1 00:00:18,079 --> 00:00:20,639 Speaker 1: Hello, Welcome to the Credit Edge, a weekly markets podcast. 2 00:00:20,800 --> 00:00:22,840 Speaker 1: My name is James Crombie. I'm a senior editor at 3 00:00:22,840 --> 00:00:23,880 Speaker 1: Bloomberg and. 4 00:00:23,840 --> 00:00:26,520 Speaker 2: I'm Made and Chasin, head of the Amere credit research 5 00:00:26,520 --> 00:00:30,120 Speaker 2: team at Bloomberg Intelligence. This week, we're very pleased to 6 00:00:30,160 --> 00:00:33,880 Speaker 2: welcome Henrick Johns, CEO and partner of Sona Asset Management. 7 00:00:33,960 --> 00:00:36,280 Speaker 3: How are you, Henrik, I'm doing great. Thank you for 8 00:00:36,320 --> 00:00:36,680 Speaker 3: having me. 9 00:00:36,880 --> 00:00:40,040 Speaker 2: Henrik was previously the global co head of Capital markets 10 00:00:40,040 --> 00:00:42,200 Speaker 2: and co heed of European Investment banking at Deutsche Bank, 11 00:00:42,240 --> 00:00:47,160 Speaker 2: and he is Sona's first CEO. Sona managers twenty billion dollars, 12 00:00:47,200 --> 00:00:49,240 Speaker 2: up from about six billion in twenty twenty four. It 13 00:00:49,320 --> 00:00:52,879 Speaker 2: runs a long short European focused fund, provides capital solutions 14 00:00:52,880 --> 00:00:55,960 Speaker 2: to firms in need of financing, invest in SRTs, and 15 00:00:56,000 --> 00:00:59,800 Speaker 2: also has a COLO business. It's flagship hedge fund again 16 00:00:59,840 --> 00:01:02,720 Speaker 2: top in eight percent last year. So James, I'll hand 17 00:01:02,800 --> 00:01:04,240 Speaker 2: over to you to kick us off. 18 00:01:04,760 --> 00:01:07,160 Speaker 1: Thank you, Aiden, Thanks for joiningus, Henricks. Clearly a lot 19 00:01:07,200 --> 00:01:09,560 Speaker 1: to discuss today. I do want to start, though, with 20 00:01:09,600 --> 00:01:12,880 Speaker 1: the stress that you're seeing in credit markets. Regular listeners 21 00:01:12,880 --> 00:01:15,240 Speaker 1: to this show will be aware of the prevailing optimism 22 00:01:15,520 --> 00:01:18,280 Speaker 1: or complacency depending on your point of view. When we 23 00:01:18,280 --> 00:01:21,800 Speaker 1: talk to investors and analysts, almost everyone is bullish right 24 00:01:21,840 --> 00:01:25,280 Speaker 1: now on credit, but SONA is positioning for a tougher 25 00:01:25,360 --> 00:01:26,080 Speaker 1: cycle ahead. 26 00:01:26,800 --> 00:01:26,959 Speaker 3: Now. 27 00:01:27,040 --> 00:01:28,679 Speaker 1: To be clear, your firm is in a position to 28 00:01:28,720 --> 00:01:32,000 Speaker 1: take advantage of market dislocations, so it is in your 29 00:01:32,040 --> 00:01:34,080 Speaker 1: interest to see the world in that way. But how 30 00:01:34,120 --> 00:01:37,000 Speaker 1: tough could things get, Henrik, and where are the pressure points? 31 00:01:37,000 --> 00:01:38,600 Speaker 1: Why is that not and also why is that not 32 00:01:38,640 --> 00:01:41,000 Speaker 1: reflected in the data or the market pricing right now? 33 00:01:41,160 --> 00:01:44,280 Speaker 3: Well, it's a it's a funny definition of stress that 34 00:01:44,360 --> 00:01:48,840 Speaker 3: you started a stress where everyone is positive. Yeah, I'm 35 00:01:48,840 --> 00:01:53,040 Speaker 3: not sure that actually is stress. I think the opportunity 36 00:01:53,360 --> 00:01:58,160 Speaker 3: set that's therefore a fund like us is enormous. And 37 00:01:58,520 --> 00:02:01,720 Speaker 3: you know that opportunity set is there because we're seeing 38 00:02:02,240 --> 00:02:05,760 Speaker 3: so many different trends that are driving the credit markets, 39 00:02:06,280 --> 00:02:09,880 Speaker 3: some of which are genuinely transformational, you know, to all 40 00:02:09,919 --> 00:02:13,400 Speaker 3: of our lives, like the large amount of AI financing 41 00:02:13,480 --> 00:02:17,840 Speaker 3: that needs to happen across all markets, all products together 42 00:02:17,880 --> 00:02:22,640 Speaker 3: with you know, also some trends around how we consume things, 43 00:02:23,160 --> 00:02:26,760 Speaker 3: European d industrialization. There's just a lot of things to 44 00:02:26,800 --> 00:02:29,440 Speaker 3: get your teeth into if you're a long short credit 45 00:02:29,480 --> 00:02:30,560 Speaker 3: manager like ourselves. 46 00:02:30,720 --> 00:02:33,839 Speaker 1: But how tough do you think things could get? 47 00:02:33,840 --> 00:02:33,880 Speaker 2: Me? 48 00:02:33,919 --> 00:02:35,880 Speaker 1: Because you do talk about a tougher cycle a head, 49 00:02:36,200 --> 00:02:39,559 Speaker 1: and you do talk about more defaults and low recoveries. 50 00:02:39,880 --> 00:02:41,720 Speaker 1: I mean that would suggest stress to me. 51 00:02:42,840 --> 00:02:46,480 Speaker 3: It depends a lot on which market segments. So if 52 00:02:46,480 --> 00:02:50,760 Speaker 3: we start maybe with the the BSL market, you know, 53 00:02:50,840 --> 00:02:54,519 Speaker 3: something that maybe isn't widely appreciated is at the sort 54 00:02:54,520 --> 00:02:57,560 Speaker 3: of aggregate level of defaults in the BSL market is 55 00:02:57,560 --> 00:03:00,880 Speaker 3: at a pretty high level, and it represents it's a 56 00:03:01,919 --> 00:03:06,080 Speaker 3: you know, dispersion and and in some cases disruption you 57 00:03:06,120 --> 00:03:09,840 Speaker 3: know where you know, some of the ways that people 58 00:03:09,880 --> 00:03:13,560 Speaker 3: have financed themselves, you know, during the private credit boom 59 00:03:13,600 --> 00:03:16,480 Speaker 3: and the private equity boom. You know, some of those 60 00:03:16,520 --> 00:03:19,320 Speaker 3: things in terms of lack of credit discipline, you know, 61 00:03:19,400 --> 00:03:22,880 Speaker 3: really starting to come home to roost. And so that 62 00:03:23,040 --> 00:03:28,880 Speaker 3: again creates opportunity, you know, to to provide solutions, you know, 63 00:03:28,919 --> 00:03:31,919 Speaker 3: to some of the stressed capital structures. And you know, 64 00:03:32,000 --> 00:03:35,080 Speaker 3: that's a place again where where we do do really 65 00:03:35,080 --> 00:03:38,640 Speaker 3: well because we have a lot of fundamental you know, 66 00:03:38,680 --> 00:03:41,720 Speaker 3: analysis skills and also the scale you know, to make 67 00:03:41,880 --> 00:03:45,280 Speaker 3: a difference. So, you know, in terms of trying to 68 00:03:45,280 --> 00:03:47,200 Speaker 3: answer your question, which is which is very broad one, 69 00:03:47,240 --> 00:03:50,040 Speaker 3: you know, how how bad can things get? Yeah? Things 70 00:03:50,280 --> 00:03:52,680 Speaker 3: right now? You know that there's opportunities. I wouldn't say 71 00:03:52,680 --> 00:03:55,720 Speaker 3: that they're bad per se. And you know, one of 72 00:03:55,760 --> 00:03:58,240 Speaker 3: the things that I'm sure we'll cover, which we spend 73 00:03:58,280 --> 00:04:00,760 Speaker 3: a lot of time thinking about, is, you know, the 74 00:04:00,840 --> 00:04:03,920 Speaker 3: amount of AI capex that's coming and the financing needs. 75 00:04:04,400 --> 00:04:09,280 Speaker 3: Is that an appropriate level of exuberance around the opportunities 76 00:04:09,360 --> 00:04:12,560 Speaker 3: And you know, not to get historical round it, but 77 00:04:12,880 --> 00:04:15,080 Speaker 3: if you look at prior cycles, you a lot of 78 00:04:15,120 --> 00:04:17,800 Speaker 3: people talking about the railway boom for example of eighteen 79 00:04:17,880 --> 00:04:19,720 Speaker 3: seventy three. You know, you have to go back a 80 00:04:19,760 --> 00:04:24,039 Speaker 3: long way, but you know that there's genuine productivity improvements 81 00:04:24,560 --> 00:04:27,640 Speaker 3: that are potentially coming from this, you know, which could 82 00:04:27,960 --> 00:04:31,000 Speaker 3: justify you know, the valuations of the financing needs. But 83 00:04:31,440 --> 00:04:33,920 Speaker 3: the sort of the flip side of that is, of course, 84 00:04:34,320 --> 00:04:39,880 Speaker 3: that software which previously has been seen as an incredibly safe, 85 00:04:40,360 --> 00:04:43,400 Speaker 3: you know, highly lucrative investment, both on the equity and 86 00:04:43,760 --> 00:04:46,960 Speaker 3: the dead side. You know is is you know, under 87 00:04:47,000 --> 00:04:50,640 Speaker 3: pressure because you know, maybe the AI spending and the 88 00:04:50,680 --> 00:04:53,479 Speaker 3: tools that we can all develop, you know, is going 89 00:04:53,560 --> 00:04:56,279 Speaker 3: to you know, make the markets you know that they're in, 90 00:04:56,360 --> 00:04:59,039 Speaker 3: you know, much more difficult. So again that creates an 91 00:04:59,080 --> 00:05:02,800 Speaker 3: opportunity which is a sort of a factor or a 92 00:05:02,920 --> 00:05:04,719 Speaker 3: tangent to the AI boom. 93 00:05:05,560 --> 00:05:09,280 Speaker 2: So it's about opportunity from from the shorting side. Do 94 00:05:09,360 --> 00:05:12,520 Speaker 2: you think there is any kind of long opportunities available 95 00:05:12,520 --> 00:05:14,560 Speaker 2: in this market as well? Or is it is the 96 00:05:14,560 --> 00:05:17,680 Speaker 2: focus of the firm mainly really kind of areas of 97 00:05:17,680 --> 00:05:19,560 Speaker 2: distress and emerging problems. 