1 00:00:18,200 --> 00:00:20,880 Speaker 1: Hello, and welcome to The Credit Edge, a weekly markets podcast. 2 00:00:21,120 --> 00:00:23,599 Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg. 3 00:00:24,000 --> 00:00:27,080 Speaker 1: This week, we're very pleased to welcome Mattis Potter, co 4 00:00:27,200 --> 00:00:29,760 Speaker 1: Chief investment Officer at Artmont Asset Management. How are you, 5 00:00:29,800 --> 00:00:31,000 Speaker 1: Mattis very good? 6 00:00:31,080 --> 00:00:32,800 Speaker 2: Thanks James, thanks for having me on the show. 7 00:00:33,080 --> 00:00:34,600 Speaker 1: Thank you so much for joining us today. We're very 8 00:00:34,600 --> 00:00:38,000 Speaker 1: excited to dig into your credit market views. Also delighted 9 00:00:38,000 --> 00:00:41,000 Speaker 1: to see Cat Hidalgo with Bloomberg News. Welcome Cat, Thanks 10 00:00:41,040 --> 00:00:43,519 Speaker 1: so much for having me. James and Rob Schiffman with 11 00:00:43,560 --> 00:00:45,120 Speaker 1: Bloomberg Intelligence. Great to see you again. 12 00:00:45,200 --> 00:00:46,320 Speaker 3: Rob stoked to be here. 13 00:00:46,720 --> 00:00:49,320 Speaker 1: So we're here to talk about private credit, the hottest 14 00:00:49,320 --> 00:00:51,960 Speaker 1: trade on Wall Street. We've seen staggering growth over the 15 00:00:52,040 --> 00:00:54,800 Speaker 1: last few years, and private credits now a one point 16 00:00:54,920 --> 00:00:59,840 Speaker 1: seven trillion dollar market, biggest deal, biggest fundraising, titus pricing 17 00:00:59,840 --> 00:01:02,480 Speaker 1: among some of the superlatives we racked up over the 18 00:01:02,560 --> 00:01:05,720 Speaker 1: last few years, and every day we see more exciting headlines. 19 00:01:06,120 --> 00:01:09,039 Speaker 1: At the same time, though, there's growing concern about private 20 00:01:09,040 --> 00:01:12,600 Speaker 1: credit risk as interest rates stay high for longer and 21 00:01:12,640 --> 00:01:15,479 Speaker 1: the economy slows, putting pressure on companies with a lot 22 00:01:15,520 --> 00:01:19,119 Speaker 1: of debt. We're seeing more borrowers having to pay in kind, 23 00:01:19,520 --> 00:01:21,760 Speaker 1: which means that they are using more debt instead of 24 00:01:21,800 --> 00:01:25,039 Speaker 1: cash to cover interest payments. We're also seeing more amendments 25 00:01:25,080 --> 00:01:29,480 Speaker 1: and extensions to existing deals. That's often a sign of stress. Meanwhile, 26 00:01:29,520 --> 00:01:33,920 Speaker 1: tighter spreads imply lower returns. Fundraising is getting tougher. There's 27 00:01:33,920 --> 00:01:35,839 Speaker 1: not enough deals for all the funds that have already 28 00:01:35,840 --> 00:01:38,000 Speaker 1: been raised, and investors are having to reach for a 29 00:01:38,000 --> 00:01:41,560 Speaker 1: bit of yield. Plus, there are signs of creditor on 30 00:01:41,640 --> 00:01:46,280 Speaker 1: creditor violence and fears that new, less experienced money so 31 00:01:46,400 --> 00:01:49,240 Speaker 1: called private debt tourists, could be running into trouble here. 32 00:01:49,560 --> 00:01:52,000 Speaker 1: Red flags being raised by the likes of Jamie Diamond, 33 00:01:52,200 --> 00:01:55,840 Speaker 1: the IMF, and PIMCO. Some say the Golden Ages over 34 00:01:56,040 --> 00:01:59,200 Speaker 1: not very long after it started. What's your take, mattis 35 00:01:59,360 --> 00:02:02,080 Speaker 1: is it the beginning, the end or people worrying too much? 36 00:02:02,320 --> 00:02:04,440 Speaker 2: Yeah, Look, it's a very interesting topic. It's a very 37 00:02:04,440 --> 00:02:08,959 Speaker 2: interesting debate. Looking at private credit and recent growth, I 38 00:02:09,000 --> 00:02:13,320 Speaker 2: would say private credit in Europe has been growing consistently 39 00:02:13,840 --> 00:02:16,440 Speaker 2: for a decade plus. We were fortunate to be one 40 00:02:16,480 --> 00:02:19,239 Speaker 2: of the first ones to start the industry after the GFC. 41 00:02:19,960 --> 00:02:22,800 Speaker 2: We started with a one billion fund more than twelve 42 00:02:22,919 --> 00:02:26,559 Speaker 2: years ago and we are now ten times plus that size. 43 00:02:26,880 --> 00:02:31,040 Speaker 2: I how I view the private credit growth as consistent 44 00:02:31,120 --> 00:02:37,519 Speaker 2: growth over many many years. Fundraising. Industry growth was very 45 00:02:37,639 --> 00:02:40,360 Speaker 2: very strong, I'd say more in terms of twenty twenty one, 46 00:02:40,520 --> 00:02:44,760 Speaker 2: early twenty two and frankly over the last eighteen twenty 47 00:02:44,800 --> 00:02:47,680 Speaker 2: four months it was very bifurcated. Were the likes of 48 00:02:47,720 --> 00:02:51,040 Speaker 2: the largest asset managers in the space, with a special 49 00:02:51,320 --> 00:02:54,600 Speaker 2: focus on what they do with a clear differentiation, had 50 00:02:54,639 --> 00:02:57,720 Speaker 2: an easy time fundraising because we're generating very high yet 51 00:02:57,800 --> 00:03:00,520 Speaker 2: for firstly in credit, but a lot of the rest 52 00:03:00,520 --> 00:03:03,360 Speaker 2: of the market frankly did not, So I would actually 53 00:03:03,440 --> 00:03:05,919 Speaker 2: not say that in the last twelve of eighteen twenty 54 00:03:06,000 --> 00:03:09,560 Speaker 2: four months was the fastest growth for the industry in 55 00:03:09,639 --> 00:03:13,600 Speaker 2: terms of fund raising, But the US picture may be 56 00:03:13,639 --> 00:03:16,560 Speaker 2: slightly different. There's different sources that you can raise from 57 00:03:16,560 --> 00:03:19,920 Speaker 2: in terms of wealth bdcsent the likes. Europe is an 58 00:03:20,200 --> 00:03:24,480 Speaker 2: almost fully institutional backed market where investors allocate to private 59 00:03:24,520 --> 00:03:28,320 Speaker 2: debt consistently and they increasing their allocations as right, and 60 00:03:28,360 --> 00:03:30,959 Speaker 2: we're growing very well, but it is not that they're 61 00:03:31,040 --> 00:03:34,600 Speaker 2: jumping into private debt and then straight back out. I wouldn't. 62 00:03:34,639 --> 00:03:36,760 Speaker 2: I wouldn't call the last eighteen to twenty four months 63 00:03:36,760 --> 00:03:41,760 Speaker 2: a huge growth in our European private credit space. 64 00:03:41,920 --> 00:03:45,640 Speaker 3: Hey Madison, I've got some big picture macro questions for you, 65 00:03:45,720 --> 00:03:48,880 Speaker 3: But just in terms of background, I'm Robie Schiffman. I'm 66 00:03:48,880 --> 00:03:52,800 Speaker 3: a team leader and a technology credit analyst for Bloomberg Intelligence, 67 00:03:52,880 --> 00:03:56,680 Speaker 3: which is Bloomberg's research department, and we've got a ton 68 00:03:56,680 --> 00:03:59,320 Speaker 3: of analysts, five hundred analysts and strategists for covering all 69 00:03:59,360 --> 00:04:04,080 Speaker 3: major markets, over two thousand equities and credits across ninety industry. 70 00:04:04,080 --> 00:04:06,440 Speaker 3: So having a chance to talk to you about credit 71 00:04:06,560 --> 00:04:10,920 Speaker 3: risks and rewards is really a true pleasure if we 72 00:04:11,000 --> 00:04:14,000 Speaker 3: could just start off, maybe with your big picture and 73 00:04:14,120 --> 00:04:17,280 Speaker 3: dig deeper into your bottoms before we dig deeper into 74 00:04:17,320 --> 00:04:19,640 Speaker 3: the bottoms of value. View, this is a credit world 75 00:04:19,680 --> 00:04:22,400 Speaker 3: that feels like a little bit of a Goldilocks story. 76 00:04:23,080 --> 00:04:25,760 Speaker 3: So I'm wondering where you are in terms of the 77 00:04:25,760 --> 00:04:30,919 Speaker 3: investment cycle, direction of rates and opportunities across geographic areas. 78 00:04:31,160 --> 00:04:33,800 Speaker 2: Look, I think James and I talked about it last 79 00:04:33,800 --> 00:04:35,960 Speaker 2: week in terms of how we're wired, what we do 80 00:04:36,440 --> 00:04:40,039 Speaker 2: and how we invest. I must say we are very 81 00:04:40,839 --> 00:04:43,159 Speaker 2: you want to call it boring or consistent shop that 82 00:04:43,200 --> 00:04:46,960 Speaker 2: has been investing in private credit in Western Europe sponsor 83 00:04:47,040 --> 00:04:50,800 Speaker 2: backed with a very similar strategy for far more than 84 00:04:50,839 --> 00:04:53,920 Speaker 2: a decade. That has served us very well. I think 85 00:04:53,960 --> 00:04:58,520 Speaker 2: it is very important in credit whether you talk about 86 00:04:58,600 --> 00:05:02,680 Speaker 2: risk and reward. The reward is your contractual return. That's it, right, 87 00:05:02,720 --> 00:05:05,920 Speaker 2: they have no upset. It's very important to be steady, consistent, 88 00:05:06,400 --> 00:05:10,920 Speaker 2: have underwriting discipline over all the deals you do, all 89 00:05:10,960 --> 00:05:14,880 Speaker 2: the years you invest in, and we shy away from 90 00:05:15,000 --> 00:05:19,560 Speaker 2: binary risk, cyclic risks, regulatory risk, which is why, frankly, 91 00:05:19,600 --> 00:05:22,760 Speaker 2: of course we debate a lot. The perfect micro picture 92 00:05:23,760 --> 00:05:27,000 Speaker 2: is youre going to into recession, which country, which market, 93 00:05:27,040 --> 00:05:30,479 Speaker 2: which industries We are set up, and we model for 94 00:05:30,560 --> 00:05:33,320 Speaker 2: every deal we do that we're going into recession and 95 00:05:33,360 --> 00:05:36,600 Speaker 2: that our companies can withstand that. I think that's how 96 00:05:36,600 --> 00:05:39,400 Speaker 2: we are wired, that's how we invest, and frankly, that 97 00:05:39,480 --> 00:05:42,400 Speaker 2: has changed very little over the last ten years. 