think of some that are still proving

715
00:35:44,120 --> 00:35:48,920
Speaker 6: their profitability model and their revenue model versus Oracle, you know,

716
00:35:49,200 --> 00:35:53,319
Speaker 6: versus Google, those are very different risks. So one is

717
00:35:53,520 --> 00:35:56,240
Speaker 6: taking a lot of real estate and asset risk. One

718
00:35:56,280 --> 00:35:59,560
Speaker 6: is taking counterparty risk, where even if you're wrong, and

719
00:35:59,800 --> 00:36:02,759
Speaker 6: even and if you have obsolete sence, you still end

720
00:36:02,800 --> 00:36:05,120
Speaker 6: up in the situation where you have this counterparty and

721
00:36:05,160 --> 00:36:07,560
Speaker 6: you have those payments and you have that and especially

722
00:36:07,560 --> 00:36:09,759
Speaker 6: from a credit seat you're covered by that, you know,

723
00:36:09,840 --> 00:36:11,759
Speaker 6: that's what's ends up kind of driving.

724
00:36:11,440 --> 00:36:14,920
Speaker 2: That and as a as a lender competing for that

725
00:36:15,360 --> 00:36:19,320
Speaker 2: sort of you know hot sector uh, those hot sector

726
00:36:19,360 --> 00:36:25,839
Speaker 2: assets with those you know, deep credit tenants. Size has

727
00:36:25,880 --> 00:36:28,319
Speaker 2: to make a big difference there, right, you know, I

728
00:36:28,320 --> 00:36:31,520
Speaker 2: think we talked a couple of times about about sort

729
00:36:31,520 --> 00:36:36,319
Speaker 2: of the market, this private asset back market will inevitably

730
00:36:36,360 --> 00:36:38,520
Speaker 2: be some people that specialize and could be smaller, but

731
00:36:38,640 --> 00:36:40,880
Speaker 2: scale has to play a huge role in this if

732
00:36:40,880 --> 00:36:43,680
Speaker 2: you're dealing with with you know, sort of tenants of

733
00:36:43,760 --> 00:36:44,400
Speaker 2: that stature.

734
00:36:45,000 --> 00:36:47,440
Speaker 6: I agree, And look there we're in in in our

735
00:36:47,480 --> 00:36:49,840
Speaker 6: infraquity group to made in an investment in a platform

736
00:36:49,840 --> 00:36:52,440
Speaker 6: earlier this year and they'll continue to grow that we

737
00:36:52,520 --> 00:36:56,960
Speaker 6: have we have obviously with the acquisition in GCP earlier

738
00:36:56,960 --> 00:36:58,680
Speaker 6: this year, they have that There's going to be lots

739
00:36:58,719 --> 00:36:59,320
Speaker 6: of opportunities.

740
00:36:59,320 --> 00:36:59,799
Speaker 4: That's what I mean.

741
00:36:59,840 --> 00:37:02,440
Speaker 6: It's it's kind of across the firm from from our

742
00:37:02,480 --> 00:37:04,560
Speaker 6: seat and all credit. It's going to be credit, right,

743
00:37:04,600 --> 00:37:07,400
Speaker 6: that's where we're really going to be looking at. But

744
00:37:07,520 --> 00:37:10,560
Speaker 6: I do agree that it's a transformational area. On one side,

745
00:37:10,719 --> 00:37:13,120
Speaker 6: it's learning algorithms, so They've been around for a while

746
00:37:13,960 --> 00:37:16,839
Speaker 6: in other things, and I do think there's still this

747
00:37:16,920 --> 00:37:21,200
Speaker 6: push to where their revenue model drives from here. You know,

748
00:37:21,880 --> 00:37:24,759
Speaker 6: I think that in the end, Google wasn't Google Teley

749
00:37:24,840 --> 00:37:27,479
Speaker 6: found Ads, you know, like, in the end, all things

750
00:37:27,560 --> 00:37:29,920
Speaker 6: kind of change, and I think that's the part that

751
00:37:29,960 --> 00:37:32,600
Speaker 6: we'll kind of play itself out over time. But the

752
00:37:32,680 --> 00:37:35,279
Speaker 6: scale and the opportunity and the changes to everything we