98 00:05:20,160 --> 00:05:23,160 Speaker 3: So I mean I should probably take a step back 99 00:05:23,400 --> 00:05:27,120 Speaker 3: and talk about what SONA does, you know, because we 100 00:05:27,320 --> 00:05:31,000 Speaker 3: are at the moment a very broad firm in terms 101 00:05:31,040 --> 00:05:33,279 Speaker 3: of what we look at. So we're active and everything 102 00:05:33,440 --> 00:05:38,159 Speaker 3: from investment grade bonds you know, to obviously you know, 103 00:05:38,320 --> 00:05:41,760 Speaker 3: regular way high yield and b A sels. You know, 104 00:05:41,800 --> 00:05:44,880 Speaker 3: we do a bit of private credit where it makes 105 00:05:44,880 --> 00:05:47,320 Speaker 3: sense for some of our strategies, you know, all the 106 00:05:47,360 --> 00:05:50,599 Speaker 3: way to converts and so on. So you know, we're 107 00:05:50,600 --> 00:05:53,240 Speaker 3: we're kind of in a lot of different things, and 108 00:05:53,440 --> 00:05:56,720 Speaker 3: you know they all have different dynamics, so you know, 109 00:05:56,880 --> 00:06:00,520 Speaker 3: on on some things we're positioned you know for growth, 110 00:06:01,320 --> 00:06:04,080 Speaker 3: and you know there's obviously long positions in other sectors. 111 00:06:04,440 --> 00:06:07,400 Speaker 3: You know, we we think that the trend is going 112 00:06:07,480 --> 00:06:10,200 Speaker 3: to be down in terms of price, you know, either 113 00:06:10,360 --> 00:06:13,960 Speaker 3: because for you know, sector reasons or idiosyncratic critic reasons. 114 00:06:14,279 --> 00:06:16,440 Speaker 3: And in those cases obviously you want to try to 115 00:06:16,440 --> 00:06:19,359 Speaker 3: express that either by just staying away from it or 116 00:06:19,400 --> 00:06:20,480 Speaker 3: by going short if you can. 117 00:06:20,839 --> 00:06:22,680 Speaker 1: Where are other problems though in terms of sex, what 118 00:06:22,720 --> 00:06:25,320 Speaker 1: do you stay away from? 119 00:06:25,640 --> 00:06:30,120 Speaker 3: I mean again, we don't really think of sectors as 120 00:06:30,160 --> 00:06:33,320 Speaker 3: something which are you know, stay away at any price. 121 00:06:33,600 --> 00:06:36,839 Speaker 3: We look at everything in terms of, you know, what 122 00:06:37,240 --> 00:06:40,480 Speaker 3: would be the appropriate entry point, either on the short 123 00:06:40,600 --> 00:06:44,120 Speaker 3: or the long side, you know, for what that particular 124 00:06:44,200 --> 00:06:46,480 Speaker 3: name or the sector is going through. So a great 125 00:06:46,520 --> 00:06:51,320 Speaker 3: example is last year the European chemical sector was one 126 00:06:51,360 --> 00:06:55,040 Speaker 3: of the worst performing sectors, you know, obviously high energy 127 00:06:55,080 --> 00:06:58,280 Speaker 3: prices and so on. And then when the war in 128 00:06:58,360 --> 00:07:01,880 Speaker 3: Iran started and a lot of those industry dynamics you know, 129 00:07:01,960 --> 00:07:05,280 Speaker 3: suddenly reversed, and you know, a sector that people had 130 00:07:05,320 --> 00:07:09,040 Speaker 3: seen as as completely toxic and you can see that 131 00:07:09,080 --> 00:07:11,360 Speaker 3: in the capital structures trading levels of some of the 132 00:07:11,360 --> 00:07:15,360 Speaker 3: major European names you know, suddenly quickly recovered because the 133 00:07:15,440 --> 00:07:18,160 Speaker 3: dynamics shifted. So I think the benefit of you know, 134 00:07:18,200 --> 00:07:21,480 Speaker 3: looking at things based on kind of the enterprise what 135 00:07:21,520 --> 00:07:24,680 Speaker 3: we think is going to happen. You know, that gives 136 00:07:24,720 --> 00:07:27,400 Speaker 3: us opportunities to what we did in that case, which 137 00:07:27,800 --> 00:07:30,880 Speaker 3: quickly reverse our thinking, you know, invest in it. You know, 138 00:07:30,960 --> 00:07:34,320 Speaker 3: now with the you know, the war in Iran, hopefully 139 00:07:34,440 --> 00:07:37,360 Speaker 3: you know, getting towards the end, you know, the industry 140 00:07:37,440 --> 00:07:41,080 Speaker 3: dynamics start to reassert themselves in terms of the cost structure, 141 00:07:41,440 --> 00:07:43,400 Speaker 3: you know, for Europe, and and maybe it's time to 142 00:07:43,880 --> 00:07:46,200 Speaker 3: you know, to think about that bit more on the short. 143 00:07:45,960 --> 00:07:51,240 Speaker 1: Side, if you are going to go short in this market, 144 00:07:51,920 --> 00:07:54,840 Speaker 1: you know, it doesn't seem that easy when you're talking 145 00:07:54,840 --> 00:07:57,600 Speaker 1: about some of the more leveraged capital structures and more 146 00:07:57,640 --> 00:08:01,720 Speaker 1: the more liquid companies that you're you're dealing with. How 147 00:08:01,920 --> 00:08:04,240 Speaker 1: what what the what's the mechanism by which you could 148 00:08:04,240 --> 00:08:07,080 Speaker 1: take a short position right now in a credit market? 149 00:08:08,880 --> 00:08:12,960 Speaker 3: Again, I mean, we have a very wide set of 150 00:08:14,000 --> 00:08:17,800 Speaker 3: investment tools, so you know, some things are easier to short, 151 00:08:17,880 --> 00:08:20,160 Speaker 3: some things are harder. So it's sort of just a 152 00:08:20,320 --> 00:08:23,440 Speaker 3: it's very situational. In some cases, you know, you can 153 00:08:23,560 --> 00:08:26,440 Speaker 3: use CDs. In some cases you can you know, borrow 154 00:08:26,480 --> 00:08:29,400 Speaker 3: the bonds go short that way. It really just depends 155 00:08:29,960 --> 00:08:32,320 Speaker 3: and you know, as part of every analysis, of course, 156 00:08:32,679 --> 00:08:35,080 Speaker 3: you know, it's what's the cost of of that short 157 00:08:35,240 --> 00:08:38,520 Speaker 3: you know, factors into the investment decision. So yeah, we 158 00:08:38,520 --> 00:08:40,440 Speaker 3: we look at things on a very individual way. 159 00:08:40,840 --> 00:08:44,160 Speaker 2: Who's providing that liquidity in in sort of more private 160 00:08:44,280 --> 00:08:45,960 Speaker 2: or or distressed end of the market. 161 00:08:48,080 --> 00:08:50,760 Speaker 3: I mean, again, I probably wouldn't want to comment on 162 00:08:50,760 --> 00:08:53,440 Speaker 3: on sort of individual relationships that we have. You know, 163 00:08:53,480 --> 00:08:55,640 Speaker 3: I think some markets are more liquid than others. You know, 164 00:08:55,640 --> 00:08:59,120 Speaker 3: those are easier to express views in otherwise less. So again, 165 00:08:59,160 --> 00:09:01,000 Speaker 3: it just really I'm glad. 166 00:09:00,840 --> 00:09:04,079 Speaker 1: You mentioned AI and software. That is something we spend 167 00:09:04,080 --> 00:09:08,400 Speaker 1: a lot of time talking about. But the software story, 168 00:09:08,480 --> 00:09:10,120 Speaker 1: I mean, it started off as a bit of a 169 00:09:10,240 --> 00:09:12,560 Speaker 1: shock to everyone, and everyone wanted to get out, and 170 00:09:12,600 --> 00:09:15,800 Speaker 1: then there was a kind of counter movement where everyone 171 00:09:15,880 --> 00:09:18,480 Speaker 1: kind of got back in realized that that software generally 172 00:09:18,520 --> 00:09:20,760 Speaker 1: wasn't worthless. You know, these companies, a lot of them 173 00:09:20,800 --> 00:09:25,480 Speaker 1: were utilities, and that they would actually survive. But it 174 00:09:25,520 --> 00:09:27,520 Speaker 1: sounds like you have a more sort of bearish view 175 00:09:27,559 --> 00:09:29,240 Speaker 1: on the sector, and I'm wondering, you know, in terms 176 00:09:29,280 --> 00:09:32,120 Speaker 1: of you do expect more defaults, you expect less recovery. 177 00:09:32,120 --> 00:09:33,800 Speaker 1: Do you expect to kind of wipe out in that 178 00:09:33,840 --> 00:09:36,839 Speaker 1: sector at this at this point, hate hate to repeat. 179 00:09:36,840 --> 00:09:39,840 Speaker 3: It depends on the name. I mean, I think we 180 00:09:39,960 --> 00:09:43,960 Speaker 3: are definitely bearish on the sector. But that's also because 181 00:09:44,000 --> 00:09:48,400 Speaker 3: of how quickly we internally are starting to utilize you know, 182 00:09:48,440 --> 00:09:52,600 Speaker 3: the technological tools that you know AI is giving us, 183 00:09:53,240 --> 00:09:55,320 Speaker 3: and you know, I'm sure that you know many of 184 00:09:55,360 --> 00:09:58,480 Speaker 3: the listeners and and you know yourselves at Bloomberger are 185 00:09:58,520 --> 00:10:02,000 Speaker 3: doing the same. And so in some cases you will 186 00:10:02,040 --> 00:10:06,680 Speaker 3: have the ability for you know, software providers to to 187 00:10:06,760 --> 00:10:11,000 Speaker 3: really reduce their costs because you know, their development costs 188 00:10:11,040 --> 00:10:13,959 Speaker 3: you know, are going down as as they can code 189 00:10:14,000 --> 00:10:17,320 Speaker 3: you know, more efficiently, and that will enhance their margins 190 00:10:17,360 --> 00:10:20,120 Speaker 3: and and they will do well. Yeah, in other cases, 191 00:10:20,960 --> 00:10:26,280 Speaker 3: you know, they're very vulnerable to disruption, and you know, 192 00:10:26,360 --> 00:10:28,640 Speaker 3: so I think we are on the more barish end, 193 00:10:29,160 --> 00:10:31,800 Speaker 3: you know, when it comes to to this sector overall. 194 00:10:32,040 --> 00:10:34,679 Speaker 3: And you know, just to address your question about you know, 195 00:10:34,760 --> 00:10:37,680 Speaker 3: the quick sell off and then the recovery, I think 196 00:10:38,080 --> 00:10:41,120 Speaker 3: it's it's definitely worth sort of mentioning that, you know, 197 00:10:41,480 --> 00:10:45,959 Speaker 3: the software business, especially if it's based on subscription. It's 198 00:10:46,000 --> 00:10:48,760 Speaker 3: not like it goes away in the space of one quarter. 