Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I think you'd agree
Speaker 1: that this is the place to be in Europe today.
Speaker 2: My first I've been to Berlin many times, but my
Speaker 2: first time at Super Return and it's wonderful to be here,
Speaker 2: and it is It is ironic how the breadth of
Speaker 2: players here at Super Return. It used to be really
Speaker 2: a private equity conference and now it really is a
Speaker 2: conference of all players in the credit markets and the
Speaker 2: capital markets and in the equity market.
Speaker 1: So thank you, of course, we're thrilled to hear what
Speaker 1: you have to say. Now this is fascinating as well
Speaker 1: because we talk about this from an Astha Coast perspective.
Speaker 1: We'll get to that in a moment. Let's talk about
Speaker 1: the overarching trade. We're based in London, you're based in
Speaker 1: the US as well. We're talking a lot about whether
Speaker 1: or not this kind of exit perhaps or at least
Speaker 1: this moment that Europe has had in the sun actually
Speaker 1: lasts give us the bold case for Europe here.
Speaker 2: Well, we've been in Europe for twenty twenty five years.
Speaker 2: We probably have one hundred billion of our eight hundred
Speaker 2: billion here in Europe today.
Speaker 3: And whether it's a poll.
Speaker 2: Domestically or a push from the current administration, and there's
Speaker 2: certainly a revitalized enthusiasm about investing in Europe. I had
Speaker 2: at dinner last night with twenty financial players, and the
Speaker 2: amount of US investors that are looking to invest in
Speaker 2: Europe is very real and palpable, you know, for us
Speaker 2: with our financing toolbox and our high grade capital solutions.
Speaker 2: In reality, most of our transaction over the last two
Speaker 2: years have been in Europe, Intel in Ireland, Venovia, here
Speaker 2: in Germany and France. So you know, we've seen it
Speaker 2: for the last few years where on the global stage,
Speaker 2: the leaders, the national leaders in industry and energy transition
Speaker 2: and utilities and manufacturing, they want to be competitive globally
Speaker 2: and they're looking for more tools to be able to
Speaker 2: play in a bigger game.
Speaker 1: How much of that, though, is a structural ball case
Speaker 1: for Europe as opposed to a reaction function to perhaps
Speaker 1: the volatility emanating out of the United States.
Speaker 2: We don't spend as much time thinking about whether it's
Speaker 2: a pull or push on the ground when we see
Speaker 2: activity from national champions in industry, and we see it
Speaker 2: with industrial players, and we see it with financial players,
Speaker 2: and we see it with government entities. Certainly in Germany
Speaker 2: you're seeing it right now with this current administration, a
Speaker 2: real pull. But we see palpable signs, lots of green shoots,
Speaker 2: of great enthusiasm, and certainly there's a variety of things
Speaker 2: you'd like to change, but for our perspective right now,
Speaker 2: it's a wonderful place to do business.
Speaker 1: How much of that, though, gets a stamp of approval
Speaker 1: or a little bit of backing because the fiscal spend
Speaker 1: from government and so, I mean it feels like Germany's
Speaker 1: bullcase has been a big piece of that. But is
Speaker 1: it just Germany that's kind of holding europe afloat at
Speaker 1: the moment?
Speaker 2: Well, I think in Germany it's very easy. This is
Speaker 2: a four trillion economy. Their goal is to get to
Speaker 2: be a six trillion economy over the next ten to
Speaker 2: twelve years. We're prepared to put an over one hundred billion.
Speaker 3: Of capital from our financing tools.
Speaker 2: And I really say that in terms of capital, mostly
Speaker 2: investment grade financing and a variety.
Speaker 3: Of dancing tools.
Speaker 2: But in Germany, because of the size and scale and
Speaker 2: their prominence in the European marketplace.
Speaker 3: They are a leader.
Speaker 2: But we're seeing enthusiasm happening right now in the Nordics.
Speaker 2: We're seeing enthusiasm happening in France to a certain degree.
Speaker 2: Obviously different industries, but it's a palpable.
Speaker 3: Change that we want to be part of, and I
Speaker 3: think that for.
Speaker 2: Our perspective, we are a large player here, but in
Speaker 2: the world of private capital and the private credit, it's
Speaker 2: an opportunity that we see as one of the brighter
Speaker 2: ones around the globe. Right now.
Speaker 1: You mentioned private credit. You took me right there. There's
Speaker 1: a lot of concern in this market right now because
Speaker 1: of the optimism and private markets generally, but also the
Speaker 1: financing and the deals that are coming from the credit
Speaker 1: space specifically. So maybe it's gone a little bit too far.
Speaker 1: You've heard warnings echoed from some of the giants of finance.
Speaker 1: Walk us through what a red flag might look like
Speaker 1: in that space.
Speaker 3: Well, we've been fortunate. We've not had a real recession in.
Speaker 2: The US for several years, a very long period of time.
Speaker 2: I will point out out that you know, a place
Speaker 2: like Australia really hasn't had a recession since the early nineties,
Speaker 2: but certainly there's been a tremendous growth of a variety
Speaker 2: of credit markets, whether it's investment grade, high yield, direct lending.