98 00:05:42,680 --> 00:05:46,360 Speaker 4: We jumped a little bit on fundraising in your previous 99 00:05:46,760 --> 00:05:49,960 Speaker 4: answer there, and I think it's fairly well known that 100 00:05:50,080 --> 00:05:53,320 Speaker 4: larger funds like yourself, who raise billions and billions in 101 00:05:53,600 --> 00:05:56,800 Speaker 4: each fund definitely have an easier time of it than 102 00:05:56,800 --> 00:05:58,200 Speaker 4: those smaller funds. 103 00:05:58,320 --> 00:06:00,000 Speaker 5: But I think that it's fair to. 104 00:06:00,160 --> 00:06:02,720 Speaker 4: Say that even you big guys have seen the fundraising 105 00:06:02,800 --> 00:06:06,680 Speaker 4: environment change and become slightly more difficult. How do you 106 00:06:06,720 --> 00:06:08,800 Speaker 4: deal with that? I'm sure there are loads of options 107 00:06:08,800 --> 00:06:11,359 Speaker 4: on the table. What does Art want doing? 108 00:06:11,720 --> 00:06:13,680 Speaker 2: Look, it helps when you have hundreds and hundreds of 109 00:06:13,680 --> 00:06:16,520 Speaker 2: investors that have packed you in the previous fund and 110 00:06:16,560 --> 00:06:19,720 Speaker 2: often the fund prior to that. They've senior returns. They 111 00:06:19,720 --> 00:06:23,440 Speaker 2: see the cashier, they like the current increase year that 112 00:06:23,480 --> 00:06:26,800 Speaker 2: we're generating, but they've also seen how you've behaved with 113 00:06:26,839 --> 00:06:29,840 Speaker 2: troubate assets in the past, how you've restructured them, how 114 00:06:29,839 --> 00:06:33,760 Speaker 2: you've gotten value back to them. It is much easier 115 00:06:33,760 --> 00:06:36,359 Speaker 2: for them to undred us than a new credit manager 116 00:06:36,480 --> 00:06:38,839 Speaker 2: or someone who's just started their business in twenty nineteen 117 00:06:38,880 --> 00:06:41,960 Speaker 2: twenty twenty and ramped it in the probably most difficult 118 00:06:42,160 --> 00:06:45,760 Speaker 2: period for new credit jops twenty one twenty two. It 119 00:06:45,839 --> 00:06:47,440 Speaker 2: is much easier for an established manager to. 120 00:06:47,480 --> 00:06:51,640 Speaker 4: Raise, undoubtedly, but have you found yourself needing to go 121 00:06:51,720 --> 00:06:54,320 Speaker 4: after new investors as well? We've seen a lot of 122 00:06:54,400 --> 00:06:58,960 Speaker 4: pushing into places like insurance companies or for example, in 123 00:06:59,000 --> 00:07:02,679 Speaker 4: the Middle East. Are you kind of following any new lines. 124 00:07:03,800 --> 00:07:07,680 Speaker 2: Look, we always we have a global investor base across Europe, 125 00:07:07,760 --> 00:07:10,720 Speaker 2: Asia and the US, actually North America quite a lot 126 00:07:10,760 --> 00:07:14,280 Speaker 2: as well. But that doesn't mean we're not like there 127 00:07:14,280 --> 00:07:16,680 Speaker 2: are many investors that are not part of ours, and 128 00:07:16,720 --> 00:07:21,000 Speaker 2: we will always go for new investors. We did eighteen 129 00:07:21,000 --> 00:07:24,320 Speaker 2: months ago a partnership with TA and Novenda, obviously being 130 00:07:24,640 --> 00:07:28,200 Speaker 2: one of the largest pension and insurance companies and one 131 00:07:28,200 --> 00:07:31,200 Speaker 2: of the largest allocators to private that globally. That is 132 00:07:31,440 --> 00:07:34,720 Speaker 2: a partnership that hasn't come from nowhere. That is very 133 00:07:34,760 --> 00:07:38,000 Speaker 2: synergistic and that's probably the biggest step change in our 134 00:07:38,720 --> 00:07:43,640 Speaker 2: fund or investor capital raising that we have had in 135 00:07:43,760 --> 00:07:44,400 Speaker 2: quite some time. 136 00:07:45,040 --> 00:07:46,840 Speaker 5: So that facilitates fundraising. 137 00:07:46,840 --> 00:07:48,840 Speaker 4: You're able to kind of use the network that comes 138 00:07:48,840 --> 00:07:50,560 Speaker 4: from your relationship with Uveen. 139 00:07:50,600 --> 00:07:53,960 Speaker 2: Both internal from TA and Novene. Of course, they haven't 140 00:07:54,360 --> 00:07:56,600 Speaker 2: bought us for a reason, they're partnering with us for 141 00:07:56,640 --> 00:08:00,400 Speaker 2: a reason, and they're investing with us. And of course 142 00:08:01,120 --> 00:08:04,000 Speaker 2: having a global platform together with Navegna and Churchill in 143 00:08:04,000 --> 00:08:07,600 Speaker 2: the US provides completely different opportunities on the fund raising 144 00:08:07,640 --> 00:08:09,480 Speaker 2: side than just being our ports stand alone. 145 00:08:10,080 --> 00:08:12,080 Speaker 4: I don't know if you're happy to kind of go 146 00:08:12,160 --> 00:08:15,880 Speaker 4: into this already, because you mentioned briefly there that you 147 00:08:16,080 --> 00:08:18,360 Speaker 4: like that your investors like the way that you've been 148 00:08:18,400 --> 00:08:21,680 Speaker 4: able to return money to them. Have you seen much 149 00:08:21,760 --> 00:08:24,680 Speaker 4: distress in the portfolios so far? Have you had to 150 00:08:24,720 --> 00:08:27,960 Speaker 4: take any kind of actions like workouts or do you 151 00:08:27,960 --> 00:08:30,200 Speaker 4: have to do much restructuring so far? 152 00:08:30,800 --> 00:08:34,319 Speaker 2: Look, we have I think by now twelve to thirteen 153 00:08:34,360 --> 00:08:36,360 Speaker 2: years of investing, we've done more than four hundred years. 154 00:08:36,400 --> 00:08:40,359 Speaker 2: Of course, we've had problems, we have restructured, restructured very successfully. 155 00:08:40,679 --> 00:08:42,920 Speaker 2: If you're looking at the very recent period, and this 156 00:08:43,000 --> 00:08:46,400 Speaker 2: is very very different two five, six years ago. We 157 00:08:46,440 --> 00:08:49,439 Speaker 2: have a portfolio of very many companies and I think 158 00:08:49,440 --> 00:08:53,880 Speaker 2: that if you look at the percentage of issues deforce problems, 159 00:08:54,360 --> 00:08:57,000 Speaker 2: it is very very low. I think the good bit 160 00:08:57,120 --> 00:09:01,320 Speaker 2: with private credit is that most of us larger, more 161 00:09:01,400 --> 00:09:06,319 Speaker 2: established managers have focused on industries that are less reliant 162 00:09:06,440 --> 00:09:12,000 Speaker 2: on the macro, and that often hundreds of customers were frankly, also, inflation, 163 00:09:12,160 --> 00:09:14,280 Speaker 2: which we were very worried about two years ago or 164 00:09:14,520 --> 00:09:17,920 Speaker 2: one year ago, can be passed through to customers and 165 00:09:17,960 --> 00:09:20,240 Speaker 2: you keep your margin. So I think portfolio performance is 166 00:09:20,240 --> 00:09:23,440 Speaker 2: probably the one piece that, having gone through the last 167 00:09:23,440 --> 00:09:26,480 Speaker 2: two or three four years, has held up very well. 168 00:09:27,520 --> 00:09:30,760 Speaker 3: So that is you know, I know mandate is somewhat critical. 169 00:09:30,880 --> 00:09:34,960 Speaker 3: But in a changing rate environment, in which part of 170 00:09:35,000 --> 00:09:38,120 Speaker 3: the capital structure are you finding most attractive these days? 171 00:09:38,120 --> 00:09:40,439 Speaker 3: And it has that changed over the past two years. 172 00:09:40,800 --> 00:09:43,719 Speaker 2: We have always been invested in firstly in credit the 173 00:09:43,840 --> 00:09:47,200 Speaker 2: vast majority of what we do. In the last two years, 174 00:09:47,240 --> 00:09:51,640 Speaker 2: I'd say we're staying even truer to that, simply because 175 00:09:52,240 --> 00:09:56,000 Speaker 2: we think in the subordinated piece of the capital structure 176 00:09:56,080 --> 00:09:59,280 Speaker 2: you're taking a lot more risk and especially the loss 177 00:09:59,280 --> 00:10:02,600 Speaker 2: given before it is much higher than in the senior 178 00:10:02,640 --> 00:10:06,719 Speaker 2: piece of it. We don't see we get very we 179 00:10:06,760 --> 00:10:10,880 Speaker 2: get the double digit years these days and getting the 180 00:10:10,920 --> 00:10:13,360 Speaker 2: extra one or two percent from being as Secondly in 181 00:10:13,400 --> 00:10:16,640 Speaker 2: a pig or pref equity we don't see much value in. 182 00:10:16,800 --> 00:10:18,840 Speaker 2: So we have focused much more on just being firstly 183 00:10:18,840 --> 00:10:20,520 Speaker 2: in senior in the current environment. 