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Speaker 1: Hello, and welcome to the Credit Edge, a weekly markets podcast.

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

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Speaker 1: This week, we're very pleased to welcome Tim Lyin, CEO

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Speaker 1: of Vanari's Capital.

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Speaker 2: How are you, Tim, I'm well, James, Good morning.

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Speaker 1: Thanks so much for joining us today. We're very excited

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Speaker 1: to dig into your credit market views. Also delighted to

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Speaker 1: welcome back David Havens with Bloomberg Intelligence. Great to see you,

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Speaker 1: and David.

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Speaker 3: James, good to see you too and hear from you.

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Speaker 3: And just for the audience, I am a senior credit

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Speaker 3: and analyst at Bloomberg Intelligence. Our research department has more

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Speaker 3: than five hundred analysts and strategists worldwide, covering more than

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Speaker 3: two thousand equities and credits, and I'm the lucky guy

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Speaker 3: that gets to follow private credit.

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Speaker 1: So yeah, we're here to talk about private credit, the

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Speaker 1: hottest trade on Wall Street. There's been quite staggering growth

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Speaker 1: over the last few years. Private credit is now a

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Speaker 1: one point seven trillion dollar market. We've seen the biggest deal,

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Speaker 1: the biggest fundraising, the tightest pricing among some of the superlatives.

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Speaker 1: Every day it seems like we get more exciting headlines

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Speaker 1: on the topic. At the same time, though, there's growing

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Speaker 1: concern about private credit risk as interest rates stay high

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Speaker 1: for longer and the economy slows, putting pressure on companies

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Speaker 1: with a lot of debt. We're seeing more private borrowers

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Speaker 1: having to pay in kind, in other words, using debt

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Speaker 1: instead of cash to cover interest payments. We're also seeing

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Speaker 1: some more amendments and extensions to existing deals. That's often

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Speaker 1: a sign of stress, and the fact that there's not

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Speaker 1: that much transparency is making people nervous. I think the

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Speaker 1: consensus is that private credit defaults will rise. Meanwhile, tighter

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Speaker 1: spreads imply lower returns. Fundraising is getting tougher. There's not

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Speaker 1: enough deals for all the funds that have already been raised.

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Speaker 1: Investors are having to reach a bit for yield here,

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Speaker 1: and there are signs of credit or on credit for violence.

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Speaker 1: Fears that new, less experienced money so called pre credit tourists,

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Speaker 1: could be running into some trouble. Red flags are being

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Speaker 1: raised by the likes of Jamie Diamond, the IMF, and PIMCO.

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Speaker 1: Some say the golden age is over, not very long

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Speaker 1: after it started. What's your take, Tim, Is this at

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Speaker 1: the beginning of the end, or are we worrying about

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Speaker 1: this thing too much?

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Speaker 2: Worrying about it too much would be how I would start.

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Speaker 2: And I would also say, James, I really don't like

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Speaker 2: the term golden age of private credit. I think it's

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Speaker 2: totally overused. We've been in the industry for twenty eight

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Speaker 2: years and have operated through numerous credit cycles, said Anne Terry's.

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Speaker 2: And we have a very proven track record over that

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Speaker 2: twenty eight year period. We've generated very solid returns over

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Speaker 2: that time period. And yes, there has been a tremendous

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Speaker 2: amount of money raised in the sector. And I can

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Speaker 2: kind of give you a couple reasons. One, the move

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Speaker 2: from the broadly syndicated market that's been happening for quite

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Speaker 2: some time, and a lot of that is driven by

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Speaker 2: the sponsors looking at the private credit market is just

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Speaker 2: it's easier to do business with three or four private

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Speaker 2: credit players than it is to run a broad syndication.

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Speaker 2: We offer both products, but your private credit you're not

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Speaker 2: needing to get the deal rated. There's no flex it's

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Speaker 2: a quicker process. It's an easier process for many of

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Speaker 2: the private equity sponsors. They also like dealing with just

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Speaker 2: a smaller group, especially as they have add on acquisitions

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Speaker 2: to the extent that the company has problems down the road.

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Speaker 2: They're dealing with just three or four players versus a

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Speaker 2: massive bank group. So there's been that transition with the

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Speaker 2: private equity sponsors gravitating to private credit. On the investor side,

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Speaker 2: there's just this what appears to be over the past

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Speaker 2: kind of five years, I hate to call insatiable, but

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Speaker 2: a significant increase in investor appetite around the world for yield,

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Speaker 2: and obviously private credit is very attractive. Sponsor direct lending

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Speaker 2: returns are quite attractive. Losses are low. It's a floating

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Speaker 2: rate instrument. But because base rates are elevated right now,

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Speaker 2: and you can earn low double digit returns unlevered mid

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Speaker 2: teens levered investing in sponsor direct lending. That's why people

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Speaker 2: use the term golden age. But in the grand scheme

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Speaker 2: of things, if base rates drop two hundred basis points,

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Speaker 2: I think we're still in really good shape and it's

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Speaker 2: still a very solid return versus many other alternatives.

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Speaker 3: So, tim there's a lot going on in private credit. Obviously,

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Speaker 3: you know, the growth is one thing. The markets are moving,

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Speaker 3: base read might start to move down. It's obviously difficult

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Speaker 3: to predict interest rates, spreads of compressed colo issuance has

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Speaker 3: been vibrant. Banks are muscling back into the market in

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Speaker 3: the BSL market and we're seeing a resurgence there. You

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Speaker 3: think there's a secular trend that really favors direct lending

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Speaker 3: over the long, long haul. Why is that? Why are

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Speaker 3: the banks sort of sitting on the sidelines to some degree.

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Speaker 3: They're getting back in now. But that secular trend, what's

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Speaker 3: driving it? Is it investors? Is it funding?

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Speaker 2: Yeah? No, David, I go back to I do think

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Speaker 2: so many of these private equity sponsors. I mean some

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Speaker 2: started it ten years ago, but there was really there's

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Speaker 2: been a big trend in the last five to seven

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Speaker 2: years where they have hired capital markets professionals within the

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Speaker 2: private equity sponsor, they have one too, you know, as

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Speaker 2: many as maybe five six people depending on the size

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Speaker 2: of the firm that are So you have your partners

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Speaker 2: and your teams that are working on diligence, and you

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Speaker 2: have those that are working solely on financing. So it's

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Speaker 2: kind of like their core competency. It's centralized within the firm,

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Speaker 2: and it's many of those groups that again have kind

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Speaker 2: of gravitated in many cases to private credit, and it

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Speaker 2: goes back to that idea it's easier, it's faster, there's

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Speaker 2: no flex And importantly, the BSL market was kind of

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Speaker 2: shut down for about eighteen months, so even those sponsors

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Speaker 2: that typically went the syndicated route in many cases like

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Speaker 2: they had deals, they moved to the private credit market.

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Speaker 2: I would argue, and others have said the same thing,

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Speaker 2: there's all this bad press out there about private credit.