Speaker 2: And I think we have to differentiate between a credit
Speaker 2: cycle and industries where there may be an overabundance or
Speaker 2: an over enthusiasm. So certainly what's going on right now
Speaker 2: with in DC with reimbursement, the whole area of healthcare
Speaker 2: and medical reimbursement, you want to make sure that you
Speaker 2: don't are not overly concentrated to anyone player or anyone
Speaker 2: provider in the in the enterprise software business, a lot
Speaker 2: of concern about technology change and technology innovation and light
Speaker 2: of AI, and certainly also you want to make sure you.
Speaker 3: Don't have a concentrated business.
Speaker 2: So those are really red flags that would be the
Speaker 2: case in any credit cycle, but certainly as we are
Speaker 2: a bit long in the tooth in the cycle, you
Speaker 2: have to be more focused on at this point in time.
Speaker 1: You mentioned the risk out of Washington, DC specific connect
Speaker 1: the dots force in terms of those deficit concerns out
Speaker 1: of DC to the private credit space. How quickly do
Speaker 1: you see an.
Speaker 2: Effect, Well, you know, right now, while the tariffs and
Speaker 2: Liberation Day got a lot of the headlines, the market forces,
Speaker 2: the so called Bob Benje Lantis have woken up those
Speaker 2: to the concern about the growing deficit in the United States.
Speaker 2: So in the marketplace right now, with a little bit
Speaker 2: slower growth and some concern a lot of hand ringing,
Speaker 2: the deficit issue is taken the main stage versus the
Speaker 2: impact of the tariffs. Now this administration, we can't get
Speaker 2: too comfortable.
Speaker 3: There can be a headline in the next few minutes.
Speaker 2: It changed that, But right now the big focuses on
Speaker 2: rates and the deficit obviously is the current administration is
Speaker 2: focusing on their big, beautiful bill.
Speaker 1: When it comes to kind of the folks you're speaking
Speaker 1: to here in Berlin or around the world, how does
Speaker 1: that sentiment you just laid out affect perhaps the nervousness
Speaker 1: in terms of credit lending, but also kind of in
Speaker 1: the equity space as well. Are you seeing some of
Speaker 1: that nervousness rise.
Speaker 3: To the top? I think there.
Speaker 2: You know, we've been very clear about the role that
Speaker 2: we play as a broad based capital provider, and I
Speaker 2: think that when you see the macro headlines right now,
Speaker 2: your calibration of risk on levered equity needs to be
Speaker 2: a bit higher.
Speaker 3: But at the same token, you have real rates.
Speaker 2: You know, for four percent plus on nominal rates in
Speaker 2: the US right now, and for our perspective as a
Speaker 2: credit lender, you're getting paid for the first time in
Speaker 2: the last fifteen years. So it's a wonderful time to
Speaker 2: be a player on credit. But at the same time,
Speaker 2: I do think there's appropriate caution with buying equity at
Speaker 2: the bottom of a levered capital structure.
Speaker 1: So in the public market, there's a conversation here about
Speaker 1: holding onto cash, holding onto capital, being on the front
Speaker 1: end of the curve to kind of have that liquidity.
Speaker 1: Private markets offer the opposite.
Speaker 3: It's fairly a.
Speaker 1: Liquid it's not as easily tradable. It's a more long
Speaker 1: duration asset with the depths of concerns. A lot of
Speaker 1: folks are pulling out of that. Are you telling me
Speaker 1: that that's not bubbling to the surface.
Speaker 2: Well, I think again, private credit is is a much
Speaker 2: broader ocean of opportunities where a lot of the things,
Speaker 2: a lot of the issues you mentioned, they're really focused
Speaker 2: on the non investment grade side, which is a one
Speaker 2: point five trillion dollar marketplace of direct lending. The larger
Speaker 2: opportunity when we're more focused as a firm and three
Speaker 2: quarters of our assets are on the investment grade side,
Speaker 2: so a different setup with regard to the underlying credit metrics,
Speaker 2: mostly investment grade, mostly top of the capital structure, and
Speaker 2: with rates are where they are right now. Again, people
Speaker 2: don't tep typically buy spreads, but they buy yields and
Speaker 2: reels yields are quite strong right now, so appropriate commentary
Speaker 2: and concern about the non investment grade marketplace, and certainly
Speaker 2: a lot of concern about levered capital structures, subordinated paper
Speaker 2: pick payments and things of that nature which we've avoided.
Speaker 2: We're clearly leading massively into the investment grade side of
Speaker 2: the world of private capital. And I would say also
Speaker 2: in the past a lot a lot of the issues
Speaker 2: you brought up in the past, Historically private has been
Speaker 2: risky and in liquid and public has been safe and liquid.
Speaker 3: We would really challenge that
Speaker 2: Convention, and we're seeing it more and more on these
Speaker 2: investment great opportunities that we've been a leader and owner
Speaker 2: of