184 00:10:20,800 --> 00:10:23,000 Speaker 3: And what about in terms of sectors. I know you've 185 00:10:23,040 --> 00:10:27,440 Speaker 3: been recently positive in the tech space, from software to 186 00:10:27,840 --> 00:10:31,120 Speaker 3: it to business services. You can give some of the 187 00:10:31,200 --> 00:10:35,599 Speaker 3: characteristics of these sub sectors that make them more attractive 188 00:10:35,720 --> 00:10:38,679 Speaker 3: than others. And then if you could potentially just highlight 189 00:10:38,720 --> 00:10:41,360 Speaker 3: the next and video for all of us, we'd appreciate it. 190 00:10:41,480 --> 00:10:44,080 Speaker 2: The next time video sure, unfortunately not in the game. 191 00:10:44,120 --> 00:10:49,720 Speaker 2: But the companies we like is five ten, fifteen percent 192 00:10:49,880 --> 00:10:54,240 Speaker 2: like forlycorganic growth goods, healthy margins, twenty five thirty percent, 193 00:10:54,400 --> 00:10:57,840 Speaker 2: high cashlow generation eighty nine percent from ebadats to cash 194 00:10:57,840 --> 00:11:01,920 Speaker 2: flows ideally one of the market leaders in the industries. 195 00:11:02,600 --> 00:11:05,400 Speaker 2: Because then what happens when you get a wage inflation 196 00:11:05,600 --> 00:11:08,800 Speaker 2: shocked like in the last two years, you have many customers, 197 00:11:08,880 --> 00:11:10,959 Speaker 2: you're not reliant on any you can pass it through 198 00:11:11,000 --> 00:11:13,520 Speaker 2: and people actually won't churn. That is the type of 199 00:11:13,520 --> 00:11:15,880 Speaker 2: company we like. That can be business services, that can 200 00:11:15,880 --> 00:11:19,280 Speaker 2: be insurance broking, that can be software. All these these 201 00:11:19,520 --> 00:11:23,480 Speaker 2: these sectors have those characteristics, but characteristics very often it 202 00:11:23,640 --> 00:11:26,480 Speaker 2: does companies that are very tough to break. If grows 203 00:11:26,520 --> 00:11:29,480 Speaker 2: cycles slow, and they certainly have slowed a bit in 204 00:11:29,520 --> 00:11:31,920 Speaker 2: the last one two years and you're not growing sort 205 00:11:31,920 --> 00:11:35,200 Speaker 2: of low double digit but mid single digits not a 206 00:11:35,280 --> 00:11:38,040 Speaker 2: problem for us. It is important for us that give 207 00:11:38,080 --> 00:11:43,360 Speaker 2: you keep a stable and growing top and bottom line 208 00:11:43,400 --> 00:11:46,440 Speaker 2: to pay our interest and keep the CASHWS were running. 209 00:11:46,920 --> 00:11:49,960 Speaker 2: That's the most important. We shy away from anything that 210 00:11:50,000 --> 00:11:54,800 Speaker 2: looks anywhere near nvideo. When something grows fifty percent plus, 211 00:11:55,160 --> 00:11:58,600 Speaker 2: we probably scared and run away because we have a 212 00:11:58,640 --> 00:12:01,960 Speaker 2: fear that the same happen on the downside. So we 213 00:12:02,040 --> 00:12:05,880 Speaker 2: are very focused on stable, consistent, growing companies. 214 00:12:05,920 --> 00:12:08,000 Speaker 3: Do you have the ability to talk about any specific 215 00:12:08,080 --> 00:12:09,800 Speaker 3: investments that have worked out? 216 00:12:09,840 --> 00:12:14,320 Speaker 2: Well, I'm not sure we should talk about specific years. 217 00:12:14,720 --> 00:12:17,199 Speaker 2: If you put you into context what we do day 218 00:12:17,240 --> 00:12:20,320 Speaker 2: to day and year after year, we do forty to 219 00:12:20,360 --> 00:12:24,360 Speaker 2: fifty years a year, and that twenty of those new 220 00:12:24,400 --> 00:12:27,679 Speaker 2: logos new companies we invest in the rest is portfolio. 221 00:12:27,760 --> 00:12:32,520 Speaker 2: So very often we just minor portfolio and reinvest add 222 00:12:32,600 --> 00:12:35,800 Speaker 2: on investing in portfolio companies that we affect for years 223 00:12:35,840 --> 00:12:39,800 Speaker 2: and years, and frankly, almost all of them work out 224 00:12:39,960 --> 00:12:43,040 Speaker 2: and we get our contractual year back. Very little of 225 00:12:43,080 --> 00:12:45,840 Speaker 2: them we get outsized returns, and very little of them 226 00:12:46,040 --> 00:12:50,160 Speaker 2: we get hit with issues and problems. And that is 227 00:12:50,240 --> 00:12:54,080 Speaker 2: what we like. And we see more than a thousand 228 00:12:54,160 --> 00:12:57,280 Speaker 2: deals a year and we pick, and that's important to understand, 229 00:12:57,280 --> 00:13:01,199 Speaker 2: we pick twenty twenty five new companies every year out 230 00:13:01,240 --> 00:13:05,160 Speaker 2: of a huge pool of companies that come to us 231 00:13:05,160 --> 00:13:08,920 Speaker 2: to refinance for a new LB or whatever it is. 232 00:13:09,720 --> 00:13:14,360 Speaker 2: Origination deployment is very very easy if you have been 233 00:13:14,360 --> 00:13:17,079 Speaker 2: doing the same thing for a decade plus, because people 234 00:13:17,080 --> 00:13:19,760 Speaker 2: know exactly what you're doing, they trust you, they've seen 235 00:13:19,840 --> 00:13:22,640 Speaker 2: you how you behave on a good day and frankly 236 00:13:22,679 --> 00:13:26,280 Speaker 2: on a bad day. It is a very very good 237 00:13:26,320 --> 00:13:28,520 Speaker 2: place to be. And then it is all about credits, 238 00:13:28,559 --> 00:13:33,240 Speaker 2: election and underwriting standards, and originating is, frankly at the 239 00:13:33,960 --> 00:13:36,720 Speaker 2: today where we set the easiest bit of our business. 240 00:13:36,960 --> 00:13:39,920 Speaker 3: You know, it's interesting. I think you sort of answered 241 00:13:40,000 --> 00:13:41,800 Speaker 3: what I was going to try to focus on next. 242 00:13:41,800 --> 00:13:45,480 Speaker 3: It seems like there's so much private capital chasing after 243 00:13:45,600 --> 00:13:48,400 Speaker 3: the same companies, but you're saying there's not a lack 244 00:13:48,520 --> 00:13:52,760 Speaker 3: of investment opportunity. Now, why do you think that is? 245 00:13:51,760 --> 00:13:54,880 Speaker 3: Is there a lack of public capital? 246 00:13:54,960 --> 00:13:55,160 Speaker 5: Now? 247 00:13:55,480 --> 00:13:58,480 Speaker 3: Are you? Are you guys offering money that's just simply 248 00:13:58,600 --> 00:14:01,880 Speaker 3: more attractive because you're not charging what you used to 249 00:14:01,960 --> 00:14:04,960 Speaker 3: have to? Like? Why is why are there so many 250 00:14:04,960 --> 00:14:06,959 Speaker 3: more opportunities today than there ever were? 251 00:14:07,280 --> 00:14:11,280 Speaker 2: Look, I think it is also I think a big 252 00:14:11,280 --> 00:14:14,040 Speaker 2: difference between the US and Europe to be honest, it 253 00:14:14,120 --> 00:14:19,680 Speaker 2: is if you're European scaled private debt manager that has 254 00:14:19,720 --> 00:14:25,240 Speaker 2: been dealing with many many private equity funds, management teams 255 00:14:25,320 --> 00:14:28,720 Speaker 2: and borrow us over many many years, they have a 256 00:14:28,800 --> 00:14:32,080 Speaker 2: strong preference to keep partnering bit with you because these 257 00:14:32,120 --> 00:14:36,680 Speaker 2: private equity firms, of course they're interested in economic terms 258 00:14:36,760 --> 00:14:40,280 Speaker 2: as you say, but in reality, how they make their 259 00:14:40,280 --> 00:14:42,720 Speaker 2: money and how they drive their equity stories very often 260 00:14:42,840 --> 00:14:46,160 Speaker 2: is buy and build with a trusted partner then can 261 00:14:46,200 --> 00:14:49,320 Speaker 2: give you the debt capital to do so, and that 262 00:14:49,560 --> 00:14:53,040 Speaker 2: oftentimes they get two hundred million from us they won 263 00:14:53,120 --> 00:14:56,000 Speaker 2: in the first LBO, and they get another two hundred 264 00:14:56,000 --> 00:14:59,640 Speaker 2: million over the next five years of US doing this 265 00:15:00,480 --> 00:15:04,720 Speaker 2: doing add on deals to form those companies together. And 266 00:15:04,840 --> 00:15:08,160 Speaker 2: if they take the money from someone who's just raised 267 00:15:08,200 --> 00:15:13,440 Speaker 2: a huge amount, maybe from Wales or from other source 268 00:15:13,480 --> 00:15:16,320 Speaker 2: of capital in the US and place Europe in twenty 269 00:15:16,360 --> 00:15:18,440 Speaker 2: twenty one, it is gone for twenty two and twenty 270 00:15:18,440 --> 00:15:22,240 Speaker 2: three is back in twenty twenty four. They will think 271 00:15:22,280 --> 00:15:25,040 Speaker 2: twice and oftentimes they give us a last look on 272 00:15:25,080 --> 00:15:28,160 Speaker 2: financings and say, look, you want to do this deal 273 00:15:28,280 --> 00:15:32,480 Speaker 2: because frankly I know the same people, the same funds. 