753
00:37:35,400 --> 00:37:37,560
Speaker 6: do and we see it every day and you see

754
00:37:37,560 --> 00:37:40,520
Speaker 6: it every day, are happening at speeds that you know,

755
00:37:40,600 --> 00:37:43,760
Speaker 6: the only analogy I can really make is to dot

756
00:37:43,800 --> 00:37:46,440
Speaker 6: Com and what we went through in others. But that

757
00:37:46,520 --> 00:37:48,879
Speaker 6: means you need to make sure that you're making great

758
00:37:48,920 --> 00:37:52,000
Speaker 6: investments with good downside because there's going to be winners

759
00:37:52,040 --> 00:37:54,200
Speaker 6: and there will be losers, and making sure you're structuring

760
00:37:54,200 --> 00:37:54,640
Speaker 6: it that way.

761
00:37:54,680 --> 00:37:56,759
Speaker 4: But I think we're well positioned across areas for that.

762
00:37:56,960 --> 00:37:59,040
Speaker 1: Where is the best relative value right now in terms

763
00:37:59,040 --> 00:38:01,520
Speaker 1: of you know, whatever you you look across all of

764
00:38:01,560 --> 00:38:04,080
Speaker 1: the things that you could possibly invest in for let's

765
00:38:04,080 --> 00:38:06,879
Speaker 1: say the long horizon, you're talking about the three, five,

766
00:38:07,000 --> 00:38:09,200
Speaker 1: seven year horizon, where's the best relative value?

767
00:38:10,600 --> 00:38:12,520
Speaker 6: So right now it's been more driven by size and

768
00:38:12,560 --> 00:38:16,600
Speaker 6: flexibility as I mentioned, and we've definitely seen it in

769
00:38:16,680 --> 00:38:19,719
Speaker 6: fun finance. We're definitely seeing even residential mortgage in the

770
00:38:19,840 --> 00:38:23,520
Speaker 6: United States is very healthy on all things across that

771
00:38:23,560 --> 00:38:26,520
Speaker 6: you've got you know, prime super prime type borrowers, home

772
00:38:26,560 --> 00:38:29,800
Speaker 6: appreciation that has continued to grow up despite even the

773
00:38:29,840 --> 00:38:33,920
Speaker 6: higher rates and things we've seen. We continue to see.

774
00:38:34,400 --> 00:38:37,520
Speaker 6: You know, it does go to my cohort common earlier,

775
00:38:37,600 --> 00:38:40,360
Speaker 6: which is you know, there's cohorts that are very very healthy,

776
00:38:40,960 --> 00:38:43,680
Speaker 6: most of that being your prime and super prime. Even

777
00:38:43,719 --> 00:38:47,319
Speaker 6: at the same time you're necessarily seeing other weakness. We

778
00:38:47,400 --> 00:38:51,600
Speaker 6: are seeing interesting opportunities in Europe. We are seeing interesting

779
00:38:51,640 --> 00:38:54,880
Speaker 6: opportunities in digital infra, as we mentioned, not just data centers,

780
00:38:54,880 --> 00:38:58,799
Speaker 6: but across self powers and others. The good side is,

781
00:38:59,040 --> 00:39:01,719
Speaker 6: you know, a finance, you know, it's a house with

782
00:39:01,760 --> 00:39:05,360
Speaker 6: many rooms. There's always something to do. It's just a

783
00:39:05,400 --> 00:39:07,560
Speaker 6: function of where you're kind of playing, and there's times

784
00:39:07,560 --> 00:39:11,040
Speaker 6: you're really busy and there's times you're slow. Honestly, the

785
00:39:11,080 --> 00:39:13,319
Speaker 6: thing that gets me excited, sadly is when you do

786
00:39:13,400 --> 00:39:16,719
Speaker 6: go through periods of dislocation, whether deserved or not deserved,

787
00:39:17,280 --> 00:39:20,160
Speaker 6: you end up doing the same healthy assets you were before,

788
00:39:20,560 --> 00:39:24,440
Speaker 6: sometimes from distressed sellers and sometimes in distressed situations. So