199 00:10:49,600 --> 00:10:52,200 Speaker 3: I mean, that's that's the nature of the business. And 200 00:10:52,440 --> 00:10:54,280 Speaker 3: you know, we're very early in the software or is 201 00:10:54,320 --> 00:10:57,240 Speaker 3: there in the AI sort of utilization boom, and people 202 00:10:57,280 --> 00:10:59,600 Speaker 3: need to think about how many tokens you know, they're 203 00:10:59,640 --> 00:11:04,960 Speaker 3: they're buying and spending money on. But you know, over time, 204 00:11:05,480 --> 00:11:08,640 Speaker 3: you know, particularly if you take software, you know, in 205 00:11:08,720 --> 00:11:12,199 Speaker 3: the sort of leverage finance space, you know, these are 206 00:11:12,240 --> 00:11:15,960 Speaker 3: often a bit smaller. You know, they're higher leveraged companies, 207 00:11:16,559 --> 00:11:20,160 Speaker 3: slightly more vulnerable in terms of disruption. And if you 208 00:11:20,240 --> 00:11:22,760 Speaker 3: have a big maturity that's coming up in a couple 209 00:11:22,800 --> 00:11:25,840 Speaker 3: of years time, I'm sure you've you've seen, you know, 210 00:11:25,880 --> 00:11:29,840 Speaker 3: there's about a twenty percent maturity cliff in twenty twenty eight, 211 00:11:30,200 --> 00:11:33,199 Speaker 3: and that's a very self selecting group of companies that 212 00:11:33,280 --> 00:11:37,040 Speaker 3: are are subject to that. You know that refinancing is 213 00:11:37,080 --> 00:11:41,000 Speaker 3: going to be harder, and you know, if you just 214 00:11:41,120 --> 00:11:44,679 Speaker 3: look at these names on the basis of are they 215 00:11:44,760 --> 00:11:48,040 Speaker 3: paying their current income, what is you know, this quarter's earnings, 216 00:11:48,480 --> 00:11:52,280 Speaker 3: you know then obviously you know big price falls is unjustified. 217 00:11:52,679 --> 00:11:55,400 Speaker 3: But if you're thinking ahead and thinking about the terminal value. 218 00:11:55,800 --> 00:11:58,520 Speaker 3: Then it's different. And you know, I think a great 219 00:11:58,559 --> 00:12:02,520 Speaker 3: way to illustrate that is you think about, you know, 220 00:12:02,600 --> 00:12:08,600 Speaker 3: where secondary buyout funds are pricing, or even just what's 221 00:12:08,600 --> 00:12:10,960 Speaker 3: happening in the equity markets. It sort of tells you 222 00:12:11,000 --> 00:12:13,160 Speaker 3: that all is not well, you know, in that sector 223 00:12:13,280 --> 00:12:15,120 Speaker 3: in general, and a. 224 00:12:15,160 --> 00:12:17,760 Speaker 2: Nasset like sector of course, which is something that you 225 00:12:17,800 --> 00:12:21,400 Speaker 2: guys have brought up about one of the kind of 226 00:12:21,400 --> 00:12:24,960 Speaker 2: structural problems with the portfolios in private credit right now. 227 00:12:25,920 --> 00:12:29,120 Speaker 3: Yeah, and look, I think you know, private credit, you know, 228 00:12:29,240 --> 00:12:32,920 Speaker 3: as sort of a tangent, you know, was a phenomenally 229 00:12:33,400 --> 00:12:38,040 Speaker 3: successful business for a long time, I mean last ten 230 00:12:38,120 --> 00:12:41,440 Speaker 3: years really, but you know, in a way it was 231 00:12:41,480 --> 00:12:43,800 Speaker 3: a victim of its own success. You know, they've seen 232 00:12:44,280 --> 00:12:47,760 Speaker 3: a lot of inflows and so it became very deployment focused, 233 00:12:47,920 --> 00:12:53,160 Speaker 3: and the easiest way to deploy was in large software deals, 234 00:12:53,200 --> 00:12:54,959 Speaker 3: you know, particularly in the sort of twenty one twenty 235 00:12:55,000 --> 00:12:58,199 Speaker 3: two boom. So if you've ended up with a lot 236 00:12:58,240 --> 00:13:01,240 Speaker 3: of that in your portfolio, then you know you're going 237 00:13:01,280 --> 00:13:02,760 Speaker 3: to be scratching your head a little bit now and 238 00:13:02,800 --> 00:13:04,960 Speaker 3: thinking like how do I get out of this? And 239 00:13:05,040 --> 00:13:06,839 Speaker 3: of course, you know, it's very much in your interest 240 00:13:07,000 --> 00:13:10,520 Speaker 3: to believe that these credits are all performing and there's 241 00:13:10,559 --> 00:13:12,840 Speaker 3: nothing wrong. You know, time will tell. 242 00:13:14,360 --> 00:13:17,880 Speaker 1: And do you expect much lower recovery rates than what 243 00:13:18,080 --> 00:13:19,200 Speaker 1: people are currently assuming. 244 00:13:20,559 --> 00:13:24,800 Speaker 3: Well, I think one thing that hopefully market pisipits are 245 00:13:24,960 --> 00:13:28,240 Speaker 3: very aware of is that the there's been a big 246 00:13:28,280 --> 00:13:31,839 Speaker 3: divergence over the last you know, five years in terms 247 00:13:31,840 --> 00:13:36,400 Speaker 3: of the credit quality on loans and bonds and you 248 00:13:36,440 --> 00:13:40,600 Speaker 3: know loans, both BSL loans and private credit loans, although 249 00:13:40,640 --> 00:13:45,840 Speaker 3: obviously there's less information available in private credit, you know, 250 00:13:45,880 --> 00:13:48,680 Speaker 3: where the bond market, you know, because of the discipline 251 00:13:48,880 --> 00:13:52,320 Speaker 3: of ratings and you know mark to markets and and 252 00:13:52,920 --> 00:13:58,079 Speaker 3: daily liquidity has trended to becoming higher quality in terms 253 00:13:58,080 --> 00:14:03,280 Speaker 3: of ratings, and the BSL market has tended to become 254 00:14:03,440 --> 00:14:06,640 Speaker 3: lower quality, you know, because you've just been able to 255 00:14:06,679 --> 00:14:09,320 Speaker 3: do you know, more sort of qute unquote creative things 256 00:14:09,360 --> 00:14:12,960 Speaker 3: there and so, uh, you know, we do think that 257 00:14:13,000 --> 00:14:16,440 Speaker 3: there's going to be you know, more stress in the 258 00:14:16,520 --> 00:14:20,800 Speaker 3: loan market, but again, you know that that creates opportunity 259 00:14:20,880 --> 00:14:25,480 Speaker 3: because you know, there's a right price to enter a 260 00:14:26,240 --> 00:14:29,320 Speaker 3: credit that's under stress, you know where you know it 261 00:14:29,360 --> 00:14:31,800 Speaker 3: may not have asset value, but maybe it persists longer 262 00:14:31,840 --> 00:14:34,400 Speaker 3: than you think, or you have a great match mean 263 00:14:34,480 --> 00:14:36,760 Speaker 3: team that's able to turn around, or you know, and 264 00:14:36,800 --> 00:14:39,760 Speaker 3: there's some very super I mean very smart you know 265 00:14:40,000 --> 00:14:44,800 Speaker 3: equity sponsors who are good at building businesses and restructuring. 266 00:14:44,840 --> 00:14:48,400 Speaker 3: So yeah, again it's very situational in terms of you 267 00:14:48,440 --> 00:14:49,320 Speaker 3: know how to invest in them. 268 00:14:49,360 --> 00:14:51,320 Speaker 2: Yeah, and that brings me on to the question we 269 00:14:51,800 --> 00:14:54,440 Speaker 2: have about the kind of refinancing. Well, you touched on 270 00:14:54,480 --> 00:14:59,760 Speaker 2: it earlier. John Eyrewood, obviously founder of Sona said last 271 00:14:59,840 --> 00:15:02,360 Speaker 2: year at about one hundred billion dollars of European leverage 272 00:15:02,360 --> 00:15:05,840 Speaker 2: credit issued by Pe firms or struggle to refinance before 273 00:15:05,840 --> 00:15:09,360 Speaker 2: it matures in twenty twenty eight, do you have a 274 00:15:09,440 --> 00:15:12,040 Speaker 2: kind of update on that view, and then maybe just 275 00:15:12,080 --> 00:15:17,480 Speaker 2: talk us through what's Sona's approach to kind of evaluating 276 00:15:17,520 --> 00:15:20,240 Speaker 2: that risk or all of those issues coming to market, 277 00:15:20,560 --> 00:15:23,640 Speaker 2: and what's your edge compared to maybe your peers in 278 00:15:24,600 --> 00:15:25,560 Speaker 2: how you would look at that. 279 00:15:27,800 --> 00:15:31,480 Speaker 3: So I think Sona's edge and I speak as a 280 00:15:31,600 --> 00:15:35,480 Speaker 3: relatively recent arrival who's not making investments, So you know, 281 00:15:35,480 --> 00:15:37,560 Speaker 3: please take this, you know, with a with a grain 282 00:15:37,600 --> 00:15:41,400 Speaker 3: of salt, but I think the reason for the firm's 283 00:15:41,400 --> 00:15:46,160 Speaker 3: success is that it essentially thinks of itself and is 284 00:15:46,200 --> 00:15:53,000 Speaker 3: perceived by a lot of its sort of counterparties as 285 00:15:53,120 --> 00:15:56,840 Speaker 3: as a solution provider. And you know, that solution can 286 00:15:56,880 --> 00:16:01,720 Speaker 3: be anything from anchoring a new issue, you know, to 287 00:16:01,880 --> 00:16:06,440 Speaker 3: d risk a bank underwrite, you know, to supporting a 288 00:16:06,480 --> 00:16:10,000 Speaker 3: sponsor in a amend and extent they want to do 289 00:16:11,000 --> 00:16:14,640 Speaker 3: for for a b SL and and sort of anything 290 00:16:14,800 --> 00:16:18,320 Speaker 3: in between, or de risking a bank by investing in 291 00:16:19,040 --> 00:16:21,920 Speaker 3: an SRT, you know, to help them recycle capital for 292 00:16:22,000 --> 00:16:24,280 Speaker 3: something that they want to do. So you know, we 293 00:16:24,280 --> 00:16:27,600 Speaker 3: we sort of do all of those things. And you know, 294 00:16:27,800 --> 00:16:32,440 Speaker 3: to maintain that, you know that view by our counterparties, 295 00:16:32,840 --> 00:16:35,440 Speaker 3: you need to have scale, so you know, they need 296 00:16:35,480 --> 00:16:38,240 Speaker 3: to be able to come to us and feel like, 297 00:16:38,840 --> 00:16:41,200 Speaker 3: you know, even if we're not doing the whole solution, 298 00:16:41,640 --> 00:16:43,440 Speaker 3: we're a significant part of it. So it's not a 299 00:16:43,480 --> 00:16:45,960 Speaker 3: waste of time to to sort of get us on board. 