274 00:15:32,600 --> 00:15:34,680 Speaker 2: The same strategy you've done for the last ten years, 275 00:15:34,720 --> 00:15:36,680 Speaker 2: you will be there for the next ten years. It 276 00:15:36,760 --> 00:15:41,080 Speaker 2: is a very differentiated proposition simply because you've built a 277 00:15:41,160 --> 00:15:44,280 Speaker 2: network and you've built a business over a long period 278 00:15:44,320 --> 00:15:48,680 Speaker 2: of time that has done similar things in France, in Italy, 279 00:15:48,840 --> 00:15:53,560 Speaker 2: in Germany, in Sweden. It is very different, I think 280 00:15:53,640 --> 00:15:56,200 Speaker 2: from what people often think that you can just drop 281 00:15:56,240 --> 00:15:59,960 Speaker 2: in and do a deal that is at market terms 282 00:16:00,320 --> 00:16:02,640 Speaker 2: and then drop out of the market again. It just 283 00:16:02,680 --> 00:16:05,120 Speaker 2: doesn't work that way. It is. It is very important 284 00:16:05,160 --> 00:16:08,560 Speaker 2: for our partners. Our prioritically firms that we are in 285 00:16:08,560 --> 00:16:11,680 Speaker 2: the market, we're a scale player, and we will back 286 00:16:11,720 --> 00:16:14,880 Speaker 2: them in the future. That's why origination is easy. If 287 00:16:15,360 --> 00:16:18,320 Speaker 2: if you are in a business that tries to play 288 00:16:18,320 --> 00:16:23,560 Speaker 2: the market opportunistically in a specific year, I think origination 289 00:16:23,680 --> 00:16:25,560 Speaker 2: is very hard and you will need to be very 290 00:16:25,680 --> 00:16:29,600 Speaker 2: very competitive and usually probably you will lose the years 291 00:16:29,640 --> 00:16:32,720 Speaker 2: because you're just not a trustworthy partner for future. 292 00:16:33,560 --> 00:16:37,400 Speaker 4: You have seen margin compression in the market though, that's correct, right, Yeah, 293 00:16:37,560 --> 00:16:40,520 Speaker 4: we've been kind of tracking about one hundred bits over 294 00:16:40,520 --> 00:16:44,440 Speaker 4: the last year. I know it's very difficult to say overall. 295 00:16:43,960 --> 00:16:45,600 Speaker 5: But do you think that's how much things have come 296 00:16:45,600 --> 00:16:46,800 Speaker 5: in roughly, I. 297 00:16:46,800 --> 00:16:48,400 Speaker 2: Think it's less than that. I think you have to 298 00:16:48,440 --> 00:16:50,440 Speaker 2: look if you look at margins over time, I think 299 00:16:50,440 --> 00:16:52,840 Speaker 2: you have to look at not just twenty two and 300 00:16:52,880 --> 00:16:55,800 Speaker 2: twenty three. Those were Look, I'm not gonna I'm not 301 00:16:55,840 --> 00:16:58,200 Speaker 2: going to sity and say second half twenty two and 302 00:16:58,240 --> 00:17:00,360 Speaker 2: all of twenty three were great years for us. The 303 00:17:00,400 --> 00:17:02,640 Speaker 2: liquid markets were shot. A lot of the players that 304 00:17:02,760 --> 00:17:06,480 Speaker 2: usually do Europe sometimes they were out of the market 305 00:17:06,560 --> 00:17:09,760 Speaker 2: because they had problems with the macro maybe fund raised, 306 00:17:09,880 --> 00:17:12,199 Speaker 2: and the smaller players in Europe didn't didn't have the 307 00:17:12,280 --> 00:17:15,639 Speaker 2: money to invest as much. So in reality, the last 308 00:17:15,760 --> 00:17:19,960 Speaker 2: eighteen twenty four months were exceptionally good. I think that's right, 309 00:17:20,000 --> 00:17:23,600 Speaker 2: And margins were high. Terms were very good, and that 310 00:17:23,720 --> 00:17:25,920 Speaker 2: is true, and we're off that I would say, probably 311 00:17:25,960 --> 00:17:29,840 Speaker 2: anywhere twenty five to seventy five BIPs ish. But if 312 00:17:29,880 --> 00:17:32,280 Speaker 2: you look a bit further back, I think margins and 313 00:17:32,320 --> 00:17:35,200 Speaker 2: spreads are very much similar to where we did. DearS 314 00:17:35,200 --> 00:17:40,200 Speaker 2: and tranjected in the time prior to sort of exceptionally 315 00:17:41,040 --> 00:17:43,880 Speaker 2: strong spreads and yeah, in terms time. 316 00:17:43,960 --> 00:17:46,320 Speaker 5: Right of course, so we're kind of back to normal, 317 00:17:46,560 --> 00:17:47,359 Speaker 5: is what I think. 318 00:17:47,400 --> 00:17:49,960 Speaker 2: That's right. I think it is. I think if everyone 319 00:17:50,000 --> 00:17:51,760 Speaker 2: says sort of we were in a golden age and 320 00:17:51,840 --> 00:17:55,159 Speaker 2: now it's all over and it's all terrible and extra competitive, 321 00:17:55,800 --> 00:17:57,680 Speaker 2: we add a couple of very good years where we 322 00:17:57,720 --> 00:18:00,119 Speaker 2: could play up and back much larger business than we 323 00:18:00,200 --> 00:18:02,639 Speaker 2: usually do. But the bread and butter of what we 324 00:18:02,680 --> 00:18:05,160 Speaker 2: do fifty two hundred million with our businesses, they're too 325 00:18:05,160 --> 00:18:08,159 Speaker 2: small for the liquor markets, and they're much too large 326 00:18:08,200 --> 00:18:12,359 Speaker 2: for the smaller direct lenders, for the commercial banks, et cetera. 327 00:18:12,520 --> 00:18:14,640 Speaker 2: It's a good space to be in. That's what we're 328 00:18:14,680 --> 00:18:17,240 Speaker 2: currently doing. We're not competing with a BSM market. 329 00:18:17,359 --> 00:18:19,720 Speaker 4: So you mentioned earlier that you're not a big fan 330 00:18:19,760 --> 00:18:23,800 Speaker 4: of pick. What do you do when a company comes 331 00:18:23,840 --> 00:18:25,720 Speaker 4: to you and says that we're having trouble with our 332 00:18:25,800 --> 00:18:27,800 Speaker 4: cash burden? Can we can we turn this into pick? 333 00:18:28,040 --> 00:18:29,720 Speaker 4: How do you typically deal with that? 334 00:18:30,600 --> 00:18:33,879 Speaker 2: I think so those there's two things that pick or 335 00:18:33,960 --> 00:18:37,960 Speaker 2: subordinated capital. I think it's different if if you're first 336 00:18:38,040 --> 00:18:40,040 Speaker 2: lea in cash BA loan with a small element of 337 00:18:40,080 --> 00:18:45,639 Speaker 2: PICK to it, because you control your destiny, your firstly lender. 338 00:18:46,400 --> 00:18:49,119 Speaker 2: If they are trouble, you are the dominant piece in 339 00:18:49,160 --> 00:18:52,840 Speaker 2: the capital structure, and you will force the outcome which 340 00:18:52,880 --> 00:18:56,800 Speaker 2: direction it goes into. If you're a junior pick lender 341 00:18:57,240 --> 00:18:59,520 Speaker 2: and the cup company comes into trouble and the value 342 00:18:59,520 --> 00:19:03,760 Speaker 2: breaks in this you face the risk of losing hunder 343 00:19:03,760 --> 00:19:06,119 Speaker 2: percent of your capital. That has never happened to us, 344 00:19:06,119 --> 00:19:07,720 Speaker 2: and we must avoid it all. Of course, that's why 345 00:19:07,720 --> 00:19:09,280 Speaker 2: we don't like junior picks. 346 00:19:09,280 --> 00:19:11,879 Speaker 4: Right, okay, But you never come into a situation, you 347 00:19:11,920 --> 00:19:15,159 Speaker 4: know where that's looking to kind of it's coming to 348 00:19:15,240 --> 00:19:17,760 Speaker 4: maturity and it's looking to refinance, and they say to you, 349 00:19:17,760 --> 00:19:19,760 Speaker 4: you know, are you capable of giving pick? 350 00:19:19,800 --> 00:19:20,920 Speaker 5: Would you like to give pick? 351 00:19:20,960 --> 00:19:23,560 Speaker 4: I mean, I guess my question is would you be 352 00:19:23,600 --> 00:19:26,600 Speaker 4: happy to lose that deal instead of offering a pick? 353 00:19:27,200 --> 00:19:31,120 Speaker 2: We are okay to give a pick or component to 354 00:19:31,160 --> 00:19:34,280 Speaker 2: borrow us private equity firms when they say, look we 355 00:19:34,320 --> 00:19:37,959 Speaker 2: want to level this company six times, Really the lever 356 00:19:38,080 --> 00:19:39,439 Speaker 2: should have been five and a half times. On a 357 00:19:39,480 --> 00:19:43,320 Speaker 2: cash pay basis, can we structure alone that you have 358 00:19:43,840 --> 00:19:46,600 Speaker 2: a component of the margin to be picked, and we're 359 00:19:46,640 --> 00:19:48,960 Speaker 2: open to that. There's obviously a different risk profile for 360 00:19:49,000 --> 00:19:52,520 Speaker 2: the pick versus cash pay because it's not quarterly accruing 361 00:19:52,600 --> 00:19:56,320 Speaker 2: cash yield, so that is also priced a littleit of 362 00:19:56,320 --> 00:20:01,040 Speaker 2: a premium, but we will offer a l of pick indias. 363 00:20:01,200 --> 00:20:03,320 Speaker 5: Okay, cool, that's that's helpful tonight. Thank you. 364 00:20:03,560 --> 00:20:05,680 Speaker 4: I know I'm not as nice as Roberts, so I'm 365 00:20:05,680 --> 00:20:09,720 Speaker 4: going to keep pushing on you. Are you seeing more 366 00:20:09,800 --> 00:20:13,400 Speaker 4: requests for this type of pick, because we certainly are. 367 00:20:14,920 --> 00:20:17,600 Speaker 4: Is that something that you're seeing across the market or 368 00:20:17,600 --> 00:20:18,520 Speaker 4: in your portfolio? 369 00:20:19,000 --> 00:20:21,600 Speaker 2: So I think I think it is correct that private 370 00:20:21,720 --> 00:20:26,440 Speaker 2: credit and our funds it is much easier to allow 371 00:20:26,480 --> 00:20:29,280 Speaker 2: for an element of pick than the liquid loan markets. 