789
00:39:24,480 --> 00:39:27,160
Speaker 6: we don't do distressed We're not digging, you know, turning

790
00:39:27,160 --> 00:39:30,560
Speaker 6: around companies or other things. But it does create opportunities

791
00:39:30,600 --> 00:39:33,600
Speaker 6: because when the asset back securitization market shuts down, it

792
00:39:33,640 --> 00:39:37,600
Speaker 6: creates huge opportunities because all of that thirty trillion dollars

793
00:39:37,640 --> 00:39:40,680
Speaker 6: of the market starts to sprinkle a five or six trillion,

794
00:39:40,719 --> 00:39:43,439
Speaker 6: It might sprin clover into the ten trillion dollars non

795
00:39:43,440 --> 00:39:46,640
Speaker 6: insurance market, and that always creates an opportunity. And we

796
00:39:46,680 --> 00:39:49,399
Speaker 6: saw we saw that obviously in twenty ten through two

797
00:39:49,440 --> 00:39:50,800
Speaker 6: thousand and call it fifteen or so.

798
00:39:51,960 --> 00:39:52,120
Speaker 2: Good.

799
00:39:52,160 --> 00:39:54,919
Speaker 1: Interestingly, the stress we talked about at the top, Jill,

800
00:39:55,520 --> 00:39:58,080
Speaker 1: you know, the food critics got hurt. They lost their shirt.

801
00:39:58,160 --> 00:39:59,600
Speaker 1: Some of them are out of business. But you know,

802
00:39:59,640 --> 00:40:02,520
Speaker 1: we lost few generals. It doesn't matter the chefs, mean while,

803
00:40:02,520 --> 00:40:06,120
Speaker 1: they're okay, But how really is it affecting your business?

804
00:40:06,200 --> 00:40:06,279
Speaker 2: This?

805
00:40:06,440 --> 00:40:08,360
Speaker 1: You know, we are going through a kind of mini

806
00:40:08,480 --> 00:40:11,560
Speaker 1: storm in credit. How does it affect the olts?

807
00:40:13,200 --> 00:40:14,720
Speaker 4: I It hasn't.

808
00:40:14,840 --> 00:40:16,560
Speaker 6: I mean, look I think it just goes too You

809
00:40:16,600 --> 00:40:18,600
Speaker 6: have done to right assuming that so we've been doing

810
00:40:18,680 --> 00:40:22,040
Speaker 6: that for a long time. That's nothing new. Necessarily, you'll

811
00:40:22,080 --> 00:40:24,960
Speaker 6: go through periods where you know m and A activity

812
00:40:25,000 --> 00:40:27,760
Speaker 6: is slow and MINA activity is fast. In a space finance,

813
00:40:27,800 --> 00:40:31,640
Speaker 6: we get less directly impacted by MNA activity because the

814
00:40:31,719 --> 00:40:34,600
Speaker 6: creation of assets. You know, you're borrowing on your credit card,

815
00:40:34,680 --> 00:40:37,720
Speaker 6: you know, you're doing stuff with equipment, you're buying cars,

816
00:40:37,760 --> 00:40:40,080
Speaker 6: other things. They get impacted, but they don't get impacted

817
00:40:40,080 --> 00:40:43,200
Speaker 6: as large as wings as you do buy M and

818
00:40:43,280 --> 00:40:46,480
Speaker 6: A and other markets. So we continue to do what

819
00:40:46,520 --> 00:40:49,480
Speaker 6: we're doing. I think that us continuing to grow our

820
00:40:49,480 --> 00:40:52,919
Speaker 6: brand and grow our market share really happens with being

821
00:40:52,960 --> 00:40:56,280
Speaker 6: a preferred counterparty. You know, we want to partner with banks,

822
00:40:56,320 --> 00:40:58,600
Speaker 6: we want to partner with insurance, we want to partner

823
00:40:58,640 --> 00:41:02,120
Speaker 6: with originators. And if we do what we say we're

824
00:41:02,120 --> 00:41:04,880
Speaker 6: going to do and we show up and do that,

825
00:41:04,880 --> 00:41:07,120
Speaker 6: that in itself you win, you know, because if you

826
00:41:07,160 --> 00:41:09,880
Speaker 6: show yourself as a good counter party who kind of

827
00:41:09,880 --> 00:41:13,000
Speaker 6: follows through with it, you know there that in itself

828
00:41:13,080 --> 00:41:15,640
Speaker 6: kind of leads to in prese market share and continue

829
00:41:15,680 --> 00:41:17,360
Speaker 6: to grow. It's that there's a little bit of the

830
00:41:17,400 --> 00:41:20,200
Speaker 6: Warren buffet there also, which is why does he get

831
00:41:20,200 --> 00:41:22,160
Speaker 6: those calls. He gets those calls because he does it.