300 00:16:47,560 --> 00:16:52,280 Speaker 3: It requires obviously, you know, fundamental analysis, you know, to 301 00:16:52,600 --> 00:16:57,800 Speaker 3: understand what you're getting yourself into. And it also requires, 302 00:16:58,080 --> 00:17:01,200 Speaker 3: and this is really the thing that we think is 303 00:17:01,240 --> 00:17:04,920 Speaker 3: most critical, you know, a broad view across public and 304 00:17:05,000 --> 00:17:08,600 Speaker 3: private markets, so we can think about how to price 305 00:17:08,680 --> 00:17:12,360 Speaker 3: risk appropriately, you know, kind of everywhere that that touches 306 00:17:12,400 --> 00:17:14,679 Speaker 3: this credit, you know, whether that's you know, in the 307 00:17:14,720 --> 00:17:18,240 Speaker 3: BSL market, you know what's going on in private credit, 308 00:17:18,280 --> 00:17:21,399 Speaker 3: and also in the public markets, and so you know, 309 00:17:21,640 --> 00:17:26,679 Speaker 3: the combination of those three things means that often we 310 00:17:26,720 --> 00:17:31,080 Speaker 3: are in a position where, certainly in Europe and increasingly 311 00:17:31,119 --> 00:17:33,320 Speaker 3: in the US, you know, we are coming up with 312 00:17:33,359 --> 00:17:39,320 Speaker 3: solutions in partnership, you know, with our relationships as opposed 313 00:17:39,320 --> 00:17:42,480 Speaker 3: to you know, being the fund that someone calls up, 314 00:17:42,600 --> 00:17:46,720 Speaker 3: you know and says, this is what's happening, and you know, 315 00:17:47,280 --> 00:17:51,639 Speaker 3: again that requires being very you know, fast in responses. 316 00:17:51,920 --> 00:17:54,080 Speaker 3: I remember when I was on the cell side. You know, 317 00:17:54,080 --> 00:17:56,680 Speaker 3: the thing I probably hated the most was getting strung 318 00:17:56,720 --> 00:17:59,439 Speaker 3: along for a few weeks by fund and then getting 319 00:17:59,480 --> 00:18:02,359 Speaker 3: told no. You know, I'd much rather have a fast 320 00:18:02,520 --> 00:18:04,560 Speaker 3: no and then move on or know that I'm wrong. 321 00:18:05,520 --> 00:18:08,320 Speaker 3: You know, fast know, in many cases is as good 322 00:18:08,440 --> 00:18:11,960 Speaker 3: or almost as good as a yes. And then you know, 323 00:18:12,040 --> 00:18:15,919 Speaker 3: again like being there not based on whether the market 324 00:18:16,040 --> 00:18:18,600 Speaker 3: has moved five basis points that day, but having done 325 00:18:18,680 --> 00:18:21,200 Speaker 3: a fundamental credit analysis that you stick with your view 326 00:18:21,200 --> 00:18:22,600 Speaker 3: because it's a high conviction view. 327 00:18:22,800 --> 00:18:25,600 Speaker 1: But is the edge more that you kind of get 328 00:18:25,640 --> 00:18:27,879 Speaker 1: involved in the smaller situations as well, because you know, 329 00:18:27,960 --> 00:18:30,040 Speaker 1: what you're describing is pretty much what you know, all 330 00:18:30,040 --> 00:18:32,320 Speaker 1: the banks would say, including JP Morgan, that they offer 331 00:18:32,320 --> 00:18:35,000 Speaker 1: across the board service, but you must be doing a 332 00:18:35,000 --> 00:18:37,480 Speaker 1: different scale of business right in the middle market. 333 00:18:37,800 --> 00:18:39,520 Speaker 3: Well, I think what I mean by that is that 334 00:18:41,160 --> 00:18:45,199 Speaker 3: while many banks have obviously a very broad business model, 335 00:18:45,560 --> 00:18:47,920 Speaker 3: even though not all of them are particularly well joined 336 00:18:48,000 --> 00:18:50,120 Speaker 3: up between the different types of things that they do, 337 00:18:50,800 --> 00:18:53,560 Speaker 3: there's not that many people on the by side, and yes, 338 00:18:53,640 --> 00:18:56,840 Speaker 3: certainly in Europe that have the broad, unconstrained mandate that 339 00:18:56,880 --> 00:18:59,640 Speaker 3: we do. And you know, again we touched on AI. 340 00:19:00,160 --> 00:19:03,520 Speaker 3: You know, we're we're very active in you know, all 341 00:19:03,560 --> 00:19:07,240 Speaker 3: sorts of types of AI investments, you know, many in 342 00:19:07,240 --> 00:19:11,000 Speaker 3: the US, increasingly in Europe. We're also you know, very 343 00:19:11,000 --> 00:19:13,680 Speaker 3: active in the new issue market. You know, we're a 344 00:19:13,680 --> 00:19:17,639 Speaker 3: big trader in the secondary market. So it's really just 345 00:19:17,680 --> 00:19:22,240 Speaker 3: that we're constantly ingesting information and getting signals you know, 346 00:19:22,320 --> 00:19:24,680 Speaker 3: from the kind of investments that we're doing or or 347 00:19:24,680 --> 00:19:27,720 Speaker 3: frankly investments that we choose not to do. And you know, 348 00:19:27,800 --> 00:19:30,520 Speaker 3: that's what gives us that that sort of fundamental conviction. 349 00:19:31,200 --> 00:19:34,760 Speaker 3: And you know, we're also relatively focused on you know, 350 00:19:34,840 --> 00:19:38,479 Speaker 3: liquidity and you know, making sure that you know, something 351 00:19:38,600 --> 00:19:41,000 Speaker 3: is you know, whatever it is that we're doing is 352 00:19:41,440 --> 00:19:44,280 Speaker 3: appropriate in terms of liquidity for the strategy that we 353 00:19:44,359 --> 00:19:46,920 Speaker 3: invest in. Yeah, and obviously we have a number of 354 00:19:46,920 --> 00:19:50,240 Speaker 3: different buckets that we can use as investing vehicles. 355 00:19:50,520 --> 00:19:52,360 Speaker 1: But the scale of these deals and you mentioned AI, 356 00:19:52,400 --> 00:19:54,480 Speaker 1: I mean I've talked to an underwriter recently who said 357 00:19:54,520 --> 00:19:57,240 Speaker 1: that quote, some of these issues wouldn't get out of 358 00:19:57,240 --> 00:20:00,000 Speaker 1: bed for less than twenty five billion, which is a huge, 359 00:20:00,600 --> 00:20:03,480 Speaker 1: you know evolution even compared to last year. And so 360 00:20:03,720 --> 00:20:06,679 Speaker 1: like we're talking about massive, massive, you know, a multi 361 00:20:06,680 --> 00:20:11,440 Speaker 1: trillion dollar investment cycle. How does a you know, relatively 362 00:20:11,600 --> 00:20:13,639 Speaker 1: niche shop like Sonar participate in that. 363 00:20:13,920 --> 00:20:17,399 Speaker 3: Well, I'm glad you asked that question, James, because I 364 00:20:17,480 --> 00:20:21,720 Speaker 3: think we're everything other than niche in the world that 365 00:20:21,760 --> 00:20:27,320 Speaker 3: we're in, you know, the and maybe touching a little 366 00:20:27,320 --> 00:20:31,320 Speaker 3: bit on the on the kind of the AI CAPEX needs. 367 00:20:31,359 --> 00:20:34,640 Speaker 3: So I think you know, people are banding around different numbers, 368 00:20:34,720 --> 00:20:36,959 Speaker 3: you know, whether it's you know, eight hundred or nine 369 00:20:37,040 --> 00:20:40,640 Speaker 3: hundred billion that needs to get financed in CAPEX next year. 370 00:20:41,160 --> 00:20:44,120 Speaker 3: Now what that means is that the largest bar wars 371 00:20:44,160 --> 00:20:46,800 Speaker 3: you know, in the investment grade bond market you know, 372 00:20:47,080 --> 00:20:51,679 Speaker 3: are going to become you know, potentially the hyperscalers in 373 00:20:52,160 --> 00:20:53,960 Speaker 3: uh you know, the course of you know, three to 374 00:20:54,040 --> 00:20:57,800 Speaker 3: four years. But the investment grade bond market, you know, 375 00:20:58,040 --> 00:21:02,440 Speaker 3: I unsecured that issue directly by the hyperscalers to finance 376 00:21:02,480 --> 00:21:05,320 Speaker 3: the CAPEX is only a small part of the story. 377 00:21:05,680 --> 00:21:10,560 Speaker 3: You know. It's everything from construction lending to GPU financing, 378 00:21:10,800 --> 00:21:16,560 Speaker 3: to you know, HILD bonds, to various you know, securitization vehicles. 379 00:21:16,920 --> 00:21:18,639 Speaker 3: You know, all of this is coming at us and 380 00:21:18,640 --> 00:21:22,320 Speaker 3: that is what's creating you know, this incredible opportunity to 381 00:21:22,480 --> 00:21:26,920 Speaker 3: invest money. And you know, for fund like us, I 382 00:21:27,160 --> 00:21:29,639 Speaker 3: suppose we're niche in the sense that we are not 383 00:21:29,800 --> 00:21:34,600 Speaker 3: managing a trillion, But you know what that also means 384 00:21:34,840 --> 00:21:38,959 Speaker 3: is that for the opportunities that we pick to invest in, 385 00:21:39,359 --> 00:21:42,439 Speaker 3: we can be very meaningful. And so you know, the 386 00:21:42,480 --> 00:21:44,440 Speaker 3: reason we're so excited about what's going on in the 387 00:21:44,480 --> 00:21:48,520 Speaker 3: world again, particularly in that space, is because the amount 388 00:21:48,560 --> 00:21:53,040 Speaker 3: of opportunities that you get shown because banks, I mean 389 00:21:53,600 --> 00:21:58,080 Speaker 3: a fundamental difference between bank and you know, debt financing 390 00:21:58,200 --> 00:22:04,440 Speaker 3: equity financing generally is that banks and credit funds typically 391 00:22:04,520 --> 00:22:08,440 Speaker 3: don't allow the kind of concentration that equity markets allow. 