372 00:20:29,600 --> 00:20:33,240 Speaker 2: There are ten times leveled clos that need cash pay 373 00:20:33,280 --> 00:20:36,879 Speaker 2: and they must get the cash pay in full in 374 00:20:37,000 --> 00:20:40,879 Speaker 2: order to pay the liability sec Most of our money 375 00:20:40,920 --> 00:20:43,199 Speaker 2: is unlevered, some is one to one leveled at the 376 00:20:43,200 --> 00:20:46,480 Speaker 2: peak that it is very different So we can be 377 00:20:46,520 --> 00:20:49,760 Speaker 2: a bit more flexible and we do that, and and 378 00:20:49,800 --> 00:20:51,560 Speaker 2: then we offer an element of pick. I think that 379 00:20:51,680 --> 00:20:53,520 Speaker 2: is a differentiator. And then the buy and build I 380 00:20:53,520 --> 00:20:56,879 Speaker 2: talked about earlier, where you have committed and uncommitted lines 381 00:20:56,880 --> 00:20:59,840 Speaker 2: that people can tap. Those are the two differentiators we 382 00:20:59,880 --> 00:21:04,560 Speaker 2: have versus these very level structures that are very boxed 383 00:21:04,560 --> 00:21:06,600 Speaker 2: in a certain way that they need to behave all 384 00:21:06,640 --> 00:21:07,680 Speaker 2: funds that very flexible. 385 00:21:08,359 --> 00:21:10,199 Speaker 3: I'd love to go a little deeper into this because 386 00:21:10,680 --> 00:21:12,480 Speaker 3: you know, it seems like so many pieces of the 387 00:21:12,480 --> 00:21:15,359 Speaker 3: market are priced to perfection right now. And I know 388 00:21:15,440 --> 00:21:19,520 Speaker 3: that capital solutions is a key strategy of your firms. 389 00:21:19,880 --> 00:21:25,199 Speaker 3: Know what sort of dislocation are you seeing today in 390 00:21:25,320 --> 00:21:30,040 Speaker 3: terms of size and sectors that are in most need 391 00:21:30,119 --> 00:21:34,440 Speaker 3: for liquidity or rescue financing, and how do you best 392 00:21:34,440 --> 00:21:35,400 Speaker 3: take advantage of that? 393 00:21:35,760 --> 00:21:38,000 Speaker 2: Yeah, that's a good question. So our business, we have 394 00:21:38,119 --> 00:21:41,520 Speaker 2: a capital solutions business as part of our private credit offering, 395 00:21:42,359 --> 00:21:45,760 Speaker 2: and that sort of joined the private credit offering I 396 00:21:45,840 --> 00:21:49,040 Speaker 2: want to say five years ago roughly, and it's had 397 00:21:49,040 --> 00:21:53,199 Speaker 2: a very good time. And the reason is that I 398 00:21:53,240 --> 00:21:57,040 Speaker 2: talked about earlier what we focus on direct lending or 399 00:21:57,119 --> 00:22:01,720 Speaker 2: direct lending funds, and it's quite narrow. If I talked 400 00:22:01,760 --> 00:22:05,520 Speaker 2: about the industries the type of businesses we like, we 401 00:22:05,640 --> 00:22:09,920 Speaker 2: are quite narrow. We are selecting very carefully and frankly, 402 00:22:10,160 --> 00:22:14,679 Speaker 2: they are very strong businesses in slightly more cyclical sectors 403 00:22:14,760 --> 00:22:20,359 Speaker 2: in what our capal solutions business we call unloved sectors. 404 00:22:20,400 --> 00:22:26,600 Speaker 2: From credit or other investors, you can invest in market 405 00:22:26,680 --> 00:22:31,399 Speaker 2: leading good businesses and unloved sectors and often get e 406 00:22:31,520 --> 00:22:34,359 Speaker 2: plus ten percent and more for it, and they can 407 00:22:34,640 --> 00:22:39,760 Speaker 2: generate mid teens returns that way. I think that is 408 00:22:39,960 --> 00:22:43,040 Speaker 2: given our standing in the with also the private equity 409 00:22:43,080 --> 00:22:45,040 Speaker 2: community in Europe where we've done this more with more 410 00:22:45,080 --> 00:22:50,840 Speaker 2: than one hundred funds, they will, for more challenging sectors, 411 00:22:50,840 --> 00:22:53,520 Speaker 2: et cetera, try to come to a trusted source where 412 00:22:53,520 --> 00:22:56,840 Speaker 2: they get the financing not from our direct learning proposition, 413 00:22:57,320 --> 00:22:59,520 Speaker 2: but from the couple solutions business. That is the biggest 414 00:22:59,560 --> 00:23:03,280 Speaker 2: difference that we have in capital solutions that the origination 415 00:23:04,320 --> 00:23:08,720 Speaker 2: platform is so strong that from a dirog lending business 416 00:23:08,760 --> 00:23:12,560 Speaker 2: we reject some of those slightly high risk credits that 417 00:23:12,600 --> 00:23:16,760 Speaker 2: then they will transact on. That has always been the 418 00:23:16,760 --> 00:23:20,440 Speaker 2: biggest differentiator they have done. They're also very flexible funds, 419 00:23:20,480 --> 00:23:23,720 Speaker 2: even more flexible diag lending funds, and they can of 420 00:23:23,840 --> 00:23:28,399 Speaker 2: course also take advantage of seasonal cyclical differences that you 421 00:23:28,480 --> 00:23:31,600 Speaker 2: may have when the liquid markets are completely dissilocated, are 422 00:23:31,600 --> 00:23:34,439 Speaker 2: trading at the discount currently they're working well, so then 423 00:23:34,440 --> 00:23:38,240 Speaker 2: they focus on private opportunities that come through the private 424 00:23:38,280 --> 00:23:39,480 Speaker 2: equity franchise that we have. 425 00:23:40,080 --> 00:23:40,119 Speaker 4: It. 426 00:23:40,800 --> 00:23:44,720 Speaker 2: It is different in different years, but this year, of course, 427 00:23:44,840 --> 00:23:47,080 Speaker 2: liquid et cetera. For capital solutions are not relevant. 428 00:23:47,440 --> 00:23:50,720 Speaker 3: So your track record enables you to be highly selective. 429 00:23:50,720 --> 00:23:54,560 Speaker 3: That's pretty clear, and that reduces significant amounts of risk, 430 00:23:54,560 --> 00:23:56,520 Speaker 3: particularly as you're moving up in the capital structure. But 431 00:23:57,000 --> 00:23:59,159 Speaker 3: if you had to define, you know, the one or 432 00:23:59,160 --> 00:24:01,040 Speaker 3: two things that that keep you up at night that 433 00:24:01,480 --> 00:24:04,120 Speaker 3: you're really worried about, what are they? 434 00:24:04,520 --> 00:24:06,399 Speaker 2: It is interesting. I mean, I think actually, if you 435 00:24:06,440 --> 00:24:08,960 Speaker 2: look at our funds today compared to our fund one 436 00:24:09,000 --> 00:24:11,520 Speaker 2: that we first raised, what are we trying to do. 437 00:24:11,560 --> 00:24:14,119 Speaker 2: We're trying to be first lean, we are trying to 438 00:24:14,200 --> 00:24:17,040 Speaker 2: diversify the funds. We want to control our destinies, so 439 00:24:17,119 --> 00:24:20,320 Speaker 2: we usually lead our deals and all of that together, 440 00:24:20,520 --> 00:24:23,640 Speaker 2: and we want to back larger businesses because they are safer, 441 00:24:24,080 --> 00:24:27,399 Speaker 2: and all of that together. Frankly, in Front one we 442 00:24:27,440 --> 00:24:29,720 Speaker 2: had to make a lot of compromises because it was 443 00:24:29,800 --> 00:24:32,840 Speaker 2: much smaller, with much less track recorded, with much less relationships. 444 00:24:33,240 --> 00:24:35,440 Speaker 2: It is a lot easier, and I think the risk 445 00:24:35,520 --> 00:24:37,560 Speaker 2: that is currently in our funds is a lot less 446 00:24:37,960 --> 00:24:40,719 Speaker 2: for that reason. What keeps me up. Let's be honest. 447 00:24:40,800 --> 00:24:45,560 Speaker 2: We are credit people and we are constantly worried. I 448 00:24:45,640 --> 00:24:48,520 Speaker 2: share the IC at least twice a week. We see 449 00:24:48,800 --> 00:24:55,120 Speaker 2: ten plus memos and transactions every single week. Underwriting standards, 450 00:24:55,160 --> 00:25:00,159 Speaker 2: consistency in backing the right credits, and making sure to 451 00:25:00,200 --> 00:25:02,800 Speaker 2: make no mistakes on upfront when we go into a 452 00:25:02,840 --> 00:25:05,040 Speaker 2: credit into a company. I think that's the thing that 453 00:25:05,080 --> 00:25:08,560 Speaker 2: always worries me most, and that is debt together with people, 454 00:25:09,240 --> 00:25:12,919 Speaker 2: because people consistency and people will drive those decisions I 455 00:25:12,960 --> 00:25:16,119 Speaker 2: think are most important for our firm. And people have 456 00:25:16,160 --> 00:25:19,560 Speaker 2: been very consistent rising too. But when you do forty 457 00:25:19,600 --> 00:25:21,639 Speaker 2: to fifty loans a year, you've got to be on 458 00:25:21,680 --> 00:25:22,679 Speaker 2: your tours all the time. 459 00:25:23,800 --> 00:25:26,360 Speaker 4: You spoke a bit about controlling your destiny, and when 460 00:25:26,359 --> 00:25:29,160 Speaker 4: you say that, I think of depth for equity swaps, 461 00:25:29,520 --> 00:25:33,399 Speaker 4: I understand that you Aren'tmont took over a business called 462 00:25:33,480 --> 00:25:34,720 Speaker 4: Sosalitos in. 463 00:25:34,560 --> 00:25:36,800 Speaker 5: Germany last year. 464 00:25:38,080 --> 00:25:40,320 Speaker 4: We hear a lot about dept frequity swaps and we 465 00:25:40,359 --> 00:25:44,240 Speaker 4: get a lot of kind of speak from from direct 466 00:25:44,280 --> 00:25:46,640 Speaker 4: lenders telling us, you know, well, we can actually get 467 00:25:46,640 --> 00:25:49,600 Speaker 4: away higher return when we get a debt f equity swap, 468 00:25:49,640 --> 00:25:51,359 Speaker 4: and some people kind of frame it like it's actually 469 00:25:51,400 --> 00:25:55,120 Speaker 4: a really good thing. I'd love to hear where you 470 00:25:55,200 --> 00:25:58,520 Speaker 4: stand on that pendulum, and again sorry for being so mean. 471 00:25:59,240 --> 00:26:01,440 Speaker 2: Look, we don't want to take over businesses. I think 472 00:26:01,680 --> 00:26:04,600 Speaker 2: we are wired that we are running highly that first 473 00:26:04,840 --> 00:26:07,399 Speaker 2: firstly funds that frankly we just want to get our 474 00:26:07,400 --> 00:26:11,160 Speaker 2: cash return and be repaid after three to four years. 