832
00:41:22,280 --> 00:41:24,080
Speaker 6: When he says he's going to do something, he follows

833
00:41:24,080 --> 00:41:26,279
Speaker 6: through with it. And we stress that to our team

834
00:41:26,280 --> 00:41:28,240
Speaker 6: every day to make sure that we're being a preferred

835
00:41:28,280 --> 00:41:31,319
Speaker 6: counter party party. But you have to find great risk,

836
00:41:31,920 --> 00:41:34,200
Speaker 6: you know, things have to go hand in hand.

837
00:41:34,080 --> 00:41:36,440
Speaker 1: The end of cycle behavior you mentioned him. Does that

838
00:41:36,480 --> 00:41:38,560
Speaker 1: mean you're taking more calls from people that need to

839
00:41:39,280 --> 00:41:41,800
Speaker 1: liquidate and you know, taking those assets.

840
00:41:42,920 --> 00:41:43,520
Speaker 4: Not as much?

841
00:41:43,640 --> 00:41:47,120
Speaker 6: Again, I I'm I'm a natural perma bear, and I'm

842
00:41:47,120 --> 00:41:49,440
Speaker 6: always looking under the covers and trying to see if

843
00:41:49,480 --> 00:41:51,480
Speaker 6: there's something there. And if if you read our in

844
00:41:51,600 --> 00:41:53,880
Speaker 6: the Gaps newsletter, you'll go, wow, this guy's so barrassed

845
00:41:53,920 --> 00:41:55,960
Speaker 6: generally on things and across our.

846
00:41:55,800 --> 00:41:56,880
Speaker 4: Team, you know.

847
00:41:56,960 --> 00:41:58,520
Speaker 6: But then when you pull back and you look at

848
00:41:58,520 --> 00:42:01,080
Speaker 6: the data, you actually say, you know, actually things are

849
00:42:01,280 --> 00:42:04,200
Speaker 6: a lot more resilient than you would imagine, both on

850
00:42:04,239 --> 00:42:06,959
Speaker 6: the consumer or on the drag lending if you're looking

851
00:42:07,000 --> 00:42:10,080
Speaker 6: at the underlying revenue, but not on other trends looking backwards.

852
00:42:10,680 --> 00:42:14,000
Speaker 6: So I think that, you know, I think the question

853
00:42:14,160 --> 00:42:16,919
Speaker 6: really becomes, you know, making sure you're investing in great

854
00:42:16,920 --> 00:42:19,560
Speaker 6: companies and great portfolios of assets, no matter what lens

855
00:42:19,640 --> 00:42:21,040
Speaker 6: you're you're looking from, and.

856
00:42:21,040 --> 00:42:22,279
Speaker 5: The current issues then the.

857
00:42:22,360 --> 00:42:26,000
Speaker 2: Full classic classic classic credit best the.

858
00:42:25,960 --> 00:42:28,080
Speaker 5: Current issues in that scenario, Shiblow.

859
00:42:28,120 --> 00:42:30,200
Speaker 1: But you did use the word end of cycle, which

860
00:42:30,239 --> 00:42:32,560
Speaker 1: implies that you know, maybe there'll be some reckoning to come.

861
00:42:34,000 --> 00:42:34,120
Speaker 2: Oh.

862
00:42:34,120 --> 00:42:38,440
Speaker 6: Look, cycles are real, they happen, There is there is

863
00:42:38,520 --> 00:42:42,240
Speaker 6: no this time it's different. We always run into, obviously

864
00:42:42,320 --> 00:42:43,680
Speaker 6: periods of cycles and others.