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Speaker 2: If not for private credit during that eighteen month period,

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Speaker 2: there was no liquidity to and sponsor acquisitions, So it

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Speaker 2: was really the direct lenders that we're providing that liquidity

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Speaker 2: to the market. So I do think that many of

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Speaker 2: those sponsors will continue to use it, but it does

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Speaker 2: need to be competitive, and that's really why all of

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Speaker 2: a sudden the BSL market came back triplea spread. You know,

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Speaker 2: CLO issuance is very strong, spread COLO spreads are down,

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Speaker 2: so there's a lot of money invested in BSL deals

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Speaker 2: right now, and the private credit market needs to be

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Speaker 2: competitive with the BSL market, not all the way kind

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Speaker 2: of down at the pricing, but on a blended basis,

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Speaker 2: there can be a premium, but it can't be a

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Speaker 2: huge premium, and therefore that's why you've seen spreads compressed

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Speaker 2: for that reason. You've also seen spreads compressed simply due

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Speaker 2: to the very limited M and A volume. So it's

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Speaker 2: kind of there's the limited supply of deals, and when

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Speaker 2: these really attractive deals hit the market, there's a feeding frenzy,

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Speaker 2: if that's the right term. There just a lot of

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Speaker 2: private equity money chasing those really high quality deals and

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Speaker 2: similarly a lot of private credit dollars chasing them as well.

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Speaker 3: Right, and what is this sweet spot for antarrees? You know?

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Speaker 3: The is it in the jumbo deals? Is it more

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Speaker 3: sort of core middle market? Is it a blend of

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Speaker 3: both that? You know? How have you seen that change?

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Speaker 2: Yeah? So what I would say is we go where

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Speaker 2: we see value, We play where we see value. Historically,

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Speaker 2: if you look over a twenty eight year period, we

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Speaker 2: think that that value tends to be in the core

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Speaker 2: middle market. What would what would be defined as the

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Speaker 2: core middle market? It's probably twenty million to one hundred millions.

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Speaker 2: I might say one hundred and twenty five million and

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Speaker 2: ebit DA But when gaps when when pricing gapped out

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Speaker 2: in the upper middle market, and when that's happened in

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Speaker 2: the past, we will move into the upper middle market

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Speaker 2: and we will play there, but our core is the

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Speaker 2: middle market. We do separately though, just to be we

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Speaker 2: do have both a syndicated business where we will lead

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Speaker 2: and be a leader ranger of a syndicated financing. We

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Speaker 2: also have a liquid credit business where we buy into

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Speaker 2: deals led by other lenders.

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Speaker 1: I want to ask Tim about the solid returns you

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Speaker 1: mentioned earlier. You know, double digit is very attractive, but

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Speaker 1: you can still get pretty high returns in you know,

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Speaker 1: public high yield, which is liquid which you can trade

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Speaker 1: in our So if you're not locked up, you don't

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Speaker 1: lock your money up for a long time. There's not

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Speaker 1: this lack of transparency, there's not all of this kind

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Speaker 1: of risk around it. Do you really need to stretch

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Speaker 1: into private credit? What's the benefit you know, just for

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Speaker 1: that extra It seems like, you know, a few hundred

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Speaker 1: basis points.

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Speaker 2: To a lot of these investors around the world, James,

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Speaker 2: A one hundred, one hundred and fifty basis points of

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Speaker 2: additional spread is really significant, and many of them don't

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Speaker 2: really need the liquidity. So there I kind of think

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Speaker 2: of it as you're making more of a permanent allocation.

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Speaker 2: You may you may change the target allocation percentage a

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Speaker 2: little bit periodically, but it's not like it's something you're

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Speaker 2: trading in and out of on a regular basis. To

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Speaker 2: many of these pensions, endowments, etc. Insurance companies around the world,

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Speaker 2: they are looking at it and saying, I want to

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Speaker 2: have a whatever the target allocation is. Uh. In private credit,

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Speaker 2: I don't need liquidity, and for that I'm getting an

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Speaker 2: ill liquidity premium of one hundred and twenty five basis points.

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Speaker 2: And that's over a long period of time. I find

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Speaker 2: that trade attractive.

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Speaker 1: How are they marking it?

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Speaker 2: Though?

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Speaker 1: There's no sort of way of you know, seeing how

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Speaker 1: it's valued. You know, I just assuming that it's constantly

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Speaker 1: at par.

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Speaker 2: No. So we certainly mark our portfolio for all of

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Speaker 2: our investors. Uh. And it's not just kind of a

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Speaker 2: you know, here's what ANTIS thinks. We use outside valuation

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Speaker 2: firms as well, so you know that that is something

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Speaker 2: that we pride ourselves on our valuation methodology. Uh. And

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Speaker 2: And it's you know, it's not just kind of it,

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Speaker 2: Like I said, it's not just Anti's We we use

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Speaker 2: outside firms to confirm our marks.

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Speaker 1: So let's go back to the growth tim does it

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Speaker 1: continue at this pace? I mean, obviously there's this attraction

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Speaker 1: of the yield, there's the pickup, but does the money

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Speaker 1: just keep flowing in? Does this market just keep expending?

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Speaker 1: And also it seems that the definition of private credit

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Speaker 1: is changing so that you know, into asset based financial

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Speaker 1: that stuff, So it could be substantially larger and what

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Speaker 1: makes you think it will grow?

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Speaker 2: Yeah, So the way I think about it is kind

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Speaker 2: of let's start at the real macro and then kind

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Speaker 2: of move in. So McKinsey did a study for us

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Speaker 2: on the overall private equity market and the number their

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Speaker 2: estimate is the number of middle market companies in North

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Speaker 2: America that are owned by private equity, it's about twelve percent.

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Speaker 2: They believe that that number is going to continue to

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Speaker 2: increase over time. So you're starting with Okay, the private

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Speaker 2: equity market is going to continue to grow, Their penetration

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Speaker 2: is going to increase. We've seen this continued move from

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Speaker 2: private equity firms. We still think the syndicated market will grow,

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Speaker 2: but that private credit will be more and more sponsors

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Speaker 2: will choose private credit over the syndicated offering. So that

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Speaker 2: kind of leads to there's many different estimates out there,

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Speaker 2: but almost all of them kind of are estimating a

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Speaker 2: five year Kiger north of ten percent. I mean, the

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Speaker 2: lowest I've seen is eleven percent. The highest I've seen

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Speaker 2: is more like seventeen or eighteen percent. Everyone defines it

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Speaker 2: a little bit differently to your point, So private credit

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Speaker 2: can encompass so many different things, so real estate infrastructure.

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Speaker 2: Now sometimes you're talking about the asset backs in there

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Speaker 2: as well. If you just say, okay, what do you

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Speaker 2: think on the direct lending side, which is kind of

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Speaker 2: the largest part of it, again, that direct lending. The

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Speaker 2: view is it's double digit rates for the next five years.

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Speaker 2: That's what the different firms are estimating. And I absolutely

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Speaker 2: believe that that will happen unless there's some you know,

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Speaker 2: major geopolitical event that shuts down our economy for a

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Speaker 2: couple of years.