475 00:26:11,160 --> 00:26:13,399 Speaker 2: Normally we don't want to take over. I think we 476 00:26:13,440 --> 00:26:18,160 Speaker 2: don't opportunistically take over, but sometimes we have to. We've 477 00:26:18,160 --> 00:26:21,680 Speaker 2: done hundreds of hundreds of years and there's a number 478 00:26:21,680 --> 00:26:23,960 Speaker 2: which is much less than ten over the last thirteen 479 00:26:24,000 --> 00:26:27,040 Speaker 2: fourteen years that we had to take over. And then 480 00:26:27,080 --> 00:26:31,760 Speaker 2: we do that, we take action. The important bit is 481 00:26:31,960 --> 00:26:35,280 Speaker 2: when do you take over. We have covenance almost all 482 00:26:35,280 --> 00:26:38,400 Speaker 2: our the years. When they breach and there's an issue 483 00:26:38,400 --> 00:26:41,080 Speaker 2: and the private equity is not willing to sort of 484 00:26:41,240 --> 00:26:45,520 Speaker 2: put new money and back their back their investment, we 485 00:26:45,560 --> 00:26:47,280 Speaker 2: will have to do that and then we have to 486 00:26:47,280 --> 00:26:51,760 Speaker 2: come in oftentimes change management team, correct stabilize the company 487 00:26:51,760 --> 00:26:56,680 Speaker 2: and growth again. And I don't think that's an excellent opportunity, 488 00:26:56,800 --> 00:26:59,720 Speaker 2: but you need to be able to do it. Of course, 489 00:26:59,760 --> 00:27:02,040 Speaker 2: wetructuring teams, you need to have partners in the business 490 00:27:02,080 --> 00:27:05,760 Speaker 2: that all we have restructure before and it is for 491 00:27:05,920 --> 00:27:09,400 Speaker 2: a private credit fund, it's incredibly important to be well 492 00:27:09,440 --> 00:27:12,320 Speaker 2: set up to do it, do it successfully return the 493 00:27:12,359 --> 00:27:15,280 Speaker 2: money to investors. Yeah, that's how we think about it. 494 00:27:15,359 --> 00:27:20,280 Speaker 4: Fair enough, sponsor relationships, as you've spoken a key how 495 00:27:20,480 --> 00:27:22,920 Speaker 4: how do how does that kind of work when you 496 00:27:22,960 --> 00:27:25,280 Speaker 4: do a debt for actor swat are you able to 497 00:27:25,440 --> 00:27:27,600 Speaker 4: kind of keep the relationship up with the sponsor if 498 00:27:27,600 --> 00:27:29,520 Speaker 4: you were to take a company. And I'm happy to 499 00:27:29,520 --> 00:27:32,800 Speaker 4: hear about this kind of in theory because yeah, I've 500 00:27:32,840 --> 00:27:34,400 Speaker 4: never personally worked on a debt. 501 00:27:34,480 --> 00:27:37,760 Speaker 2: Franquity thought, Look, it's very rare. We do it, and 502 00:27:37,840 --> 00:27:42,800 Speaker 2: it is. It is very We've done more the Hunt, 503 00:27:42,840 --> 00:27:44,679 Speaker 2: We've worked with more. We are working with more than 504 00:27:44,680 --> 00:27:49,640 Speaker 2: one hundred sponsors. We've taken over businesses with very, very 505 00:27:49,760 --> 00:27:53,600 Speaker 2: very few, and it is a unique experience every single time. 506 00:27:53,760 --> 00:27:57,240 Speaker 2: And sometimes, frankly, when we take over what we see 507 00:27:57,280 --> 00:27:59,760 Speaker 2: what the private aguiti film has done and how they'vet 508 00:27:59,800 --> 00:28:03,719 Speaker 2: oft at the business, and we're not very enthused with 509 00:28:03,760 --> 00:28:07,720 Speaker 2: what we see, and maybe we don't want to transact 510 00:28:07,720 --> 00:28:10,760 Speaker 2: with them in the future. But sometimes frankly, there were 511 00:28:10,800 --> 00:28:14,119 Speaker 2: external issues, other issues. You work with them together and 512 00:28:14,160 --> 00:28:17,680 Speaker 2: maybe you jointly help the company, you jointly run it, 513 00:28:18,320 --> 00:28:21,480 Speaker 2: and you're very much respect for the private equity firm, 514 00:28:21,520 --> 00:28:25,120 Speaker 2: and you do transact in the future. It completely depends 515 00:28:25,200 --> 00:28:28,600 Speaker 2: on how these situations are being dealt with each time. 516 00:28:29,040 --> 00:28:29,600 Speaker 5: That makes sense. 517 00:28:29,600 --> 00:28:31,119 Speaker 4: I wonder if I could get your opinion on the 518 00:28:31,119 --> 00:28:34,639 Speaker 4: private equity industry as a whole. Obviously you speak to 519 00:28:34,720 --> 00:28:40,600 Speaker 4: loads of sponsors very closely connected with the industry. I 520 00:28:40,600 --> 00:28:44,080 Speaker 4: was at Super Return last week and Scott Kleinman was 521 00:28:44,080 --> 00:28:46,680 Speaker 4: on a panel, you know, saying I'm here to tell 522 00:28:46,720 --> 00:28:50,760 Speaker 4: you everything's not going to be okay. Things when we 523 00:28:50,800 --> 00:28:53,719 Speaker 4: look at kind of pick going up, leverage going higher, 524 00:28:53,920 --> 00:28:57,640 Speaker 4: things like no fun financing getting secured against secuity positions. 525 00:28:58,240 --> 00:29:02,400 Speaker 4: All of this to me looks like private equity is 526 00:29:03,440 --> 00:29:05,680 Speaker 4: in a very difficult position and that things could get 527 00:29:05,720 --> 00:29:08,200 Speaker 4: a lot harder in the future. I'd be interested to 528 00:29:08,240 --> 00:29:11,560 Speaker 4: know where you stand on private equity returns. 529 00:29:12,120 --> 00:29:14,600 Speaker 2: Look, I think if you are general as private aguity 530 00:29:14,680 --> 00:29:18,440 Speaker 2: fund at the moment that is doesn't have the decades 531 00:29:18,480 --> 00:29:21,680 Speaker 2: of track record of the larger ones, it is much 532 00:29:21,720 --> 00:29:24,600 Speaker 2: harder to raise and get your new fund together then 533 00:29:25,520 --> 00:29:28,000 Speaker 2: it was three years ago. I think that's clear and 534 00:29:28,040 --> 00:29:31,960 Speaker 2: we see that with private equity firms it is it 535 00:29:32,040 --> 00:29:34,400 Speaker 2: is much tougher, and it is, but let's be clear. 536 00:29:34,440 --> 00:29:38,280 Speaker 2: I think private firms have gone through very tough environments 537 00:29:38,280 --> 00:29:41,160 Speaker 2: in the GFC and after and they are quite good 538 00:29:41,200 --> 00:29:45,880 Speaker 2: at managing difficult periods and managing the assets through those 539 00:29:46,560 --> 00:29:50,280 Speaker 2: and then also coming out at the other end. That 540 00:29:50,400 --> 00:29:54,040 Speaker 2: will probably they will not all go through this well 541 00:29:54,080 --> 00:29:57,000 Speaker 2: and easily. If you have a specialized fund, if you 542 00:29:57,040 --> 00:29:59,600 Speaker 2: have long track record, it's all about returns. If you 543 00:29:59,600 --> 00:30:02,800 Speaker 2: have good returns and also cash returns to your investors 544 00:30:02,800 --> 00:30:05,560 Speaker 2: in the last years, you will raise money. It is 545 00:30:06,440 --> 00:30:09,000 Speaker 2: very important to show these cash leads that a piece 546 00:30:09,280 --> 00:30:10,360 Speaker 2: want so much these days. 547 00:30:10,480 --> 00:30:13,600 Speaker 4: Yeah, definitely, and that's actually what I mentioned. Have fund 548 00:30:13,600 --> 00:30:18,440 Speaker 4: financing already. Is this a potential strategy for you guys 549 00:30:18,440 --> 00:30:20,320 Speaker 4: in the future. Do you think could you look into 550 00:30:20,360 --> 00:30:21,480 Speaker 4: doing that fund financing? 551 00:30:21,760 --> 00:30:25,360 Speaker 2: It's definitely a possibility. Look, we are we are first 552 00:30:25,360 --> 00:30:28,200 Speaker 2: with our direct lending business. Then we capital solutions. We 553 00:30:28,280 --> 00:30:31,480 Speaker 2: are very good in providing solutions for the private ecor 554 00:30:31,520 --> 00:30:36,160 Speaker 2: community and get the best returns out of that for 555 00:30:36,320 --> 00:30:40,840 Speaker 2: our ALPS and ENAW would be a logical extension where 556 00:30:41,000 --> 00:30:46,560 Speaker 2: your private decor relationships in a different product could frankly 557 00:30:46,680 --> 00:30:49,320 Speaker 2: give us a very good deal flow in a different 558 00:30:49,400 --> 00:30:52,320 Speaker 2: set of opportunity that we haven't tapped into at all. 559 00:30:53,040 --> 00:30:56,480 Speaker 4: So, I mean, it's my job to be nervous about 560 00:30:56,480 --> 00:31:00,440 Speaker 4: the industry. We're talking a lot about leverage and leverage 561 00:31:00,440 --> 00:31:03,560 Speaker 4: on leverage and kind of we're seeing leverage packages on 562 00:31:03,640 --> 00:31:05,560 Speaker 4: certain deals not really getting. 