865
00:42:43,719 --> 00:42:45,759
Speaker 1: And you are also, as you mentioned earlier, having a

866
00:42:45,800 --> 00:42:48,080
Speaker 1: positive impact. Can you talk a bit about that, I mean,

867
00:42:48,080 --> 00:42:50,160
Speaker 1: what's the charity angle.

868
00:42:50,400 --> 00:42:53,399
Speaker 6: Sure, I come from very humble beginning, some of poor

869
00:42:53,440 --> 00:42:55,799
Speaker 6: preacher's kid from Boise, Idaho, who did not know this

870
00:42:55,840 --> 00:42:59,759
Speaker 6: world existed in any form or fashion. And I've been

871
00:43:00,040 --> 00:43:02,160
Speaker 6: very lucky and very blessed to even get the job

872
00:43:02,200 --> 00:43:04,120
Speaker 6: at City. If you go back twenty eight years ago,

873
00:43:04,320 --> 00:43:06,520
Speaker 6: I kind of stumbled in backwards. I wasn't quite the

874
00:43:06,520 --> 00:43:08,399
Speaker 6: mail room, but I was pretty dang close to get

875
00:43:08,400 --> 00:43:11,279
Speaker 6: my opportunity, and I've been able to make the most

876
00:43:11,280 --> 00:43:15,600
Speaker 6: of the opportunity. But you're lying to yourself, anybody who invests,

877
00:43:15,640 --> 00:43:17,480
Speaker 6: anybody who does what we do for a living, if

878
00:43:17,520 --> 00:43:19,440
Speaker 6: you don't think luck had a large part of it.

879
00:43:19,480 --> 00:43:22,279
Speaker 6: Then you're lying to yourself. And so I think you

880
00:43:22,400 --> 00:43:25,239
Speaker 6: have an obligation to try to give back. And you know,

881
00:43:26,800 --> 00:43:30,560
Speaker 6: I've set that up my wife's family, her dad's originally

882
00:43:30,600 --> 00:43:34,000
Speaker 6: from Peru, was a first generation immigrant and it came

883
00:43:34,040 --> 00:43:37,800
Speaker 6: to here and served in the military to kind of

884
00:43:37,840 --> 00:43:40,839
Speaker 6: help get a citizenship and others, and so we both

885
00:43:40,880 --> 00:43:42,759
Speaker 6: believed in kind of giving back, and we set it

886
00:43:42,840 --> 00:43:46,760
Speaker 6: up that way from the beginning. And you know, about

887
00:43:46,960 --> 00:43:50,000
Speaker 6: eight years ago, I'd already been involved in charity for

888
00:43:50,040 --> 00:43:53,960
Speaker 6: seventeen eighteen years personally, I did a trip to India

889
00:43:54,640 --> 00:43:57,319
Speaker 6: on a board i'd recently joined, which was path Global Health,

890
00:43:57,400 --> 00:43:59,920
Speaker 6: one of the largest tied to INGOs, tied to back

891
00:44:00,160 --> 00:44:03,640
Speaker 6: nations in the Third World, and they do amazing work

892
00:44:03,680 --> 00:44:07,720
Speaker 6: seventy plus countries across that And I did this trip

893
00:44:08,080 --> 00:44:11,239
Speaker 6: and when you're sitting in Dravi, the largest slum in Mumbai,

894
00:44:11,280 --> 00:44:14,319
Speaker 6: working on a tuberculosis program, you get perspective in life

895
00:44:14,320 --> 00:44:18,760
Speaker 6: on how lucky you really are. And it was an amazing,

896
00:44:19,000 --> 00:44:23,200
Speaker 6: amazing experience. And I came back from that saying, what

897
00:44:23,320 --> 00:44:25,319
Speaker 6: else can we do? There's got to be more than

898
00:44:25,360 --> 00:44:27,400
Speaker 6: just me doing this on a personal basis, how do

899
00:44:27,440 --> 00:44:28,680
Speaker 6: we get others to do more?

900
00:44:29,440 --> 00:44:30,839
Speaker 4: And it started with.