392 00:22:08,520 --> 00:22:11,560 Speaker 3: So you have to have diversifications. So there's no institution 393 00:22:11,720 --> 00:22:14,679 Speaker 3: on earth that could absorb, you know, all of the 394 00:22:14,720 --> 00:22:19,280 Speaker 3: amount of debt requirements that that's coming. And so by 395 00:22:19,359 --> 00:22:22,560 Speaker 3: having very strong sourcing relationships and you know, some of 396 00:22:22,560 --> 00:22:24,840 Speaker 3: that edge that I mentioned, we're able to pick and 397 00:22:24,920 --> 00:22:27,960 Speaker 3: choose the things that we really like, and you know, 398 00:22:28,040 --> 00:22:31,320 Speaker 3: if there's something that we don't like, then you can 399 00:22:31,440 --> 00:22:34,400 Speaker 3: just move on because you can be confident that next 400 00:22:34,440 --> 00:22:37,720 Speaker 3: week someone else is going to show you a different 401 00:22:37,760 --> 00:22:40,000 Speaker 3: deal which you may like. And so that just creates 402 00:22:40,480 --> 00:22:42,840 Speaker 3: a great dynamic, you know, for us in terms of 403 00:22:42,840 --> 00:22:44,760 Speaker 3: deploying capital, is. 404 00:22:44,720 --> 00:22:47,959 Speaker 1: It though ABF type deals? Is it? I mean? I mean, 405 00:22:48,000 --> 00:22:52,520 Speaker 1: how does Sony participate in a an AI financing? There's 406 00:22:52,520 --> 00:22:53,879 Speaker 1: so many different kinds. 407 00:22:54,359 --> 00:23:00,520 Speaker 3: Everything, you know, everything from you know, equity to HILED 408 00:23:00,520 --> 00:23:03,359 Speaker 3: bonds to investment grade bonds to a b F. You know, 409 00:23:03,400 --> 00:23:05,520 Speaker 3: we we have a very As I said, yes, some 410 00:23:05,560 --> 00:23:08,800 Speaker 3: people still think of us as a European left in 411 00:23:09,000 --> 00:23:12,600 Speaker 3: player and you know, we we are a lot more 412 00:23:12,640 --> 00:23:15,520 Speaker 3: than that at this point. You know, we've got five 413 00:23:15,560 --> 00:23:20,800 Speaker 3: global offices. We've just announced that we're opening one in Tokyo. 414 00:23:21,320 --> 00:23:24,199 Speaker 3: You know, we have a significant investment team in New 415 00:23:24,240 --> 00:23:26,920 Speaker 3: York and I've had for you know, really since the inception, 416 00:23:27,480 --> 00:23:30,280 Speaker 3: So we're involved. You know, wherever we see you know 417 00:23:30,320 --> 00:23:33,880 Speaker 3: alpha And you know, again it comes back to that 418 00:23:34,080 --> 00:23:36,560 Speaker 3: investing age that I talked about, but you know that 419 00:23:36,680 --> 00:23:39,080 Speaker 3: is applicable across all of these markets. 420 00:23:39,520 --> 00:23:41,000 Speaker 1: So where do you see alpha right now? Because I 421 00:23:41,040 --> 00:23:43,280 Speaker 1: mean if you've bought SpaceX bonds, that wouldn't have been 422 00:23:43,440 --> 00:23:47,359 Speaker 1: partletuarly good that right last week? But what what is 423 00:23:47,359 --> 00:23:51,840 Speaker 1: the opportunity in AI debt right now? 424 00:23:52,960 --> 00:23:56,320 Speaker 3: Some trades are great and they pay you appropriately. Others 425 00:23:56,400 --> 00:24:00,920 Speaker 3: are more more difficult. And you know what's fascinating about 426 00:24:00,960 --> 00:24:03,480 Speaker 3: it is that on one hand, you can say all 427 00:24:03,560 --> 00:24:07,080 Speaker 3: of this is speculative, right, you know, will people actually 428 00:24:07,600 --> 00:24:10,760 Speaker 3: adopt AI? And you know, is all of this debt 429 00:24:10,880 --> 00:24:14,240 Speaker 3: and you know all of this equity value you know 430 00:24:14,760 --> 00:24:18,800 Speaker 3: going to work out well? And you know in a 431 00:24:18,840 --> 00:24:21,080 Speaker 3: way if you look at you know, particularly the equity markets, 432 00:24:21,520 --> 00:24:25,439 Speaker 3: you know you have you've see earnings assumptions that have 433 00:24:25,600 --> 00:24:27,920 Speaker 3: gone up and up and up, and that is really 434 00:24:27,920 --> 00:24:31,480 Speaker 3: what's justifying the valuations as opposed to you know, just 435 00:24:31,600 --> 00:24:36,160 Speaker 3: multiple expansions and that earning. You know, there's many different 436 00:24:36,160 --> 00:24:39,640 Speaker 3: ways of playing AI. You know, some of them is 437 00:24:40,080 --> 00:24:44,160 Speaker 3: in memory, you know, others are in powershells, Others are 438 00:24:44,600 --> 00:24:48,679 Speaker 3: in GPU financings. Others are you know, buying and trading 439 00:24:48,720 --> 00:24:52,520 Speaker 3: high old bonds. I know some of your previous guests 440 00:24:52,520 --> 00:24:56,760 Speaker 3: have talked about the the pressure that the sheer amount 441 00:24:56,760 --> 00:24:59,199 Speaker 3: of financing will have on the IG market, and and 442 00:24:59,240 --> 00:25:01,280 Speaker 3: we certainly think that the case. I mean, it's sort 443 00:25:01,280 --> 00:25:05,240 Speaker 3: of inevitable that you know, with the amount of financing 444 00:25:05,240 --> 00:25:08,840 Speaker 3: that has to go, that spreads you know, eventually go wider. 445 00:25:08,960 --> 00:25:11,960 Speaker 3: I mean, it's just a supplied demand in bads. At 446 00:25:12,000 --> 00:25:14,480 Speaker 3: the same time, you know, with yields where they are, 447 00:25:14,720 --> 00:25:17,200 Speaker 3: if we're talking about you know, IG bonds for a second, 448 00:25:17,480 --> 00:25:19,800 Speaker 3: you know, there is still a ton of demand you know, 449 00:25:19,920 --> 00:25:24,600 Speaker 3: from yield buyers, insurance companies and others, and you know 450 00:25:24,680 --> 00:25:26,960 Speaker 3: that's what's keeping spreads as tight as they are. So 451 00:25:27,320 --> 00:25:32,080 Speaker 3: we're not necessarily seeing that, you know, there's a massive 452 00:25:32,119 --> 00:25:34,840 Speaker 3: widening happening in the short term. But I mean those 453 00:25:34,840 --> 00:25:36,760 Speaker 3: of us that have been in the market for a 454 00:25:36,800 --> 00:25:39,720 Speaker 3: long time know that you know, comes and fits and starts, 455 00:25:39,920 --> 00:25:42,760 Speaker 3: and you know there'll be you know, some rumor that 456 00:25:43,119 --> 00:25:46,600 Speaker 3: a hyperscaler is is slowing down its cap e spending 457 00:25:47,080 --> 00:25:50,000 Speaker 3: and everyone will panic and sell everything, and then in 458 00:25:50,000 --> 00:25:53,680 Speaker 3: two weeks time, you know, they'll buy everything again and again. 459 00:25:53,720 --> 00:25:55,520 Speaker 3: If you think about, you know what what a fund 460 00:25:55,640 --> 00:25:59,040 Speaker 3: like ours does, you know, we really live off of, 461 00:25:59,400 --> 00:26:01,679 Speaker 3: you know, the rate of changed seeing things go up 462 00:26:01,720 --> 00:26:06,200 Speaker 3: and down. That's what creates opportunities for us. Rather than saying, okay, 463 00:26:06,359 --> 00:26:08,440 Speaker 3: you know AI is the thing We're going to put 464 00:26:08,440 --> 00:26:10,560 Speaker 3: all our money and go along this, you know, we 465 00:26:10,560 --> 00:26:13,040 Speaker 3: we obviously try to find ways to create convexity in 466 00:26:13,080 --> 00:26:13,640 Speaker 3: our investment. 467 00:26:14,160 --> 00:26:16,719 Speaker 2: Given your background as an originator, given be touching on 468 00:26:16,720 --> 00:26:19,320 Speaker 2: this subject, have to ask you a lot's been made 469 00:26:19,600 --> 00:26:23,920 Speaker 2: about pe firms kind of eating debt, syndicate of bank 470 00:26:23,960 --> 00:26:26,520 Speaker 2: investment banks lunch in times of the origination market, even 471 00:26:26,520 --> 00:26:30,119 Speaker 2: spreading into investment grade in a big way. What's your 472 00:26:30,200 --> 00:26:32,280 Speaker 2: kind of take on that and how you see the 473 00:26:32,320 --> 00:26:37,240 Speaker 2: outlook for that kind of disintermediated origination going forward. 474 00:26:37,560 --> 00:26:39,600 Speaker 3: Yeah, I think the ones that you may be talking 475 00:26:39,600 --> 00:26:42,000 Speaker 3: about may have started as p firms, but you know, 476 00:26:42,040 --> 00:26:46,040 Speaker 3: they're not that anymore. Look, I think that the trends 477 00:26:46,119 --> 00:26:49,640 Speaker 3: in the left in market and just markets generally has 478 00:26:49,680 --> 00:26:53,520 Speaker 3: been that both you know, private equity firms have gotten 479 00:26:53,560 --> 00:26:56,920 Speaker 3: a lot more sophisticated. You know, they all have capital markets, 480 00:26:57,760 --> 00:27:01,080 Speaker 3: you know, teams now, you know, which are in many 481 00:27:01,080 --> 00:27:06,360 Speaker 3: cases directly syndicating debt, you know, and in some cases 482 00:27:06,680 --> 00:27:10,000 Speaker 3: you know, obviously they've grown to become you know, completely 483 00:27:10,000 --> 00:27:14,199 Speaker 3: outgrown their their private equity businesses. So for us, you know, 484 00:27:14,359 --> 00:27:17,440 Speaker 3: it's again about being a solutions provider to all sides 485 00:27:17,480 --> 00:27:21,920 Speaker 3: of that. I mean, I have to think that banks 486 00:27:22,200 --> 00:27:24,320 Speaker 3: and you know, I've I've left banking now, but I 487 00:27:24,320 --> 00:27:27,639 Speaker 3: think banks have an opportunity to gain market share, you know, 488 00:27:27,720 --> 00:27:30,320 Speaker 3: for for the next couple of years, because you know, 489 00:27:30,920 --> 00:27:34,120 Speaker 3: aside from the A boom, another thing that we strongly 490 00:27:34,160 --> 00:27:38,880 Speaker 3: believe in is that public and private markets are converging, 491 00:27:39,640 --> 00:27:43,240 Speaker 3: and public markets are probably going to be gaining market 492 00:27:43,280 --> 00:27:46,120 Speaker 3: share at the expense of private markets. I mean, if 493 00:27:46,119 --> 00:27:51,480 Speaker 3: you just think about what's happened, private markets benefited from 494 00:27:51,800 --> 00:27:55,560 Speaker 3: the sort of the financial repression ultra low interest rates 495 00:27:55,600 --> 00:27:58,639 Speaker 3: caused a lot of money to flow into that you 496 00:27:58,640 --> 00:28:02,520 Speaker 3: know where that's p direct lending or other forms of financing. 