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Speaker 3: Right right, So to maybe like I understand the the

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Speaker 3: the uh supply element of things, you know, because you've

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Speaker 3: got all this money in private credit and private equity

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Speaker 3: sort of funneled into there, maybe you can get a

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Speaker 3: little bit more granular on the demand element of private credit.

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Speaker 3: And by demand I mean investor demand and where Antari's

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Speaker 3: is involved there. You know, we're seeing so many of

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Speaker 3: your competitors and others in the field, you know, tapping

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Speaker 3: the public markets via BDCs, tapping private wealth via privately

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Speaker 3: traded BDCs. We're seeing a lot of insurance companies allocating

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Speaker 3: more funds to private credit. Where are we going here

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Speaker 3: and where Zintari is going here?

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Speaker 2: Sure? So yes again, So if I think about how

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Speaker 2: the market has grown over time as it relates to

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Speaker 2: investor demand, started with whether you're talking private credit, direct

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Speaker 2: endings at part of private credit, it started with kind

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Speaker 2: of major institutional investors around the world, sovereigns, major pensions,

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Speaker 2: large endowments, and some insurance companies. This idea that you're

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Speaker 2: beginning to see this democratization of the asset class is

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Speaker 2: another thing that I think is going to is another

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Speaker 2: big growth avenue for the industry over the next five years.

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Speaker 2: So it's kind of okay, we went from institutions to

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Speaker 2: ultra high net worth family offices that had access to

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Speaker 2: the asset class, then to high net worth and some

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Speaker 2: of these things could be structured. As you know, there's

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Speaker 2: many different ways. There's public BDC's private, non traded public,

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Speaker 2: non traded BDC's private, perpetual BDCs. Many of our competitors

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Speaker 2: and intere we have multiple BDCs, and so I do

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Speaker 2: think the if you look at the overall allocation by

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Speaker 2: whether you look at kind of you know, all consumers

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Speaker 2: or you're just looking at kind of high net worth, Uh,

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Speaker 2: their allocation to alternatives is very low compared to the institutions.

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Speaker 2: And so the view is you're going to see many

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Speaker 2: of them, many of their advisors, I should say, increase

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Speaker 2: the allocations for those high net worth ultra high net

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Speaker 2: worth investors for sure. So that's going to lead some

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Speaker 2: of the That is certainly going to cause some of

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Speaker 2: the growth. But even your kind of there's a view

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Speaker 2: that private credit direct lending could be an allocation that

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Speaker 2: investors will be able to choose, employees will be able

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Speaker 2: to choose as part of their flour one K in

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Speaker 2: a few years. Again, that could cause pretty tremendous growth. Right.

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Speaker 3: And I'm a I'm a debt NERD I cover credit here.

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Speaker 3: So you guys have pretty good investment grade ratings, you know,

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Speaker 3: mid low triple B. How does that factor into you know,

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Speaker 3: your own funding strategy? How important is it to your

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Speaker 3: funding strategy and how does it factor into the way

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Speaker 3: that you market yourself to institutional investors and retail investors.

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Speaker 2: Yeah, I'd say it helps significantly our rating as it

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Speaker 2: relates to our funding. For sure, that rating helps us

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Speaker 2: in terms of the cost of our funding. It's quite beneficial.

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Speaker 2: Less so in terms of kind of raising money with

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Speaker 2: institutional and retail investors when they're looking at Antari's and

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Speaker 2: kind of what we're selling to them is firms been

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Speaker 2: around for twenty eight years. We cover four hundred middle

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Speaker 2: market upper middle market sponsors throughout North America. Many cases

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Speaker 2: we've had those relationships with them since the firms were founded.

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Speaker 2: The ideas we see all their business, all of their deals,

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Speaker 2: and we're highly selective, so we only close four percent

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Speaker 2: of the deals that we see. And the way we

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Speaker 2: have a very senior workout team because when you're in

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Speaker 2: credit right and you would know this, David, the alpha

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Speaker 2: that we create there's not equity upside, So the alpha

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Speaker 2: is minimizing the losses and our workout team has done

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Speaker 2: a tremendous job. So it's kind of we need to

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Speaker 2: select the right credits, but when they go sideways, we

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Speaker 2: need to really be able to minimize the losses. So

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Speaker 2: the investors really like that, along with the fact that

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Speaker 2: we have this portfolio of almost five hundred companies that

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Speaker 2: generates seventy percent of our business. The last thing that

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Speaker 2: I would say, in many cases they think is the

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Speaker 2: most important. They really like a lot, and that is

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Speaker 2: we take principal risk on every deal we do, so

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Speaker 2: unlike many of our competitors where they're committing x percent.

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Speaker 2: Is the GP to the fund we're owned, as you

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Speaker 2: know by CPP Canadian Pension Plan is our majority owner.

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Speaker 2: We have a very significant balance sheet, so think of

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Speaker 2: round numbers. We manage seventy billion. Thirty billion of that

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Speaker 2: is our balance sheet and forty billion is kind of

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Speaker 2: capital from other investors that invest alongside us in deals.

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Speaker 2: The fact that we're taking major principal risk on every

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Speaker 2: deal we do on our balance sheet, we're looking to

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Speaker 2: protect not just their capital but our capital, and that

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Speaker 2: is a really big cell. They like that a lot.

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Speaker 1: Can you talk a bit more tim about the defaults

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Speaker 1: that you're seeing. I mean, there is obviously some stress

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Speaker 1: that I mentioned earlier, but the difficulty is that a

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Speaker 1: lot of this stuff just gets worked out. I assume,

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Speaker 1: I mean, although it must imply some kind of loss

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Speaker 1: on the investor side, and then ultimately, you know, in

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Speaker 1: the worst case scenario, you can just end up owning

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Speaker 1: the company to take the keys. But is it true

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Speaker 1: to say that there are defaults in private credit now

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Speaker 1: than they were let's say last year? And is it expected?

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Speaker 1: You know, some of the racing agencies expect more defaults.

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Speaker 1: Are you Are you worried about more defaults in this market?

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Speaker 2: Not really. If there's an increase in defaults, I think

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Speaker 2: it'll be modest. I think I was asked on a

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Speaker 2: panel yesterday, what's the biggest surprise and the biggest surprise

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Speaker 2: to me over the last let's say eighteen months is

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Speaker 2: the resiliency of the portfolios across direct lending. It's been

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Speaker 2: it's been quite surprising. I mean, so we have been

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Speaker 2: quite surprised with how well our portfolio has performed, in

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Speaker 2: particular things like industrials. So the industrial portfolio has been

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Speaker 2: probably the single biggest surprise in terms of how well

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Speaker 2: those companies have performed. Things like so if I look

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Speaker 2: at our largest sectors mission critical software, that's big. Those

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Speaker 2: companies just aren't growing as quickly as the sponsors had

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Speaker 2: wanted them to grow, but we're not seeing a pickup

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Speaker 2: in defaults. There the areas where I would say, so

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Speaker 2: back to our default maybe they're a little higher than

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Speaker 2: they were last year. The analysts are expecting they're going

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Speaker 2: to increase a little bit going forward. Not so sure

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Speaker 2: about that, especially if we begin to see some interest

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Speaker 2: rate cuts in the future here, which I think we

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Speaker 2: are expecting. Where is the stress If I think about

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Speaker 2: our portfolio, We've certainly seen some stress in commercial aerospace.