563 00:31:05,200 --> 00:31:07,680 Speaker 5: That much smaller in general. 564 00:31:08,200 --> 00:31:10,920 Speaker 4: I'd love to hear you passif could you pacify me, 565 00:31:11,080 --> 00:31:15,280 Speaker 4: say that everything's fine, or do you have a doomsday answer? 566 00:31:15,360 --> 00:31:18,720 Speaker 4: Is this really kind of a dangerous moment that we're 567 00:31:18,720 --> 00:31:20,920 Speaker 4: in in terms of just how much leverage is in 568 00:31:20,960 --> 00:31:21,640 Speaker 4: the industry. 569 00:31:22,120 --> 00:31:25,200 Speaker 2: Look, the typical deals that we do are single bee credits, right, 570 00:31:25,360 --> 00:31:28,360 Speaker 2: they are levered. They're private equity owned. Call it five 571 00:31:28,480 --> 00:31:31,120 Speaker 2: five and a half times leverage. That's a typical deal. 572 00:31:32,200 --> 00:31:36,240 Speaker 2: These companies do transact. We typically do deers at thirty 573 00:31:36,280 --> 00:31:38,080 Speaker 2: thirty five percent loan to value. So if you have 574 00:31:38,160 --> 00:31:41,120 Speaker 2: five times loan, it's a fifteen times company most of 575 00:31:41,160 --> 00:31:46,040 Speaker 2: the time, or on average leverage on leverage and there's leverage, right, 576 00:31:46,040 --> 00:31:47,560 Speaker 2: A five or five and a half times business is 577 00:31:47,560 --> 00:31:49,560 Speaker 2: a levered business. That's why we need to be very 578 00:31:49,600 --> 00:31:53,720 Speaker 2: picky on industries, industry leader, can they sustain difficult periods, 579 00:31:53,680 --> 00:31:58,000 Speaker 2: et cetera, et cetera. But leverage on leverage and is 580 00:31:58,040 --> 00:32:01,680 Speaker 2: the system levered and is there a lot of problem 581 00:32:02,000 --> 00:32:05,840 Speaker 2: in our fund structure? All of that, I think it is. Frankly, 582 00:32:06,720 --> 00:32:09,800 Speaker 2: it's very different to when you're at hedge funds, credit 583 00:32:09,840 --> 00:32:13,040 Speaker 2: hedge funds and clos, which are all sometimes five times 584 00:32:13,080 --> 00:32:17,560 Speaker 2: plus and colos ten times levered. We are often unlevered, 585 00:32:17,800 --> 00:32:22,160 Speaker 2: sometimes up to one to one. That's it. I think, Yes, 586 00:32:22,240 --> 00:32:26,000 Speaker 2: we lever companies highly. I don't. I'm not going to 587 00:32:26,000 --> 00:32:28,680 Speaker 2: dispute that. But in the background, I think there's very 588 00:32:28,720 --> 00:32:30,080 Speaker 2: little leverage in the system. 589 00:32:30,160 --> 00:32:33,520 Speaker 4: Definitely, is this matter Spotter telling us that he's worried 590 00:32:33,520 --> 00:32:36,280 Speaker 4: about CLO leverage and hedge fund leverage. 591 00:32:36,840 --> 00:32:39,360 Speaker 2: Look, I know, I think. Look, I mean the in 592 00:32:39,400 --> 00:32:42,160 Speaker 2: the liquid credit market, clos have played a very important 593 00:32:42,160 --> 00:32:45,080 Speaker 2: function for decades. They've actually, if you look at CLO 594 00:32:45,160 --> 00:32:48,080 Speaker 2: returns through the GFC, they've played up quite nicely if 595 00:32:48,080 --> 00:32:50,240 Speaker 2: you hadn't sold at the worst possible time, which I 596 00:32:50,400 --> 00:32:54,040 Speaker 2: unfortunately some people did. I think they're very relevant for 597 00:32:54,040 --> 00:32:56,800 Speaker 2: the structure. They have a good business model networks, I'm 598 00:32:56,840 --> 00:32:57,680 Speaker 2: not worried about. 599 00:32:57,520 --> 00:33:00,520 Speaker 3: That, and made one more for me, like, how worry 600 00:33:00,560 --> 00:33:04,680 Speaker 3: are you about the private credit in general? In terms 601 00:33:04,720 --> 00:33:07,120 Speaker 3: of deal flow? You mentioned like you have to turn 602 00:33:07,200 --> 00:33:09,520 Speaker 3: down looks like ninety five percent of the deals that 603 00:33:09,560 --> 00:33:12,320 Speaker 3: you're being shown. But what happens in a few years 604 00:33:12,320 --> 00:33:15,360 Speaker 3: if we're in an immaningly lower rate environment is does 605 00:33:15,400 --> 00:33:19,240 Speaker 3: the need for private credit drop dramatically and do we 606 00:33:19,400 --> 00:33:22,000 Speaker 3: go back to where we were five years ago? And 607 00:33:22,440 --> 00:33:24,880 Speaker 3: what does that generally mean for your business profile? 608 00:33:25,320 --> 00:33:27,480 Speaker 2: Yeah, I mean we lived in zero rate environment for 609 00:33:27,760 --> 00:33:31,959 Speaker 2: most of our existence. Frankly, the last two years were different. 610 00:33:32,720 --> 00:33:35,240 Speaker 2: I think what has the last two or three years 611 00:33:35,840 --> 00:33:41,200 Speaker 2: have shown to borrow us issues private equity firms That 612 00:33:41,920 --> 00:33:46,880 Speaker 2: a private equity structure, private debt structure with committed capital 613 00:33:48,200 --> 00:33:53,200 Speaker 2: is a huge differentiator to a liquid structure or a 614 00:33:53,240 --> 00:33:57,240 Speaker 2: structure where you backed by a source of finance which 615 00:33:58,040 --> 00:34:02,160 Speaker 2: can't give you stable, consistent and debt finans for future growth. 616 00:34:02,680 --> 00:34:05,400 Speaker 2: And I think that is the step change we've been 617 00:34:05,400 --> 00:34:07,800 Speaker 2: through and that was so great for the last two 618 00:34:07,880 --> 00:34:10,720 Speaker 2: or three years for private credit because even the larger 619 00:34:10,719 --> 00:34:13,720 Speaker 2: private aquity firms that frankly often operated on the assumption 620 00:34:13,800 --> 00:34:16,360 Speaker 2: that I'm going to get the loosest stock, the tightest 621 00:34:16,400 --> 00:34:19,440 Speaker 2: price from the liquid markets. I have a revolver, I 622 00:34:19,480 --> 00:34:20,919 Speaker 2: do a bit of M and A, and I tap 623 00:34:21,000 --> 00:34:23,759 Speaker 2: the market and I get that revolver refinites in two 624 00:34:23,840 --> 00:34:28,280 Speaker 2: days and it's perfectly efficient. It is great and it works. 625 00:34:28,480 --> 00:34:32,520 Speaker 2: COVID Ukraine conflict the markets being shot for some time 626 00:34:32,840 --> 00:34:36,920 Speaker 2: showed the Pe community that that is not the case, 627 00:34:37,200 --> 00:34:40,240 Speaker 2: and a lot of companies we looked at had finance 628 00:34:40,320 --> 00:34:45,359 Speaker 2: from larger, less scaled players, liquid markets, people that don't 629 00:34:45,400 --> 00:34:48,120 Speaker 2: focus on Europe all the time, that were gone in 630 00:34:48,160 --> 00:34:51,160 Speaker 2: twenty twenty three, and that is there's always been. Our 631 00:34:51,200 --> 00:34:54,800 Speaker 2: pitch is that you rely on the prior credit players. 632 00:34:54,800 --> 00:34:57,280 Speaker 2: We've done the same for you for years and years. 633 00:34:57,320 --> 00:34:59,840 Speaker 2: We will be there. And also that give you committed 634 00:34:59,880 --> 00:35:02,360 Speaker 2: line that you can tap for ad ons, because otherwise 635 00:35:02,680 --> 00:35:05,000 Speaker 2: you have to do with the equity. And even though 636 00:35:05,000 --> 00:35:08,400 Speaker 2: we're expensive these days, we're much cheaper than the equity capital. 637 00:35:08,800 --> 00:35:11,319 Speaker 2: So this last two or three years I think has 638 00:35:11,360 --> 00:35:14,040 Speaker 2: given a structural boost to the private credit industry in 639 00:35:14,120 --> 00:35:17,120 Speaker 2: terms of demand because a lot of boris and fe 640 00:35:17,239 --> 00:35:21,960 Speaker 2: films have realized there is much added value to private 641 00:35:21,960 --> 00:35:27,120 Speaker 2: credit then they had frankly appreciated before. So I do think. 642 00:35:27,160 --> 00:35:30,000 Speaker 2: I think, I think look summer cyclical, the liquor markets 643 00:35:30,000 --> 00:35:32,920 Speaker 2: are back, the mega deals we will do, but a 644 00:35:32,960 --> 00:35:35,920 Speaker 2: lot of its structural growth that is the demand for 645 00:35:36,040 --> 00:35:36,799 Speaker 2: our loans. 646 00:35:37,239 --> 00:35:40,360 Speaker 1: And when we look at the US against Europe, matter 647 00:35:40,400 --> 00:35:44,000 Speaker 1: is I know you have that perspective. What we what 648 00:35:44,000 --> 00:35:45,600 Speaker 1: we generally hear over here is there's a lot of 649 00:35:45,600 --> 00:35:47,400 Speaker 1: money chasing too few deals, and there's a lot of 650 00:35:47,400 --> 00:35:49,120 Speaker 1: frost and there's a lot of risk going on. But 651 00:35:49,160 --> 00:35:51,200 Speaker 1: it sounds like what you're saying is in Europe it's 652 00:35:51,280 --> 00:35:55,239 Speaker 1: quite different that there's a different sort of opportunity. Are 653 00:35:55,280 --> 00:35:57,360 Speaker 1: you seeing money flow from the US to Europe for 654 00:35:57,400 --> 00:35:58,160 Speaker 1: that opportunity? 