497 00:28:03,400 --> 00:28:05,480 Speaker 3: And you know, if you just take the US I 498 00:28:05,560 --> 00:28:08,119 Speaker 3: p O market, you can see that actually there's a 499 00:28:08,240 --> 00:28:14,080 Speaker 3: reequitization happening. You know, buybacks are slowing down and people 500 00:28:14,080 --> 00:28:16,520 Speaker 3: are issuing more more equity. I mean, look at you 501 00:28:16,560 --> 00:28:19,280 Speaker 3: know that that Google deal SpaceX. You know, we'll have 502 00:28:19,320 --> 00:28:21,919 Speaker 3: more jumbo I p O s you know, coming and 503 00:28:21,960 --> 00:28:26,560 Speaker 3: so you know, I think the types of firms that 504 00:28:26,600 --> 00:28:29,640 Speaker 3: are involved in the public markets, you know, are going 505 00:28:29,680 --> 00:28:32,720 Speaker 3: to benefit. And for banks, you know, regulation in the 506 00:28:32,800 --> 00:28:35,600 Speaker 3: US certainly seems like it's it's getting a bit looser, 507 00:28:36,200 --> 00:28:39,520 Speaker 3: and you know, with less money flowing into direct lending, 508 00:28:40,040 --> 00:28:42,520 Speaker 3: I think that creates an opportunity for for banks and 509 00:28:42,680 --> 00:28:47,480 Speaker 3: public markets because banks generally aren't in the you know, 510 00:28:47,520 --> 00:28:50,680 Speaker 3: sort of warehousing business, right They're they're moving, not in storage, 511 00:28:50,680 --> 00:28:53,640 Speaker 3: as they say, and you know, they need somewhere to 512 00:28:53,720 --> 00:28:57,040 Speaker 3: go with it. And you know, we try to position 513 00:28:57,120 --> 00:29:00,240 Speaker 3: ourselves as you know, the partner of choice you know 514 00:29:00,280 --> 00:29:02,720 Speaker 3: four banks in terms of helping them distribute their risk. 515 00:29:03,760 --> 00:29:06,320 Speaker 1: Does that not mean the returns suffer because you know, 516 00:29:06,400 --> 00:29:09,720 Speaker 1: public investors generally went to private markets to find better 517 00:29:09,760 --> 00:29:13,360 Speaker 1: returns for the illiquidity. If they're converging, then you're gonna 518 00:29:13,680 --> 00:29:15,560 Speaker 1: have more more trouble finding alph. 519 00:29:17,040 --> 00:29:23,000 Speaker 3: No, because I think again, the ability to trade things 520 00:29:23,120 --> 00:29:26,480 Speaker 3: and express views in the public market is really what 521 00:29:26,640 --> 00:29:30,440 Speaker 3: generates the alpha. You know, certainly for for us, we 522 00:29:30,600 --> 00:29:35,320 Speaker 3: try to run our business as a series of smaller 523 00:29:35,360 --> 00:29:40,520 Speaker 3: wins and and that's what generates the revenue rather than 524 00:29:40,560 --> 00:29:44,000 Speaker 3: taking huge directional bed and again that's that's a fundamental 525 00:29:44,000 --> 00:29:49,560 Speaker 3: difference between you know, a sort of deployment focused model 526 00:29:49,720 --> 00:29:52,719 Speaker 3: as opposed to a trading focused model. You know, you're 527 00:29:52,800 --> 00:29:56,080 Speaker 3: always thinking about liquidity, and you know, can you monetize 528 00:29:56,440 --> 00:29:58,640 Speaker 3: you know, a movement up or down in our price? 529 00:30:00,120 --> 00:30:03,320 Speaker 1: Can we talk about Europe, Henrick, I mean you are 530 00:30:03,360 --> 00:30:05,760 Speaker 1: based there, That's that's where you know the roots are 531 00:30:06,160 --> 00:30:09,440 Speaker 1: camp I know you have an international kind of expansion plan. 532 00:30:09,520 --> 00:30:13,600 Speaker 1: But but sitting there and having the advantage in terms 533 00:30:13,600 --> 00:30:17,160 Speaker 1: of your knowledge of the local economies and jurisdictions and 534 00:30:17,200 --> 00:30:21,480 Speaker 1: all that stuff. What what is the Europe against US 535 00:30:21,520 --> 00:30:23,200 Speaker 1: credit market proposition? Right now? 536 00:30:24,640 --> 00:30:26,520 Speaker 3: I should start by saying we love Europe. You know, 537 00:30:26,640 --> 00:30:29,640 Speaker 3: this is obviously where you know, Sona was founded. It's 538 00:30:29,680 --> 00:30:34,120 Speaker 3: where I've spent my whole career. But we love it 539 00:30:34,200 --> 00:30:40,000 Speaker 3: because it's complex and difficult and and a bit harder 540 00:30:40,120 --> 00:30:44,480 Speaker 3: to get your head around than the US market is now. 541 00:30:44,880 --> 00:30:47,120 Speaker 3: I don't want to take anything away from you know 542 00:30:47,160 --> 00:30:51,160 Speaker 3: the world's largest credit market where all the exciting innovation 543 00:30:51,360 --> 00:30:56,680 Speaker 3: is happening. And you know, I think for investing in equity, 544 00:30:57,600 --> 00:31:01,680 Speaker 3: the US frankly, I mean the growth, both the productivity, growth, 545 00:31:01,760 --> 00:31:06,000 Speaker 3: the innovation, you know, that clearly has Europe beat. But 546 00:31:06,240 --> 00:31:10,400 Speaker 3: for a credit provider, you know, example we like to 547 00:31:10,520 --> 00:31:14,080 Speaker 3: use is that in the US you've got you know, 548 00:31:14,160 --> 00:31:19,120 Speaker 3: three cell phone companies, uh, and they're all super sophisticated, 549 00:31:19,280 --> 00:31:22,880 Speaker 3: large borrowers, you know, with capital markets program. You know, 550 00:31:23,040 --> 00:31:27,400 Speaker 3: in Europe each country has three, uh you know, cell 551 00:31:27,440 --> 00:31:32,160 Speaker 3: phone providers, if not four, and so you know, and 552 00:31:32,200 --> 00:31:36,080 Speaker 3: that's twenty seven countries times three, So you know, it 553 00:31:36,160 --> 00:31:39,840 Speaker 3: just gives you so many more opportunities, you know, to 554 00:31:39,840 --> 00:31:43,280 Speaker 3: to unlock value. So I think that that sort of 555 00:31:44,560 --> 00:31:47,440 Speaker 3: you know, our our sort of roots in being you know, 556 00:31:47,520 --> 00:31:51,320 Speaker 3: the best at investing in Europe with a large unconstrained mandates. 557 00:31:51,320 --> 00:31:55,760 Speaker 3: That that is always going to be foundation of the firm. 558 00:31:55,800 --> 00:31:59,840 Speaker 3: Having said that, you know, it's not so much international 559 00:32:00,000 --> 00:32:02,960 Speaker 3: expansion plans. I mean we we are expanded, you know 560 00:32:03,000 --> 00:32:06,960 Speaker 3: in the US. And you know, while the market there 561 00:32:07,040 --> 00:32:09,680 Speaker 3: is more competitive, I should say. You know, one of 562 00:32:09,680 --> 00:32:12,160 Speaker 3: the things about Europe is it is less competitive because 563 00:32:12,160 --> 00:32:14,640 Speaker 3: it's more difficult, you know, while the US market is 564 00:32:14,680 --> 00:32:18,960 Speaker 3: more competitive. Again some of the same edge that helps 565 00:32:19,040 --> 00:32:23,240 Speaker 3: us in Europe. Good partner you know, uh, you know, 566 00:32:23,480 --> 00:32:27,960 Speaker 3: fundamental analysis, commit in size, commit early, give good feedback. 567 00:32:28,560 --> 00:32:31,000 Speaker 3: You know, those things work just as well in the 568 00:32:31,120 --> 00:32:34,520 Speaker 3: US capital markets as they do in Europe. So you know, 569 00:32:34,520 --> 00:32:38,360 Speaker 3: we certainly see on our side that are sort of 570 00:32:38,400 --> 00:32:41,000 Speaker 3: mind share and certainly told by some of our partners, 571 00:32:41,440 --> 00:32:44,480 Speaker 3: mind share you know in the US is is also 572 00:32:44,920 --> 00:32:47,520 Speaker 3: drastically increased, you know the last couple of years. 573 00:32:47,680 --> 00:32:51,760 Speaker 1: Oh they're more quiet detonstructurings going on in the background. Well, 574 00:32:52,520 --> 00:32:56,880 Speaker 1: I think there definitely are on the private credit side. 575 00:32:57,160 --> 00:32:59,440 Speaker 1: And you know that's something which is a little bit 576 00:32:59,520 --> 00:33:04,560 Speaker 1: mysteriou because you know, I mentioned before the elevated levels 577 00:33:04,600 --> 00:33:08,680 Speaker 1: of defaults in the b SL market, and if you 578 00:33:08,680 --> 00:33:10,400 Speaker 1: think about private credit as. 579 00:33:10,240 --> 00:33:15,760 Speaker 3: A as an asset class, it has a lot of commonality, 580 00:33:16,240 --> 00:33:20,760 Speaker 3: you know, in terms of who the who the sponsors are, 581 00:33:21,040 --> 00:33:23,920 Speaker 3: you know, who the investors are, and the types of companies. 