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Speaker 2: We've seen some stress in some of the consumer related deals,

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Speaker 2: consumer selling into retail probably in particular. And we've seen

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Speaker 2: some in healthcare and particularly position practice management businesses. So

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Speaker 2: I mean, there are some that have worked well, but

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Speaker 2: there are some that have not, and and some maybe

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Speaker 2: on the behavioral health as well. So those are the

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Speaker 2: areas where I'd say we've seen some stress. We don't

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Speaker 2: underwrite cyclical companies, We don't underwrite commodity types of businesses.

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Speaker 2: So I would say, you know, if you did, if

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Speaker 2: you do, if you're in our space and you do

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Speaker 2: underwrite those types of deals, you've probably been hit. You know,

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Speaker 2: some of those companies have been pretty impacted inflation definitely

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Speaker 2: impacted a number of companies in our portfolio. But we

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Speaker 2: again going back to this resiliency, we were very surprised

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Speaker 2: at how quickly and how much many of them raise

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Speaker 2: their prices. So to be like, oh, yeah, we put

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Speaker 2: through a seven percent price increase. Three months later we

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Speaker 2: put through an eight percent price increase. It was like, wow, like,

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Speaker 2: how much will you really be able to increase before

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Speaker 2: your customers are saying no? But again, if these are

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Speaker 2: if you're like, if you have mission critical products and

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Speaker 2: your market leader, many of those businesses have the capability

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Speaker 2: to kind of put through those those increases.

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Speaker 3: Yeah. I think that a lot of our readers and

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Speaker 3: followers would agree with you on how surprisingly resilient private

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Speaker 3: credit has been given the five hundred basis point increase

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Speaker 3: in base rates. I just wanted to to move move

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Speaker 3: into a slightly slightly different area. And that's where you know,

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Speaker 3: not where you've been and where you are, but where

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Speaker 3: you're going. You know, over the past past couple of years,

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Speaker 3: you've you know, closed your first senior loan fund, launched

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Speaker 3: liquid credit business. What new initiatives might be at the

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Speaker 3: top of the agenda. Cerntari's right, now.

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Speaker 2: Yeah, David, we are constantly I mean, we have a

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Speaker 2: five year strategic plan. We are constantly updating that plan.

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Speaker 2: We just met as an executive committee last week to

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Speaker 2: go through it in detail. Really what happens is it's

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Speaker 2: not that often that we're just suddenly adding something new.

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Speaker 2: We might move the sequencing of when we execute on

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Speaker 2: different strategies. For example, one that I would say from

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Speaker 2: a sequencing standpoint, we really thought that NAV lending would

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Speaker 2: be a big, big opportunity here in the States. It

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Speaker 2: is big. In Europe, it is not growing. We're not

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Speaker 2: seeing a whole lot of activity there. We are seeing

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Speaker 2: activity in the secondary side, and we are definitely playing

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Speaker 2: in that space, and we think that there's a pretty

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Speaker 2: big opportunity there. I think you know that, hey, that

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Speaker 2: secondaries and private equity have been around for a long time,

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Speaker 2: and just given this tremendous growth in private credit, we

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Speaker 2: think there's going to be a big opportunity in secondaries

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Speaker 2: where LPs they're there. We're actually seeing a big opportunity

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Speaker 2: right now, and so we think that that's going to

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Speaker 2: continue where investors will suddenly be like, wow, I'm over allocated,

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Speaker 2: I need to reduce my exposure and they move to

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Speaker 2: the secondary market. Uh. We are constantly evaluating Europe. And

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Speaker 2: you know when when we make a move to Europe.

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Speaker 2: I think that will happen at some point. I can't

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Speaker 2: say when. Uh, It'll probably be you know, I don't

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Speaker 2: want to wait for the perfect acquisition uh to come along.

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Speaker 2: So maybe it's we go organically uh and and then

404
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Speaker 2: try you know, but constantly be evaluating potential acquisitions you

405
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Speaker 2: know there, but we're always looking at it at other

406
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Speaker 2: opportunities as well. I mean the list is pretty the

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Speaker 2: list goes on and on. It's kind of it as

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Speaker 2: you think about it, could we down the road go

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Speaker 2: into real estate or infrastructure, asset back, all of those

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Speaker 2: things are on the table.

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Speaker 1: As you mentioned an acquisition. A blue el just announced

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Speaker 1: it's buying Italia. Do you feel that you therefore do

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Speaker 1: not need to acquire a company to expand I mean

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Speaker 1: you can do it organically in the US as well

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Speaker 1: as Europe.

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Speaker 2: So the way I think about it, James, is if

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Speaker 2: it is a business that's quite tangential to what we do,

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Speaker 2: we may need to acquire some talent. I don't know

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Speaker 2: that we would acquire a firm, so like when we

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Speaker 2: moved into liquid credit. It's a great example. We hired

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Speaker 2: guy Seth Katzenstein from ICG, along with a couple other

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Speaker 2: folks Andrew Stern, So we pulled people in from the

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Speaker 2: outside and supplemented with antious people. At the end of

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Speaker 2: the day, it's kind of it's underwriting credit, but it's

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Speaker 2: liquid credit. We didn't need to acquire a firm there.

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Speaker 2: If we moved into secondaries, we can pretty much do that.

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Speaker 2: We don't need to acquire a secondary firm if we moved,

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Speaker 2: like I mentioned Europe, at some point in order to scale,

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Speaker 2: you probably need to do an acquisition organically. Trying to

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Speaker 2: execute over a ten year period in Europe, I think

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Speaker 2: would be challenging. Real estate in front any of those

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Speaker 2: other areas. If we entered, I would think there's two

433
00:28:36,720 --> 00:28:40,200
Speaker 2: I wouldn't think we'd do it organically. We would we

434
00:28:40,240 --> 00:28:43,840
Speaker 2: would either acquire a firm or do a big lift out.

435
00:28:44,080 --> 00:28:47,160
Speaker 2: So it's like we may not need to acquire the firm,

436
00:28:47,520 --> 00:28:51,080
Speaker 2: we may just need to acquire the talent out of

437
00:28:51,120 --> 00:28:53,760
Speaker 2: a firm or out of a couple of firms.

438
00:28:54,240 --> 00:28:56,239
Speaker 1: It's interesting, so you mentioned Europe because you have had

439
00:28:56,240 --> 00:28:59,840
Speaker 1: a few European private credit firms on this show, it

440
00:29:00,040 --> 00:29:03,120
Speaker 1: seems like a very different market. How do you like,

441
00:29:03,160 --> 00:29:05,560
Speaker 1: what does Zanterraz bring to that market that you know

442
00:29:05,560 --> 00:29:07,960
Speaker 1: they're that they're not already doing. What's your edge over there?