901
00:44:30,719 --> 00:44:34,600
Speaker 6: That idea, it turned into an ask, So an idea

902
00:44:34,640 --> 00:44:36,800
Speaker 6: turned into an asked. The ask was I went to

903
00:44:36,840 --> 00:44:39,960
Speaker 6: Mike Arraghetti r CEO, and I said, you know, hey, look,

904
00:44:40,000 --> 00:44:41,520
Speaker 6: I want to have a charity tie in to this

905
00:44:41,640 --> 00:44:44,360
Speaker 6: whatever I do next, because I had resigned from prior

906
00:44:44,440 --> 00:44:48,000
Speaker 6: firm and came up with that idea of that ask

907
00:44:48,120 --> 00:44:50,560
Speaker 6: of doing something else. And what we came up with

908
00:44:50,680 --> 00:44:53,560
Speaker 6: our Pathfinder Family of Funds, which you mentioned at the top,

909
00:44:54,080 --> 00:44:56,560
Speaker 6: is at least five to ten percent of the of

910
00:44:56,600 --> 00:44:59,760
Speaker 6: the promote of those funds goes across health and education

911
00:44:59,840 --> 00:45:03,279
Speaker 6: to it's already accrued over forty million dollars to date.

912
00:45:04,040 --> 00:45:06,360
Speaker 6: But the impact and the potential of that is huge

913
00:45:06,360 --> 00:45:08,560
Speaker 6: if you just think of the math of that on

914
00:45:08,680 --> 00:45:12,040
Speaker 6: funds that you know, across the returns and others. And

915
00:45:12,080 --> 00:45:15,319
Speaker 6: we now have over eighteen billion dollars of funds that

916
00:45:15,360 --> 00:45:19,760
Speaker 6: are underneath the Pathfinder Family of Funds, and we've always

917
00:45:19,800 --> 00:45:22,160
Speaker 6: talked about that and that's been amazing for culture. It's

918
00:45:22,200 --> 00:45:26,080
Speaker 6: actually helped inspire a broader areas. Charitable foundation we launched

919
00:45:26,080 --> 00:45:28,640
Speaker 6: in twenty twenty one, we launched the first fund on

920
00:45:28,680 --> 00:45:33,040
Speaker 6: the other nineteen. I am co chair of the foundation

921
00:45:33,160 --> 00:45:36,759
Speaker 6: with Mike Kearragety. Michelle Armstrong helps run that day to

922
00:45:36,840 --> 00:45:39,240
Speaker 6: day and if you look at that, it's amazing stuff

923
00:45:39,239 --> 00:45:41,719
Speaker 6: we're doing, not just in health and education, but the

924
00:45:42,360 --> 00:45:45,640
Speaker 6: foundation is now made over seventy million dollars of grants

925
00:45:46,080 --> 00:45:49,759
Speaker 6: across career prep and reskilling, entrepreneurship, and personal finance, having

926
00:45:49,800 --> 00:45:51,480
Speaker 6: nothing to do with what we're doing in health and

927
00:45:51,640 --> 00:45:52,799
Speaker 6: education for the.

928
00:45:52,760 --> 00:45:54,160
Speaker 4: Pathfinder family of funds.

929
00:45:54,640 --> 00:45:57,680
Speaker 6: So about a year ago, to go to the next

930
00:45:57,719 --> 00:46:00,200
Speaker 6: generation of this, we said what else could we do do?

931
00:46:00,640 --> 00:46:03,239
Speaker 6: And somebody from our team, Patrick Hugh and Hockom came

932
00:46:03,280 --> 00:46:06,320
Speaker 6: to me and said, what what if we got others

933
00:46:06,320 --> 00:46:07,800
Speaker 6: to do it? And We've been talking about this for

934
00:46:07,840 --> 00:46:10,960
Speaker 6: a while and I've talked to other managers and I've

935
00:46:11,000 --> 00:46:13,840
Speaker 6: said you should do this. This is amazing. It totally

936
00:46:13,880 --> 00:46:17,280
Speaker 6: brings purpose to everything you're doing. It's amazing for culture

937
00:46:17,320 --> 00:46:19,640
Speaker 6: and the team. And I've talked to LPs and said

938
00:46:19,640 --> 00:46:21,839
Speaker 6: you should press other people to do this. This would

939
00:46:21,840 --> 00:46:23,680
Speaker 6: be really amazing if you could make this a thing.