582 00:33:25,160 --> 00:33:29,960 Speaker 3: You'd argue that they're probably a bit smaller on average 583 00:33:30,160 --> 00:33:32,400 Speaker 3: than you know, companies that end up in the BSL 584 00:33:32,440 --> 00:33:35,880 Speaker 3: market depent on obviously when when the deal was issued, 585 00:33:36,600 --> 00:33:39,440 Speaker 3: and so you know, it seems to us, but there's 586 00:33:39,480 --> 00:33:42,520 Speaker 3: obviously not a huge amount of data on this. You know, 587 00:33:42,560 --> 00:33:45,640 Speaker 3: by nature of it being private that there must be 588 00:33:45,880 --> 00:33:51,000 Speaker 3: a lot of quote unquote quiet restructurings, you know, pick tranches, 589 00:33:51,960 --> 00:33:54,040 Speaker 3: you know, things like that, you know that are going 590 00:33:54,080 --> 00:33:57,320 Speaker 3: on in that market, and you know that's probably going 591 00:33:57,360 --> 00:34:00,840 Speaker 3: to be reflected in the returns people are seeing in 592 00:34:00,880 --> 00:34:03,760 Speaker 3: their private credit portfolios. You know, over the next couple 593 00:34:03,760 --> 00:34:06,080 Speaker 3: of years. That's you know, I don't think it's a 594 00:34:06,280 --> 00:34:10,520 Speaker 3: sort of summit systemic suddenly we have a Lehman moment 595 00:34:10,840 --> 00:34:13,560 Speaker 3: and the world ends. But you know, kind of just 596 00:34:13,600 --> 00:34:17,120 Speaker 3: a slow grind of you know, especially as there's less 597 00:34:17,160 --> 00:34:21,120 Speaker 3: liquidity coming in, you know, refinancing becomes a bit more difficult, 598 00:34:21,360 --> 00:34:24,279 Speaker 3: performance suffers. You know that there's going to be you know, 599 00:34:24,320 --> 00:34:25,720 Speaker 3: more more trouble in that space. 600 00:34:26,719 --> 00:34:29,640 Speaker 1: Are you seeing opportunities right now to take on some 601 00:34:29,760 --> 00:34:31,759 Speaker 1: of that stress in terms of you know, the BDCs 602 00:34:31,800 --> 00:34:33,439 Speaker 1: over here in a lot of trouble and they seem 603 00:34:33,440 --> 00:34:36,120 Speaker 1: to be eating to fund redemptions. Are they are they 604 00:34:36,160 --> 00:34:38,799 Speaker 1: selling their loans at a discount that you're seeing, or 605 00:34:38,840 --> 00:34:41,480 Speaker 1: even the clos that are trying to you know, reduce 606 00:34:41,520 --> 00:34:44,440 Speaker 1: their software exposure or their triples the exposure. 607 00:34:46,080 --> 00:34:54,440 Speaker 3: It's a very interesting topic because the short answer is no. 608 00:34:55,920 --> 00:34:59,200 Speaker 3: As in there is not a lot of sales of 609 00:34:59,440 --> 00:35:03,799 Speaker 3: private credit assets or even portfolios, and you know, the 610 00:35:03,840 --> 00:35:08,000 Speaker 3: portfolios that are trading are trading actually at pretty high prices. 611 00:35:08,320 --> 00:35:12,080 Speaker 3: That is a little bit hard to square sort of 612 00:35:12,120 --> 00:35:17,400 Speaker 3: redemptions coming in quarter by quarter, you know, into you know, 613 00:35:17,440 --> 00:35:21,200 Speaker 3: some of these structures that that allow it. Again, I 614 00:35:21,200 --> 00:35:25,120 Speaker 3: think it it just takes a bit of time, you know, 615 00:35:25,239 --> 00:35:29,080 Speaker 3: for for the you know, first, first of all, you know, 616 00:35:29,160 --> 00:35:33,600 Speaker 3: inflows obviously have to be smaller than outflows in order 617 00:35:33,640 --> 00:35:37,480 Speaker 3: to create stress in the system. You know, there's all 618 00:35:37,480 --> 00:35:40,480 Speaker 3: sorts of bank financings and other ways of raising liquidity, 619 00:35:40,920 --> 00:35:43,400 Speaker 3: you know, and and in fact, some private credit deals 620 00:35:43,440 --> 00:35:46,160 Speaker 3: do trade, you know, so you can actually you know, 621 00:35:46,320 --> 00:35:49,279 Speaker 3: raise you know, some cash by selling you know, the 622 00:35:49,360 --> 00:35:52,799 Speaker 3: really good stuff over time. Though, you know, it's an 623 00:35:52,840 --> 00:35:56,239 Speaker 3: area that we're watching carefully because it does feel like 624 00:35:56,320 --> 00:35:58,839 Speaker 3: there's going to be opportunities there, but we just don't 625 00:35:58,840 --> 00:35:59,480 Speaker 3: see it right now. 626 00:36:00,719 --> 00:36:03,239 Speaker 1: You like those what's the opportunity? 627 00:36:04,680 --> 00:36:08,600 Speaker 3: Yes, we really like SRTs and obviously we have a 628 00:36:08,600 --> 00:36:13,040 Speaker 3: standalone SRT fund as well, although we also invest in 629 00:36:13,040 --> 00:36:15,960 Speaker 3: in other ways. And you know, the reason why we 630 00:36:16,080 --> 00:36:20,440 Speaker 3: like SRTs is because it's part of a broader trend 631 00:36:20,600 --> 00:36:23,480 Speaker 3: that is, you know, working very much in our favor, 632 00:36:24,680 --> 00:36:29,440 Speaker 3: and that is that European banks in particular have realized 633 00:36:29,520 --> 00:36:32,640 Speaker 3: that the way that they can get the best returns 634 00:36:32,640 --> 00:36:37,319 Speaker 3: for their shareholders is to develop more into an origination 635 00:36:37,920 --> 00:36:41,720 Speaker 3: to originate, to distribute model. And you know, that's always 636 00:36:41,760 --> 00:36:44,879 Speaker 3: been the case in leverage finance broadly, and it's one 637 00:36:44,880 --> 00:36:48,640 Speaker 3: of the things that created an opportunity for direct lenders 638 00:36:48,640 --> 00:36:51,200 Speaker 3: to step into you know, mid market lending that in 639 00:36:51,280 --> 00:36:54,280 Speaker 3: Europe you know previously would have been done by banks, 640 00:36:54,320 --> 00:36:57,560 Speaker 3: but you know regulation was was you know, making it 641 00:36:57,600 --> 00:37:03,680 Speaker 3: more more punitive. Yeah, that same trend is happening across 642 00:37:03,760 --> 00:37:08,560 Speaker 3: more asset classes. So it's a big part of why 643 00:37:08,600 --> 00:37:12,560 Speaker 3: we think the ABF opportunity in Europe is so exciting, 644 00:37:13,360 --> 00:37:17,080 Speaker 3: and you know, so what we try to do either 645 00:37:17,120 --> 00:37:21,439 Speaker 3: through SRT technology, which is obviously a very structured way 646 00:37:21,480 --> 00:37:24,759 Speaker 3: of providing capital relief to to a bank you know 647 00:37:24,800 --> 00:37:27,719 Speaker 3: too you know more niche things, you know, things like 648 00:37:27,920 --> 00:37:33,200 Speaker 3: bespoke CDs or you know, outright sales or syndications you know, 649 00:37:33,280 --> 00:37:36,560 Speaker 3: to really you know, utilize the you know, the very 650 00:37:36,600 --> 00:37:40,480 Speaker 3: strong relationships that banks have, you know, with their customers 651 00:37:40,480 --> 00:37:44,000 Speaker 3: and that we could never replicate and don't want to replicate, 652 00:37:44,920 --> 00:37:48,200 Speaker 3: but basically be a partner alongside banks, you know, to 653 00:37:48,280 --> 00:37:51,440 Speaker 3: help them move risk. And again that flexible mandate that 654 00:37:51,480 --> 00:37:54,719 Speaker 3: we have which allows us to look at you know, 655 00:37:55,440 --> 00:37:58,440 Speaker 3: everything and anything you know on a bank balance sheet 656 00:37:58,480 --> 00:38:01,200 Speaker 3: and try to price that approp brittlely. You know, that 657 00:38:01,360 --> 00:38:04,239 Speaker 3: is a big advantage for us. And you know, the 658 00:38:04,320 --> 00:38:07,440 Speaker 3: SRT fund and and kind of SRTs is is really 659 00:38:07,880 --> 00:38:10,560 Speaker 3: just a subset of of that SAT. 660 00:38:10,680 --> 00:38:13,640 Speaker 2: He's obviously growing fantastically well over the last few years. 661 00:38:13,719 --> 00:38:16,440 Speaker 2: What's what's the next phase? How do you how do 662 00:38:16,480 --> 00:38:19,080 Speaker 2: you drive that even further? Do you need to hire 663 00:38:20,480 --> 00:38:23,839 Speaker 2: he looks like you've been doing some some geographic geographic 664 00:38:25,360 --> 00:38:28,719 Speaker 2: kind of diverse ication do you need to acquire? What's 665 00:38:28,880 --> 00:38:29,879 Speaker 2: what does the future hold? 666 00:38:32,239 --> 00:38:36,000 Speaker 3: Like I think I'm sonas a great business. It's ten 667 00:38:36,120 --> 00:38:39,840 Speaker 3: years old in September, and I can't take any credit 668 00:38:39,920 --> 00:38:44,239 Speaker 3: for what's happened until now, but you know, it's it's 669 00:38:44,280 --> 00:38:48,600 Speaker 3: a great place to work. The culture is amazing, and 670 00:38:48,920 --> 00:38:51,960 Speaker 3: you know, our plans are manifold. I mean, the the 671 00:38:52,280 --> 00:38:56,160 Speaker 3: most important thing is to deliver good returns to our investors. 