443
00:29:08,840 --> 00:29:13,640
Speaker 2: So many of our sponsors that we work with here

444
00:29:14,280 --> 00:29:19,680
Speaker 2: in North America have significant offices in Europe and do

445
00:29:19,760 --> 00:29:23,040
Speaker 2: a fair amount of business in Europe, and we we

446
00:29:23,800 --> 00:29:25,479
Speaker 2: you know, we have been a part of some of

447
00:29:25,480 --> 00:29:29,040
Speaker 2: those deals, but in many cases, I mean it's like,

448
00:29:29,680 --> 00:29:32,040
Speaker 2: you know, half of our Tier ones and Tier two's

449
00:29:32,120 --> 00:29:34,360
Speaker 2: are over the half of our Tier ones are over there,

450
00:29:34,880 --> 00:29:38,960
Speaker 2: and so it would make sense. I mean, it's kind

451
00:29:39,000 --> 00:29:43,000
Speaker 2: of leveraging that relationship that we already have where we've

452
00:29:43,080 --> 00:29:48,320
Speaker 2: financed fifty one hundred deals for them over time. Not

453
00:29:48,440 --> 00:29:52,400
Speaker 2: all of those deals have worked, and you know, it's

454
00:29:52,520 --> 00:29:55,280
Speaker 2: further solidified our relationship over time. So I think they

455
00:29:55,280 --> 00:29:57,200
Speaker 2: would look at it. I mean, we were just over

456
00:29:57,240 --> 00:30:00,200
Speaker 2: there over there, meeting with many of them, and they're like, hey,

457
00:30:00,320 --> 00:30:02,120
Speaker 2: my gosh, we would love it if you guys would

458
00:30:02,120 --> 00:30:04,960
Speaker 2: come over here. It would be great. So we have

459
00:30:05,160 --> 00:30:08,360
Speaker 2: that ability to leverage those relationships. And I still think

460
00:30:08,480 --> 00:30:14,400
Speaker 2: even with European centric firms as well, like we could

461
00:30:14,520 --> 00:30:17,160
Speaker 2: we could grow with them as well. Yes, it's a

462
00:30:17,200 --> 00:30:20,560
Speaker 2: different market. I think it's more it's probably the difference.

463
00:30:20,600 --> 00:30:24,040
Speaker 2: It's a more challenging market because it's so country specific,

464
00:30:24,560 --> 00:30:26,560
Speaker 2: unlike doing deals in North America.

465
00:30:26,800 --> 00:30:29,160
Speaker 1: Which countries are you mostly looking at over there?

466
00:30:30,320 --> 00:30:36,440
Speaker 2: I think that someone once mentioned to me that you

467
00:30:36,520 --> 00:30:39,120
Speaker 2: want to start with the beer drinking companies and then

468
00:30:39,200 --> 00:30:45,040
Speaker 2: move to the wine drinking countries, and so that might

469
00:30:45,080 --> 00:30:48,240
Speaker 2: be a way without giving it which countries maybe think

470
00:30:48,280 --> 00:30:48,880
Speaker 2: of it that way.

471
00:30:49,000 --> 00:30:51,280
Speaker 1: Yes, I know which ones they are, so thank you.

472
00:30:52,280 --> 00:30:54,960
Speaker 3: Just a quick follow on on the M and A

473
00:30:55,920 --> 00:30:59,160
Speaker 3: and your parents CPP. What role would they play in

474
00:30:59,200 --> 00:31:01,960
Speaker 3: that if you're talking about moving into Europe? Would it

475
00:31:02,040 --> 00:31:06,760
Speaker 3: just be you, guys, Ontario's on your own? Or would

476
00:31:06,840 --> 00:31:08,719
Speaker 3: could CPP help facilitate that?

477
00:31:09,400 --> 00:31:14,520
Speaker 2: Sure, David, they could absolutely help facilitate that. So they

478
00:31:14,640 --> 00:31:19,480
Speaker 2: already have a small team of folks on the direct

479
00:31:19,600 --> 00:31:23,560
Speaker 2: lending side. They have a pretty big presence in Europe

480
00:31:23,920 --> 00:31:29,120
Speaker 2: in a lot of other asset classes, and so we

481
00:31:29,160 --> 00:31:35,880
Speaker 2: could certainly leverage their relationships so that that's part of

482
00:31:35,920 --> 00:31:39,880
Speaker 2: the answer if in fact we were going to acquire

483
00:31:40,560 --> 00:31:43,240
Speaker 2: given that they're the majority owner of the business. First

484
00:31:43,280 --> 00:31:47,280
Speaker 2: of all, they would need to support the acquisition. Obviously

485
00:31:47,880 --> 00:31:50,560
Speaker 2: management has a lot of skin in the game. So generally,

486
00:31:50,600 --> 00:31:53,320
Speaker 2: if it's something that we think makes sense, I think

487
00:31:53,360 --> 00:31:57,920
Speaker 2: that our board would generally agree, but we would need

488
00:31:57,960 --> 00:32:01,840
Speaker 2: their support, especially because they may need to depending on

489
00:32:02,360 --> 00:32:08,240
Speaker 2: the acquisition. It may require additional dollars invested in the firm.

490
00:32:08,840 --> 00:32:13,880
Speaker 2: And you know they've done that over time, supported supported

491
00:32:13,880 --> 00:32:16,000
Speaker 2: our growth, and I think they would continue to do that.

492
00:32:16,080 --> 00:32:21,720
Speaker 2: It's a very very strategic asset for CPP and we're

493
00:32:21,760 --> 00:32:25,680
Speaker 2: coming up on nine years with them their original hold.

494
00:32:25,760 --> 00:32:30,640
Speaker 2: They called it a generational hold, so I don't think

495
00:32:30,680 --> 00:32:32,800
Speaker 2: they anticipate selling the firm anytime soon.

496
00:32:33,800 --> 00:32:38,480
Speaker 1: What about geographical diversification on the fundraising side, Tim, You know,

497
00:32:38,720 --> 00:32:40,480
Speaker 1: we hear a lot of people going to the Middle East.

498
00:32:40,480 --> 00:32:43,840
Speaker 1: Obviously some people are going to Canada. You already covered there.

499
00:32:44,840 --> 00:32:47,040
Speaker 1: I've heard of some fundraising going on and that's an

500
00:32:47,040 --> 00:32:49,640
Speaker 1: America high networth. Is there a particular hotspot for you

501
00:32:49,680 --> 00:32:52,200
Speaker 1: in terms of fundraising at the moment.

502
00:32:52,720 --> 00:32:57,040
Speaker 2: I wouldn't say there's a hot spot. Again, it's a

503
00:32:57,120 --> 00:33:00,440
Speaker 2: huge it's a big focus that I have have with

504
00:33:00,560 --> 00:33:05,560
Speaker 2: the fundraising team to really diversify it as much as possible.

505
00:33:06,360 --> 00:33:14,960
Speaker 2: We have been very very successful fundraising in Asia in particular. Yes,

506
00:33:15,040 --> 00:33:20,560
Speaker 2: we've been very successful in Canada, pretty successful in North America.