655 00:35:58,719 --> 00:36:02,800 Speaker 2: Definitely? Look it is. I think it's very different markets, 656 00:36:02,800 --> 00:36:05,040 Speaker 2: and the US is much easier to penetrate. But also 657 00:36:05,120 --> 00:36:08,239 Speaker 2: the US is much more mature. The markets started ten 658 00:36:08,280 --> 00:36:11,319 Speaker 2: to fifteen years before we started, and you can see it. 659 00:36:11,320 --> 00:36:14,080 Speaker 2: They're much much larger players, many many more of them, 660 00:36:14,120 --> 00:36:17,080 Speaker 2: and that makes it more competitive, more mature, and you 661 00:36:17,120 --> 00:36:19,960 Speaker 2: can much easier transact in all corners of the US 662 00:36:20,120 --> 00:36:24,839 Speaker 2: rather than between France and Stockholm and Austria or whatever. 663 00:36:24,920 --> 00:36:29,120 Speaker 2: You are investing, the different legal regimes, different structures, very 664 00:36:29,120 --> 00:36:31,840 Speaker 2: different actors that you need to be very familiar with, 665 00:36:32,160 --> 00:36:35,680 Speaker 2: it is harder to penetrate. But of course the successful 666 00:36:35,760 --> 00:36:39,239 Speaker 2: US firms that have raised a lot of money and 667 00:36:39,640 --> 00:36:43,040 Speaker 2: diversify into Europe, they are in Europe and they're investing, 668 00:36:43,080 --> 00:36:45,760 Speaker 2: and in twenty twenty four they're very much putting capital 669 00:36:45,800 --> 00:36:49,360 Speaker 2: to work in Europe. However, it is easiest with the 670 00:36:49,480 --> 00:36:52,480 Speaker 2: large cap sponsors with large capital markets seen as London, 671 00:36:52,520 --> 00:36:57,919 Speaker 2: that are very much more transactional. It is harder when 672 00:36:57,920 --> 00:37:00,439 Speaker 2: you go a level deeper where or the next work 673 00:37:00,520 --> 00:37:04,560 Speaker 2: and the origination capability and the track record metters so 674 00:37:04,640 --> 00:37:05,000 Speaker 2: much more. 675 00:37:05,440 --> 00:37:07,799 Speaker 1: And you're talking about double digit yields on first lean 676 00:37:07,920 --> 00:37:10,600 Speaker 1: debt in Europe, what does that mean? Is that at 677 00:37:10,640 --> 00:37:12,360 Speaker 1: ten or is it fifteen or is it twenty? And 678 00:37:12,760 --> 00:37:14,879 Speaker 1: how sustainable are those returns? 679 00:37:15,040 --> 00:37:18,239 Speaker 2: I'd say ten to twelve and I in terms of spreads, 680 00:37:18,960 --> 00:37:22,839 Speaker 2: our spreads have been very consistent for a decade. Yes, 681 00:37:23,400 --> 00:37:25,920 Speaker 2: we're less than the last two years, but that was exceptional. 682 00:37:26,800 --> 00:37:30,080 Speaker 2: And if you look at spreads and fees, frankly, you 683 00:37:30,239 --> 00:37:36,080 Speaker 2: need you will get to high single digits returns and 684 00:37:36,400 --> 00:37:38,200 Speaker 2: you add the base rates to it, and you add 685 00:37:38,360 --> 00:37:40,760 Speaker 2: ten to twelve percent. I think that's what we're currently seeing, 686 00:37:41,480 --> 00:37:44,400 Speaker 2: and I think that's sustainable. Whether rates will go we 687 00:37:44,480 --> 00:37:47,920 Speaker 2: will see that. Obviously everything's floating rate that will impact 688 00:37:48,120 --> 00:37:52,239 Speaker 2: overall absolute returns. But important to us is always to 689 00:37:52,320 --> 00:37:57,080 Speaker 2: keep a healthy spread risk premium differential to the liquid 690 00:37:57,120 --> 00:38:01,560 Speaker 2: markets who invest in similar single bee type credits as 691 00:38:01,560 --> 00:38:02,279 Speaker 2: we do. 692 00:38:02,320 --> 00:38:04,719 Speaker 1: The worry over here still seems to be that there 693 00:38:04,719 --> 00:38:07,160 Speaker 1: are too many participants. Do you expect more consolidation? 694 00:38:07,800 --> 00:38:10,000 Speaker 2: Look, we partner with MARIENA. Churchill and it's been very 695 00:38:10,000 --> 00:38:14,200 Speaker 2: good for US. It's a natural combination where global US 696 00:38:14,200 --> 00:38:18,600 Speaker 2: focused manager insurance companies is partnering with US in Europe, 697 00:38:18,960 --> 00:38:23,000 Speaker 2: you can see other managers that are having similar discussions 698 00:38:23,040 --> 00:38:27,480 Speaker 2: and transactions being done. I think as the right approach. 699 00:38:27,640 --> 00:38:30,000 Speaker 2: If you are a US firm and you want to 700 00:38:30,040 --> 00:38:33,960 Speaker 2: penetrate Europe in earnest, not just as a diversifier, then 701 00:38:34,120 --> 00:38:36,760 Speaker 2: those partnerships and consolidation makes a lot of sense. 702 00:38:37,280 --> 00:38:39,040 Speaker 1: And one last thing that sort of springs to mind 703 00:38:39,719 --> 00:38:41,600 Speaker 1: in the context of private credit, to me always is 704 00:38:41,680 --> 00:38:43,719 Speaker 1: when do you expect it to start trading will will 705 00:38:43,760 --> 00:38:46,240 Speaker 1: there ever be a secondary market for this stuff? 706 00:38:46,640 --> 00:38:49,399 Speaker 2: That will be Look, I mean private equity has had 707 00:38:49,400 --> 00:38:52,880 Speaker 2: a secondary market for a long long time. Private credit 708 00:38:52,960 --> 00:38:56,160 Speaker 2: is much younger in Europe. It is obviously still quite young. 709 00:38:56,680 --> 00:39:01,160 Speaker 2: And when most of the private gps and by now 710 00:39:01,200 --> 00:39:04,560 Speaker 2: that's the case, have hundreds of investors, you're very different 711 00:39:04,600 --> 00:39:08,280 Speaker 2: type of investors with very different needs. And it doesn't 712 00:39:08,320 --> 00:39:14,480 Speaker 2: even matter exactly oftentimes the perfect performance, but an investor 713 00:39:14,560 --> 00:39:16,880 Speaker 2: may have a liberidity need and they need to create 714 00:39:17,480 --> 00:39:20,960 Speaker 2: and they need to exit and unfortunately the long term 715 00:39:21,000 --> 00:39:25,879 Speaker 2: lockdown structure, it's not possible. And that means they will 716 00:39:25,920 --> 00:39:30,960 Speaker 2: have to find a secondary buyer and that is happening sporadically, 717 00:39:31,040 --> 00:39:33,960 Speaker 2: and that's not a big market yet. I will evolve. 718 00:39:34,080 --> 00:39:38,600 Speaker 2: I think that market will certainly. Yeah, that would certainly 719 00:39:38,680 --> 00:39:41,439 Speaker 2: be a larger market for it in a few years. 720 00:39:41,440 --> 00:39:44,680 Speaker 1: The great stuff matters pot a, co chief investment officer 721 00:39:44,719 --> 00:39:47,080 Speaker 1: at Artmond Asset Management. It's been pleasure having you on 722 00:39:47,080 --> 00:39:49,840 Speaker 1: the credit Edge. Many thanks, thank you, James, and of 723 00:39:49,880 --> 00:39:52,520 Speaker 1: course Rob Schiffing with Bloomberg Intelligence, thank you very much 724 00:39:52,560 --> 00:39:53,120 Speaker 1: for being on the show. 725 00:39:53,160 --> 00:39:53,759 Speaker 3: Thanks so much. 726 00:39:53,960 --> 00:39:56,200 Speaker 1: Bloomberg Intelligence is part of our research a buttment with 727 00:39:56,239 --> 00:39:59,280 Speaker 1: five hundred analysts and strategies working across all markets. Coverage 728 00:39:59,320 --> 00:40:02,279 Speaker 1: includes over two thousand equities and credits and outlooks on 729 00:40:02,320 --> 00:40:06,080 Speaker 1: more than ninety industries with one hundred market indices, currencies 730 00:40:06,120 --> 00:40:09,840 Speaker 1: and commodities. Last, but very much not least, Cat Hidalgo 731 00:40:09,920 --> 00:40:12,279 Speaker 1: are ace private credit report in London. Great to see you. 732 00:40:12,680 --> 00:40:13,719 Speaker 5: Thanks very much for having me. 733 00:40:14,160 --> 00:40:16,440 Speaker 1: Check out all of kats scoops on the Bloomberg Terminal 734 00:40:16,520 --> 00:40:19,160 Speaker 1: and at Bloomberg dot com, and for more analysis read 735 00:40:19,200 --> 00:40:21,520 Speaker 1: all of Rob Shiftman's great work on the Bloomberg Terminal. 736 00:40:21,760 --> 00:40:23,920 Speaker 1: Please do subscribe to the Credit Edge wherever you get 737 00:40:23,960 --> 00:40:27,240 Speaker 1: your podcasts. We're on Apple, Spotify and all other good providers, 738 00:40:27,280 --> 00:40:30,720 Speaker 1: including the Bloomberg Terminal at bpod Go. Give us a review, 739 00:40:30,760 --> 00:40:34,200 Speaker 1: tell your friends, or email me directly at jcrombieight at 740 00:40:34,239 --> 00:40:37,480 Speaker 1: Bloomberg dot net. I'm James Crombie. It's been a pleasure 741 00:40:37,520 --> 00:40:39,680 Speaker 1: having you join us again next week on the Credit 742 00:40:39,800 --> 00:40:40,120 Speaker 1: Edge