940
00:46:24,400 --> 00:46:26,360
Speaker 6: And what they came up with is this simple idea

941
00:46:26,360 --> 00:46:28,480
Speaker 6: of what if it was similar to the giving pledge.

942
00:46:28,560 --> 00:46:32,000
Speaker 6: What if you made a pledge to effectively give at

943
00:46:32,040 --> 00:46:35,440
Speaker 6: least five percent of your promote on a family of

944
00:46:35,480 --> 00:46:40,440
Speaker 6: funds to charity, whether it be health, education, housing, climate,

945
00:46:40,520 --> 00:46:43,640
Speaker 6: or others. And over the last year we've been talking

946
00:46:43,640 --> 00:46:45,880
Speaker 6: to a whole bunch of other managers out there, and

947
00:46:45,920 --> 00:46:49,120
Speaker 6: we just launched. By the time this podcast actually airs,

948
00:46:49,400 --> 00:46:53,880
Speaker 6: we'll have launched October fifteenth, Promote Giving, with the double

949
00:46:53,920 --> 00:46:57,600
Speaker 6: meaning on the word promote, promote being the percentage of

950
00:46:57,600 --> 00:47:00,360
Speaker 6: profits coming out of our pocket, not come out of

951
00:47:00,400 --> 00:47:05,360
Speaker 6: investor's pockets that would go towards charity, but also just

952
00:47:05,440 --> 00:47:08,120
Speaker 6: the broad idea of promoting giving. How can we kind

953
00:47:08,160 --> 00:47:10,719
Speaker 6: of give back in a bigger way? And so we're

954
00:47:10,760 --> 00:47:13,400
Speaker 6: hoping we can make this a broader thing, you know,

955
00:47:13,480 --> 00:47:17,120
Speaker 6: with our initial our founding signatories that have been great

956
00:47:17,160 --> 00:47:19,600
Speaker 6: partners on this, but we hope to add more. We

957
00:47:19,640 --> 00:47:21,359
Speaker 6: hope to get more people to kind of do that

958
00:47:21,400 --> 00:47:22,360
Speaker 6: same kind of idea.

959
00:47:22,920 --> 00:47:26,879
Speaker 1: Brilliant, very inspiring stuff. Joel Holsinger, co head of Alternative Credit,

960
00:47:26,960 --> 00:47:28,800
Speaker 1: thank you so much for joining us on the Credit Edge.

961
00:47:29,000 --> 00:47:29,800
Speaker 4: Thank you for having me.

962
00:47:29,880 --> 00:47:32,040
Speaker 1: I enjoyed this and of course very grateful to David

963
00:47:32,080 --> 00:47:33,440
Speaker 1: Havens from Bloomberg Intelligence.

964
00:47:33,520 --> 00:47:34,920
Speaker 2: Cheers grip being with you.

965
00:47:35,120 --> 00:47:38,400
Speaker 1: There are even more great credit market analysis and insight.

966
00:47:38,480 --> 00:47:41,280
Speaker 1: Read all of David Havens's great work on the Bloomberg Terminal.

967
00:47:41,560 --> 00:47:44,239
Speaker 1: Bloomberg Intelligence is part of our research department, with five

968
00:47:44,320 --> 00:47:47,640
Speaker 1: hundred analysts and strategists working across all markets. Coverage includes

969
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970
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971
00:47:54,840 --> 00:47:57,799
Speaker 1: Please do subscribe to the Credit Edge wherever you get

972
00:47:57,800 --> 00:48:01,080
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973
00:48:01,120 --> 00:48:05,839
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974
00:48:05,920 --> 00:48:08,400
Speaker 1: us a review, tell your friends, or email me directly

975
00:48:08,440 --> 00:48:12,359
Speaker 1: at Jcrombie at Bloomberg dot net. I'm James Crombie. It's

976
00:48:12,400 --> 00:48:14,160
Speaker 1: been a pleasure having you joined us again next week

977
00:48:14,239 --> 00:48:15,640
Speaker 1: on the Credit Edge