507
00:33:21,080 --> 00:33:24,080
Speaker 2: I think we have pretty significant opportunities in the Middle

508
00:33:24,160 --> 00:33:28,320
Speaker 2: East and Europe on a go for a basis. So

509
00:33:28,560 --> 00:33:31,000
Speaker 2: I think it's kind of like, Okay, we've been really

510
00:33:31,040 --> 00:33:35,760
Speaker 2: successful in Europe, let's been very successful in Asia, particularly

511
00:33:35,880 --> 00:33:39,160
Speaker 2: in certain parts of Asia. Let's continue to grow there,

512
00:33:39,640 --> 00:33:43,400
Speaker 2: but let's really begin to grow kind of in Europe,

513
00:33:43,400 --> 00:33:46,840
Speaker 2: in the Middle East, and to your point, Latin America.

514
00:33:46,880 --> 00:33:49,760
Speaker 2: I would agree that that is another growth area.

515
00:33:50,160 --> 00:33:52,720
Speaker 3: Tim in the just sort of doubling back to something

516
00:33:52,840 --> 00:33:57,040
Speaker 3: that James mentioned at the top of the podcast. The

517
00:33:57,120 --> 00:34:01,160
Speaker 3: IMF did write about dedicated an entire chapter to private

518
00:34:01,200 --> 00:34:07,040
Speaker 3: credit in its April Global Financial Stability Report, and one

519
00:34:07,040 --> 00:34:12,400
Speaker 3: of the things that they suggested is more intrusive regulation.

520
00:34:12,560 --> 00:34:15,080
Speaker 3: I think that was their term exactly. I'm curious whether

521
00:34:15,160 --> 00:34:18,040
Speaker 3: you think a financial market that's basically levered at two

522
00:34:18,080 --> 00:34:22,879
Speaker 3: to one private credit lenders really needs a high level

523
00:34:22,880 --> 00:34:26,759
Speaker 3: of intrusive regulation. Doesn't seem like it's systemic the way

524
00:34:26,800 --> 00:34:29,120
Speaker 3: that a bank is. It's more heavily leveraged and involved

525
00:34:29,160 --> 00:34:32,680
Speaker 3: in sort of the guts of the financing market.

526
00:34:33,000 --> 00:34:36,239
Speaker 2: Sounds like you're leading the witness there, David a little bit.

527
00:34:38,040 --> 00:34:40,840
Speaker 2: My answer would be, I don't think. For first of all,

528
00:34:41,040 --> 00:34:45,680
Speaker 2: we're all regulated by the SEC already, so let's start there.

529
00:34:46,719 --> 00:34:50,040
Speaker 2: A couple other really important facts that I think many

530
00:34:50,640 --> 00:34:54,920
Speaker 2: both politicians and other regulators tend to forget thinking about

531
00:34:55,000 --> 00:35:00,160
Speaker 2: private credit versus banks. We don't take money from consumers

532
00:35:00,200 --> 00:35:03,640
Speaker 2: that are fed, and that money is not federally insured,

533
00:35:04,080 --> 00:35:08,600
Speaker 2: So let's let's let's start there. We take money generally.

534
00:35:09,120 --> 00:35:12,400
Speaker 2: Now some have kind of moved into kind of broad retail,

535
00:35:13,520 --> 00:35:18,120
Speaker 2: most of us are taking money from very sophisticated institutional

536
00:35:18,160 --> 00:35:24,200
Speaker 2: investors around the world, high net worth again, sophisticated investors.

537
00:35:25,680 --> 00:35:32,200
Speaker 2: And the way we get paid is most in the industry.

538
00:35:32,239 --> 00:35:34,880
Speaker 2: So once again I'm not going to say everyone, but

539
00:35:36,200 --> 00:35:43,480
Speaker 2: current compensation is not really high. It's dependent on our performance,

540
00:35:43,880 --> 00:35:47,480
Speaker 2: so we need to we need to generate a hurdle

541
00:35:48,200 --> 00:35:51,120
Speaker 2: for all. So the idea is, you know, we're returning capital,

542
00:35:51,400 --> 00:35:54,200
Speaker 2: all of the capital of our investors, and then we

543
00:35:54,280 --> 00:35:57,279
Speaker 2: need to exceed the hurdle before we get paid. Any

544
00:35:57,360 --> 00:36:00,880
Speaker 2: carry and so in carry is really kind of where

545
00:36:01,520 --> 00:36:06,960
Speaker 2: the major upside is for the firm, for our employees.

546
00:36:07,960 --> 00:36:13,520
Speaker 2: So there is an incredible focus on going back to

547
00:36:14,440 --> 00:36:20,520
Speaker 2: selecting the right deals, minimizing losses, et cetera. Because if

548
00:36:20,560 --> 00:36:24,080
Speaker 2: you think about it, it's not only like okay, carry

549
00:36:24,520 --> 00:36:27,360
Speaker 2: and how we're going to get paid, but it's like,

550
00:36:27,560 --> 00:36:30,080
Speaker 2: if we're not generating good returns, we're not going to

551
00:36:30,160 --> 00:36:35,000
Speaker 2: raise that next fund. So it's it's a very different

552
00:36:35,080 --> 00:36:39,279
Speaker 2: focus than the banks. And you brought up another point

553
00:36:39,320 --> 00:36:44,400
Speaker 2: which is very valid. Our leverage is so much lower

554
00:36:45,000 --> 00:36:47,200
Speaker 2: than the banks, so it's kind of once again not

555
00:36:47,360 --> 00:36:51,759
Speaker 2: taking insured deposits, we have much lower leverage. And at

556
00:36:51,760 --> 00:36:54,080
Speaker 2: the end of the day, the way the firms are structured,

557
00:36:54,640 --> 00:36:58,520
Speaker 2: we only get paid good dollar, you know, serious dollars

558
00:36:58,640 --> 00:37:01,839
Speaker 2: if we perform. And I think that's I think that

559
00:37:01,880 --> 00:37:07,120
Speaker 2: those are significant differences, which leads me to like, then

560
00:37:07,160 --> 00:37:08,440
Speaker 2: why regulate.

561
00:37:08,800 --> 00:37:11,319
Speaker 1: Just to play devil's advocate though, Tim, on the one hand,

562
00:37:11,320 --> 00:37:13,520
Speaker 1: do you think everyone in the muket is as responsible

563
00:37:13,560 --> 00:37:15,440
Speaker 1: as you are? And on the other hand, if there

564
00:37:15,480 --> 00:37:19,720
Speaker 1: is this democratizations as you put it, and this stuff's

565
00:37:19,800 --> 00:37:22,040
Speaker 1: ending up in my four one K and you know,

566
00:37:22,080 --> 00:37:25,080
Speaker 1: private credit funds are effectively acting like the new banks.

567
00:37:24,840 --> 00:37:27,960
Speaker 1: As you know, one private credit firm has puts it

568
00:37:28,360 --> 00:37:30,240
Speaker 1: shouldn't they be regulated like banks?