672 00:38:56,280 --> 00:38:59,320 Speaker 3: And yeah, that's what drives you know, everything, and that's 673 00:38:59,600 --> 00:39:05,399 Speaker 3: you know, I you know, we keep investing in technology, 674 00:39:06,000 --> 00:39:08,880 Speaker 3: in you know, smart people. You know, we have hired 675 00:39:09,320 --> 00:39:11,800 Speaker 3: you know, quite quite a few people recently, you know, 676 00:39:11,840 --> 00:39:15,040 Speaker 3: both on the investment and the non investment side. But 677 00:39:15,080 --> 00:39:17,480 Speaker 3: I think we're about the right size. And one of 678 00:39:17,480 --> 00:39:20,200 Speaker 3: the things that's that's most fascinating now, you know, just 679 00:39:20,239 --> 00:39:23,120 Speaker 3: circling back to the beginning, is you know, what is 680 00:39:23,600 --> 00:39:26,719 Speaker 3: the AI or what are the AI tools that are 681 00:39:26,760 --> 00:39:29,960 Speaker 3: available to us going to mean? You know, for you know, 682 00:39:30,040 --> 00:39:33,080 Speaker 3: the the investment world and and you know the amount 683 00:39:33,080 --> 00:39:35,640 Speaker 3: of analysis that you can do, you know, with a 684 00:39:35,640 --> 00:39:38,840 Speaker 3: given set of people, you know, both on your internal 685 00:39:38,880 --> 00:39:41,920 Speaker 3: process side but also on the investment side. So you know, 686 00:39:41,960 --> 00:39:45,880 Speaker 3: we're very excited about that. You know, I think in 687 00:39:45,960 --> 00:39:49,160 Speaker 3: terms of you know, if there was apart from some 688 00:39:49,200 --> 00:39:52,040 Speaker 3: of these mega trends that I've talked about AI CAPEX, 689 00:39:53,440 --> 00:39:56,279 Speaker 3: you know, sort of we haven't really talked about, you know, 690 00:39:56,280 --> 00:39:59,000 Speaker 3: what's going on the consumer side with glps and people 691 00:39:59,040 --> 00:40:03,120 Speaker 3: eating and drinking like you know, d industrialization, you all 692 00:40:03,320 --> 00:40:06,760 Speaker 3: really important trends. I think the thing that invites excites 693 00:40:06,880 --> 00:40:11,239 Speaker 3: us the most probably is you know, the sort of 694 00:40:11,280 --> 00:40:15,440 Speaker 3: the scope for growth in A B F markets, you 695 00:40:15,480 --> 00:40:18,319 Speaker 3: know here in Europe because you know, just like we've 696 00:40:18,360 --> 00:40:21,759 Speaker 3: been talking about private and public convergence in the same 697 00:40:21,760 --> 00:40:28,440 Speaker 3: way corporate and and structured finance. You know, that is 698 00:40:28,600 --> 00:40:33,080 Speaker 3: also converging, and you know it's most easily seen on 699 00:40:33,280 --> 00:40:37,520 Speaker 3: the on the AI side, but European utilities, you know, 700 00:40:37,680 --> 00:40:42,840 Speaker 3: same thing. They need to massively invest in transmission generation, 701 00:40:43,680 --> 00:40:46,279 Speaker 3: you know, upgrading things. You know, there's going to be 702 00:40:46,320 --> 00:40:51,880 Speaker 3: opportunities to you know, get investment grade returns, sorry, get 703 00:40:52,000 --> 00:40:55,840 Speaker 3: above investment grade returns, you know, by being smart on structure, 704 00:40:57,040 --> 00:41:00,680 Speaker 3: you know, from you know, with basically the backing of 705 00:41:00,880 --> 00:41:05,640 Speaker 3: investment grade counterparties. So this isn't just a hyperscalar data 706 00:41:05,719 --> 00:41:09,760 Speaker 3: center kind of trade. Yeah, there's lots of those things. 707 00:41:09,960 --> 00:41:13,600 Speaker 3: And again that that's probably where we can see you know, 708 00:41:13,680 --> 00:41:16,920 Speaker 3: most growth and also where SONA is incredibly well placed 709 00:41:17,360 --> 00:41:21,040 Speaker 3: by virtue of our market share in Europe and our 710 00:41:21,080 --> 00:41:24,680 Speaker 3: relationships you know, with with potential borrowers and issues. 711 00:41:25,480 --> 00:41:28,480 Speaker 1: Well, it happens to that market though, I mean, does 712 00:41:28,520 --> 00:41:33,399 Speaker 1: it have to experience regulatory changes or how does it grow? 713 00:41:33,440 --> 00:41:36,080 Speaker 1: Because we have had people looking at ABF in Europe, 714 00:41:36,120 --> 00:41:39,760 Speaker 1: but what what's the thing that makes makes it much bigger? 715 00:41:40,280 --> 00:41:43,440 Speaker 3: I mean a lot of people talk about that, you know, 716 00:41:43,520 --> 00:41:47,040 Speaker 3: there needs to be changes in securitization rules and so on, 717 00:41:47,719 --> 00:41:52,200 Speaker 3: and yeah, that that is certainly all true. But you know, 718 00:41:52,480 --> 00:41:55,759 Speaker 3: in a way, this isn't so much about regulation. It's 719 00:41:55,800 --> 00:42:00,440 Speaker 3: about just need you know, and availability of capex. You 720 00:42:00,480 --> 00:42:03,280 Speaker 3: know that, you know, the the investments have to be made. 721 00:42:03,880 --> 00:42:06,840 Speaker 3: And you know the great thing for US is, you know, 722 00:42:06,880 --> 00:42:10,480 Speaker 3: the banks can't absorb you know, this amount of financing. 723 00:42:11,400 --> 00:42:14,040 Speaker 3: You know, banks obviously have a higher market share in 724 00:42:14,200 --> 00:42:17,200 Speaker 3: Europe than in in the US, and the banks don't 725 00:42:17,200 --> 00:42:19,080 Speaker 3: don't want to absorb it, you know, they want to 726 00:42:19,560 --> 00:42:23,120 Speaker 3: underwrite some, keep some and sell some and you know, 727 00:42:23,160 --> 00:42:25,600 Speaker 3: again that's where you know, we we play a really 728 00:42:25,600 --> 00:42:26,239 Speaker 3: important role. 729 00:42:27,239 --> 00:42:28,799 Speaker 1: When we talk to the A b F people in 730 00:42:28,880 --> 00:42:31,120 Speaker 1: the US, they talk a lot about the scale of it, 731 00:42:31,200 --> 00:42:34,359 Speaker 1: you know, into the tens of trillions of dollars of opportunity, 732 00:42:35,160 --> 00:42:36,960 Speaker 1: but they also talk about the need to be very 733 00:42:37,040 --> 00:42:40,279 Speaker 1: large to to take advantage to that. So, you know, 734 00:42:40,520 --> 00:42:44,200 Speaker 1: again to sort of repeat, maybe rephrase aidents aidents question, 735 00:42:44,280 --> 00:42:48,239 Speaker 1: I mean, why why not expand from from where you are? 736 00:42:48,280 --> 00:42:48,400 Speaker 3: Now? 737 00:42:48,440 --> 00:42:52,440 Speaker 1: Why why not acquire? Why not massively increase your your footprint? 738 00:42:52,560 --> 00:42:55,000 Speaker 3: I mean, look, of course we we'd like to do that, 739 00:42:56,000 --> 00:42:59,320 Speaker 3: but you know, we're we're not gonna do anything that 740 00:42:59,320 --> 00:43:02,040 Speaker 3: that sort of just distracts from our core mission, which is, 741 00:43:02,440 --> 00:43:06,680 Speaker 3: you know, deploy capital effectively and get good returns. You know. 742 00:43:06,800 --> 00:43:10,360 Speaker 3: So you know, we're we're a relatively small business in 743 00:43:10,480 --> 00:43:13,360 Speaker 3: number of people. You know, we don't have endless capacity. 744 00:43:13,760 --> 00:43:16,200 Speaker 3: But you know, some of the things I've said probably 745 00:43:16,200 --> 00:43:20,200 Speaker 3: gives you an indication of places that were interested in 746 00:43:20,200 --> 00:43:23,040 Speaker 3: in expanding and offering new products, you know, and that's 747 00:43:23,040 --> 00:43:24,480 Speaker 3: obviously an ongoing dialogue. 748 00:43:24,960 --> 00:43:27,880 Speaker 1: You know, with r LPs, you have the US, you 749 00:43:27,920 --> 00:43:30,920 Speaker 1: also have Japan. Any other countries you to get involved in. 750 00:43:33,640 --> 00:43:35,400 Speaker 3: I mean, there's there's a lot of exciting things. But 751 00:43:35,520 --> 00:43:39,359 Speaker 3: you know, between the US, Europe and are two. So 752 00:43:39,400 --> 00:43:42,799 Speaker 3: we have an investing office in Hong Kong, I should say, uh, 753 00:43:42,960 --> 00:43:47,480 Speaker 3: and then you know Abu Dhabi and and Japan. That's 754 00:43:47,560 --> 00:43:50,319 Speaker 3: it's quite a lot to manage. So it's only from 755 00:43:50,320 --> 00:43:52,719 Speaker 3: my side, I'm happy if we stay as we are 756 00:43:52,760 --> 00:43:53,640 Speaker 3: for for a little while. 757 00:43:54,560 --> 00:43:58,040 Speaker 1: Great stuff. Henrik Johnson, CEO of Sona Asset Management, thank 758 00:43:58,080 --> 00:43:59,880 Speaker 1: you so much for joining us on the Credit Edge. 759 00:44:00,880 --> 00:44:02,799 Speaker 3: Thank you for having me, and of. 760 00:44:02,760 --> 00:44:05,319 Speaker 1: Course very grateful to Aden Chesslin with Bloomberg Intelligence. Thank 761 00:44:05,360 --> 00:44:05,799 Speaker 1: you very much. 762 00:44:05,880 --> 00:44:07,000 Speaker 2: Always a pleasure, James. 763 00:44:07,040 --> 00:44:09,239 Speaker 1: For more credit market analysis and insight, read all of 764 00:44:09,280 --> 00:44:12,120 Speaker 1: Aiden's great work on the Bloomberg terminal. Bloomberg Intelligence is 765 00:44:12,120 --> 00:44:14,480 Speaker 1: part of our research department, with five hundred analysts and 766 00:44:14,560 --> 00:44:18,080 Speaker 1: strategists working across all markets. Coverage includes over two thousand 767 00:44:18,120 --> 00:44:21,000 Speaker 1: equities and credits, PUS outlooks on more than ninety industries 768 00:44:21,200 --> 00:44:25,120 Speaker 1: and one hundred market industries, currencies and commodities. Please do 769 00:44:25,200 --> 00:44:27,640 Speaker 1: subscribe to the Credit Edge wherever you get your podcasts. 770 00:44:27,680 --> 00:44:30,560 Speaker 1: We're on Apple, Spotify and all other good podcast providers, 771 00:44:30,560 --> 00:44:34,280 Speaker 1: including the Bloomberg Terminal at bpod Go. Give us a review, 772 00:44:34,680 --> 00:44:37,359 Speaker 1: tell your friends, or email me directly at jcromb eight 773 00:44:37,560 --> 00:44:40,719 Speaker 1: at Bloomberg dot net. I'm James Crombie. It's been a 774 00:44:40,719 --> 00:44:42,960 Speaker 1: pleasure having you join us again next week on the 775 00:44:42,960 --> 00:44:43,839 Speaker 1: Credit Ledge