Overview of Credit Business Strategies

Nov 7, 2024

Lecture Notes on Credit Business Overview

Introduction

  • Speakers: Tony, Mike, and speaker (unspecified name)
  • Duration together: 25 years
  • Purpose: Quick overview of credit business, the largest segment.
  • Key Speakers: Court Schnabel, Blair Jacobson, Joel Holsinger, Aaron Rosen, and Edwin Wong on their respective verticals.

Key Business Strategies

  • Investment in People: The focus is on putting the right people in the right position, empowering them to succeed.
  • Global Reach: Managing $300 billion with 500 people, with expansion focus on APAC credit.
  • Core of Business: Origination and differentiated deal flow.

Direct Lending Group

  • Focus Areas: Scale, origination, and incumbency.
  • Scale: Large balance sheets ($190 billion) allow holding more than competitors.
  • Origination: Largest team with global presence, leading to $40 billion + in gross originations annually.
  • Incumbency: 50% of gross originations from existing business.

Scale and Growth

  • Funds Growth: From 5 to 15 series of funds over a billion dollars in assets.
  • Verticals: Growth in alternative credit, special opportunities, sports media, and entertainment.
  • Focus: Adding resources, opening new offices, expanding the footprint.

European Credit Business

  • Established: Team lifted from Barclays Bank in mid-2000s.
  • Metrics: $70 billion in assets, 90 investment professionals.
  • Expansion: Opened offices in multiple European countries.
  • Market: Growing alternative fund-based lending.

Market Position

  • Change: Bank market share reduced from 100% to below 50%.
  • Deal Growth: Deals by fund-based lenders increased significantly.

Alternative Credit

  • Focus: Credit-related investments in portfolios of loans, leases, and receivables.
  • Team: Large, experienced team.
  • Market: $28 trillion, fragmented post-GFC.
  • Strategic Growth: Across liquid and illiquid markets.

Capital Strategy

  • Core Strategy: Focused on open-ended vs. closed-ended opportunities.
  • Quality AUM: Achieved through origination and relative value.

Opportunistic Credit

  • Evolution: From special situations to all-weather strategy.
  • Team: 30 investment professionals across major cities.
  • Returns: 22% gross, 17% net, with low loss rate.

Market Environment

  • Opportunities: In both dislocated and healthy markets.
  • Challenges: Addressing over-levered, healthy companies.

APAC Credit

  • Leader: Edwin Wong, post-SSG acquisition.
  • Regional Importance: Asia contributes 60% of global growth.
  • Platform: $12 billion managed, with extensive regional presence.

Future Outlook

  • Growth: Continuing strategies, focusing on local currency opportunities.
  • BDC Development: Anticipated expansion in the region.

Conclusion

  • The session hints at expanding opportunities, global scale, and strategic investments across various credit segments. The panel reflects optimism for continued growth and success in the credit market.