569
00:37:32,400 --> 00:37:38,080
Speaker 2: Again, I don't think so. Going back to I get

570
00:37:38,080 --> 00:37:40,680
Speaker 2: it at your point a little bit as it relates

571
00:37:40,680 --> 00:37:45,120
Speaker 2: to all of a sudden, you're marketing to Middle America

572
00:37:45,600 --> 00:37:47,840
Speaker 2: and if it ends up going into four oh one cave,

573
00:37:49,880 --> 00:37:53,240
Speaker 2: you know that part, you're kind of like, huh, but again,

574
00:37:54,920 --> 00:38:00,759
Speaker 2: leverages significantly, or we're not taking insured deposit and get

575
00:38:00,800 --> 00:38:06,359
Speaker 2: the firms. If we're not successful, we don't continue. It's

576
00:38:07,880 --> 00:38:12,480
Speaker 2: so that is, we need to be underwriting the right credits,

577
00:38:12,960 --> 00:38:17,680
Speaker 2: minimizing losses. So are there some players where I do

578
00:38:17,760 --> 00:38:23,640
Speaker 2: think there might be some newer players that are doing

579
00:38:23,760 --> 00:38:27,160
Speaker 2: things where risk return is not in line. They're trying

580
00:38:27,200 --> 00:38:32,239
Speaker 2: to differentiate themselves. They haven't worked through cycles. Maybe if

581
00:38:32,239 --> 00:38:36,960
Speaker 2: someone's particularly focused, they picked a sector, you know, and

582
00:38:37,080 --> 00:38:40,720
Speaker 2: really went long in a particular sector that's not performing well,

583
00:38:41,160 --> 00:38:43,640
Speaker 2: you know, they could have some pretty major problems in

584
00:38:43,680 --> 00:38:49,160
Speaker 2: their portfolio. So I guess there's a little bit of

585
00:38:49,680 --> 00:38:52,520
Speaker 2: risks there. But again, like, okay, so what would it

586
00:38:52,600 --> 00:38:57,080
Speaker 2: mean if okay being regulated? So I don't know. I

587
00:38:57,120 --> 00:39:00,839
Speaker 2: don't know how that would help in that situation. I

588
00:39:00,880 --> 00:39:04,640
Speaker 2: think if you are a major investor around the world,

589
00:39:04,719 --> 00:39:07,239
Speaker 2: you know someone around the world, and you're allocating to

590
00:39:07,400 --> 00:39:09,920
Speaker 2: one of the top five or six players in private

591
00:39:09,960 --> 00:39:13,600
Speaker 2: credit that is structured the way I just mentioned. I

592
00:39:14,160 --> 00:39:18,279
Speaker 2: think I respect our competitors, our major competitors. I think,

593
00:39:18,360 --> 00:39:22,759
Speaker 2: similar to us, they underwrite really good credits. Do I

594
00:39:22,840 --> 00:39:26,360
Speaker 2: sometimes think that pricing might be out of line? Sure?

595
00:39:26,760 --> 00:39:29,280
Speaker 2: Do I sometimes think, hu, that seems like they stretched

596
00:39:29,320 --> 00:39:33,160
Speaker 2: on that credit a bit. Yeah, But in an overall basis,

597
00:39:33,280 --> 00:39:36,680
Speaker 2: a holistic basis, I highly respect them, and I think

598
00:39:36,719 --> 00:39:42,080
Speaker 2: they're generally underwriting the really good credits and I don't

599
00:39:42,120 --> 00:39:45,080
Speaker 2: think they're going to have massive losses, which is why

600
00:39:45,120 --> 00:39:46,359
Speaker 2: they've been around a long time.

601
00:39:48,080 --> 00:39:51,600
Speaker 1: So other than your record, your skin in the game,

602
00:39:52,520 --> 00:39:56,680
Speaker 1: you know, your deep bench of knowledge and talent, what's

603
00:39:56,800 --> 00:39:59,560
Speaker 1: your edge on Terry's in terms of you know, what

604
00:39:59,640 --> 00:40:03,719
Speaker 1: sets you a part either sector or geography, or is

605
00:40:03,719 --> 00:40:06,840
Speaker 1: there anything else that you're doing that is particularly unique

606
00:40:06,920 --> 00:40:08,040
Speaker 1: or contrarian right now?

607
00:40:08,800 --> 00:40:13,200
Speaker 2: So anything we're doing that's contrarian. We're thinking about some

608
00:40:13,320 --> 00:40:17,840
Speaker 2: new businesses that I can't really highlight what those would

609
00:40:17,840 --> 00:40:22,799
Speaker 2: be that some might say are a bit contrarian. I

610
00:40:22,840 --> 00:40:26,880
Speaker 2: don't think we take the approach though, James. When it

611
00:40:26,960 --> 00:40:31,319
Speaker 2: comes to underwriting credits, I'm not going to take a

612
00:40:31,360 --> 00:40:34,600
Speaker 2: contrarian approach. And I'll give you I'm not going to

613
00:40:34,640 --> 00:40:39,000
Speaker 2: be like, you know what spreads are down on the

614
00:40:39,000 --> 00:40:44,960
Speaker 2: best credits. I'm going to start stretching and underwriting some

615
00:40:45,800 --> 00:40:51,960
Speaker 2: okay credits or challenging credits, and I'm going to charge

616
00:40:52,000 --> 00:40:55,640
Speaker 2: an extra three hundred basis points and extra three hundred

617
00:40:55,640 --> 00:40:59,480
Speaker 2: basis points. When you lose, you take a fifty percent

618
00:40:59,840 --> 00:41:03,560
Speaker 2: loss on a craw. It doesn't work. So I'm not

619
00:41:03,840 --> 00:41:07,040
Speaker 2: going to on the core side of the business. In

620
00:41:07,120 --> 00:41:10,520
Speaker 2: terms of underwriting new deals, I'm not going to take

621
00:41:10,600 --> 00:41:14,040
Speaker 2: a contrarian approach. I'm not going to step away from

622
00:41:14,120 --> 00:41:18,480
Speaker 2: the market simply because yields are down a bit, because

623
00:41:18,560 --> 00:41:23,520
Speaker 2: ultimately I still want to invest in really, really good

624
00:41:23,600 --> 00:41:28,239
Speaker 2: companies that I think are going to perform well over

625
00:41:28,280 --> 00:41:31,080
Speaker 2: the next few years. And hopefully when we finance it

626
00:41:31,120 --> 00:41:34,439
Speaker 2: with that first sponsor, we're going to finance it again

627
00:41:34,480 --> 00:41:36,960
Speaker 2: with the next sponsor and the next sponsor. And that

628
00:41:37,120 --> 00:41:42,359
Speaker 2: really goes again to the power of that portfolio that

629
00:41:42,560 --> 00:41:45,000
Speaker 2: it goes back to if I talk about those top

630
00:41:45,160 --> 00:41:51,000
Speaker 2: five six players, having that portfolio is a huge differentiator.

631
00:41:51,560 --> 00:41:54,800
Speaker 2: Because these companies are sold by sponsors. It used to

632
00:41:54,840 --> 00:41:56,719
Speaker 2: be every three three and a half years. Now maybe

633
00:41:56,760 --> 00:41:59,600
Speaker 2: worth five, but it's going to adjust back to a

634
00:41:59,640 --> 00:42:04,640
Speaker 2: shorter time period, and that incumbency position is a huge

635
00:42:04,640 --> 00:42:35,040
Speaker 2: competitive advantage. There are probably certain sectors right now where

636
00:42:35,520 --> 00:42:39,960
Speaker 2: the spreads are higher, and there's a reason they're higher,

637
00:42:40,480 --> 00:42:45,920
Speaker 2: and because those sectors are not performing well, and generally

638
00:42:46,520 --> 00:42:48,799
Speaker 2: we're going to shy away from that because going back

639
00:42:48,800 --> 00:42:51,920
Speaker 2: to again, it all comes down to kind of minimizing

640
00:42:52,000 --> 00:42:55,120
Speaker 2: losses and selecting the right credits. But if I say, hey,

641
00:42:55,200 --> 00:42:58,200
Speaker 2: right now, do I think there's like a relative value

642
00:42:58,320 --> 00:43:05,200
Speaker 2: play across you know, business services versus non elective healthcare,

643
00:43:05,920 --> 00:43:09,200
Speaker 2: mission critical software and industrials, Right, No, there's not.

644
00:43:10,400 --> 00:43:13,239
Speaker 1: So that risk is all being priced accordingly.

645
00:43:13,800 --> 00:43:14,839
Speaker 2: Yes it is.

646
00:43:15,560 --> 00:43:20,000
Speaker 1: Okay, So one last thing we always ask guests on

647
00:43:20,040 --> 00:43:23,120
Speaker 1: this show, Tim, what really kind of worries you about

648
00:43:23,120 --> 00:43:26,319
Speaker 1: the outlook? I mean, you mentioned a catastrophic traffic event

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00:43:26,360 --> 00:43:28,600
Speaker 1: that could shut down the economy for two years. I

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00:43:28,600 --> 00:43:30,799
Speaker 1: don't think anyone kind of expects that, but who knows.

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00:43:30,800 --> 00:43:34,320
Speaker 1: But beyond that, is there something particularly you know? Is

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00:43:34,600 --> 00:43:36,600
Speaker 1: it in the economy, is it in the politics? Is

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00:43:36,600 --> 00:43:40,320
Speaker 1: it something else that really concerns you about the out

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00:43:40,520 --> 00:43:43,160
Speaker 1: Everyone seems to be very I have used the word

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00:43:43,160 --> 00:43:46,560
Speaker 1: complacent over the last few months. If you look at

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00:43:46,560 --> 00:43:49,120
Speaker 1: credit spreads, it seems like nothing bad is going to happen.

657
00:43:49,160 --> 00:43:51,760
Speaker 1: But is there anything that you think you know we're missing?

658
00:43:52,880 --> 00:43:57,839
Speaker 2: So it's a really interesting question, James, because we've been

659
00:43:57,840 --> 00:44:01,000
Speaker 2: doing this for twenty eight years. I don't worry about

660
00:44:02,560 --> 00:44:06,960
Speaker 2: things like just we have a ton of losses and

661
00:44:07,000 --> 00:44:10,279
Speaker 2: we make a bunch of mistakes underwriting poor credits. I

662
00:44:10,320 --> 00:44:13,240
Speaker 2: don't really worry about that. I worry about the things

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00:44:13,280 --> 00:44:16,280
Speaker 2: that we almost get are a bit out of our control.

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00:44:16,360 --> 00:44:20,240
Speaker 2: So what would that be? Fraud in a portfolio company.

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00:44:20,280 --> 00:44:23,200
Speaker 2: So once again that's going to it's going to be limited.

666
00:44:24,760 --> 00:44:28,160
Speaker 2: And you know, the period of twenty eight years, I

667
00:44:28,160 --> 00:44:31,040
Speaker 2: think we've only had that over time and two deals.

668
00:44:32,320 --> 00:44:38,120
Speaker 2: So I worry about geopolitical events that really shut down

669
00:44:38,120 --> 00:44:41,120
Speaker 2: the economy and that impacting our business. Again, it's things

670
00:44:41,160 --> 00:44:45,680
Speaker 2: out of my control. I can't control that, and I

671
00:44:45,800 --> 00:44:50,800
Speaker 2: worry about and not just specifically to Terri's. It's almost

672
00:44:50,840 --> 00:44:55,000
Speaker 2: to the global financial system, but somehow impacting us is

673
00:44:55,360 --> 00:45:03,320
Speaker 2: the continued cyber threat and we've done an incredible job

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00:45:04,120 --> 00:45:07,960
Speaker 2: protecting ourselves there. But is there something that could happen

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00:45:08,560 --> 00:45:13,400
Speaker 2: that shuts down the global financial system for a period

676
00:45:13,440 --> 00:45:18,840
Speaker 2: of time. So I guess the things within my control.

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00:45:19,239 --> 00:45:21,279
Speaker 2: I don't really worry about those things. It's kind of

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00:45:21,320 --> 00:45:24,640
Speaker 2: the stuff that is a bit out of my control.

679
00:45:24,800 --> 00:45:26,640
Speaker 2: And once again, it's not like I lose a ton

680
00:45:26,680 --> 00:45:29,520
Speaker 2: of sleep about like it's one of those things like

681
00:45:30,640 --> 00:45:32,880
Speaker 2: it could happen. We just need to do the best

682
00:45:33,000 --> 00:45:36,720
Speaker 2: job we can to protect ourselves up against once again

683
00:45:36,920 --> 00:45:40,600
Speaker 2: credit risk and enterprise risk to the firm.

684
00:45:40,920 --> 00:45:43,520
Speaker 1: Great stuff, Tim Lyin, CEO of Vantari's Capital, It's been

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00:45:43,520 --> 00:45:45,120
Speaker 1: a pleasure having you on the Credit Edge.

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00:45:45,840 --> 00:45:48,359
Speaker 2: Thank you so much, James and David, I appreciate it.

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00:45:48,560 --> 00:45:49,920
Speaker 2: Thanks for having me, and.

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00:45:49,880 --> 00:45:52,040
Speaker 1: Of course David Haven's Bloomber Intelligence. Thank you so much

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00:45:52,080 --> 00:45:52,919
Speaker 1: for being back on the show.

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00:45:53,320 --> 00:45:54,680
Speaker 3: Yep, great being with you both.

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00:45:55,480 --> 00:45:58,240
Speaker 1: Check out all of David's excellent analysis on the Bloomberg

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00:45:58,360 --> 00:46:01,360
Speaker 1: terminal Bloomberg Intelligence. This is part of our research department

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00:46:01,400 --> 00:46:04,320
Speaker 1: with five hundred analysts and strategists working across all markets.

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00:46:04,520 --> 00:46:07,120
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00:46:07,160 --> 00:46:10,840
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00:46:11,120 --> 00:46:14,719
Speaker 1: currencies and commodities. Please do subscribe to the Credit Edge

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00:46:14,719 --> 00:46:17,560
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00:46:21,880 --> 00:46:24,120
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00:46:24,200 --> 00:46:29,240
Speaker 1: directly at jcrombieight at Bloomberg dot net. I'm James Crombie.

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00:46:29,239 --> 00:46:31,560
Speaker 1: It's been a pleasure having you join us again next

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Speaker 1: week on the Credit Edge