November 13, 2025 • 46 mins
Lack of discipline is a concern for credit markets as investors rush to fund artificial intelligence, according to Oaktree Capital Management. “Just how much money is chasing deals — I think you need to be mindful of that,” Danielle Poli, a portfolio manager for the firm’s global credit strategy, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Phil Brendel in the latest Credit Edge podcast. “What stands out is that anything with AI is just getting done,” Poli added. “A lot of the excess we’re seeing is in that space.” They also discuss where to find better returns in collateralized loan obligations, real estate debt, strategies for busted convertibles, private market relative value and opportunities in Europe.
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Episode Transcript
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Speaker 1 (00:18):
Hello, Welcome to Credit Edge Weekly Markets Podcast. My name
is James Crombie. I'm a senior editor at Bloomberg and.
Speaker 2 (00:24):
I'm Phil Brendall, of senior distressed Credit analyst at Bloomberg Intelligence.
This week, we're very pleased to welcome Danielle Pauley, a
portfolio manager within the Global credit strategy at oak Tree. Danielle,
how are you?
Speaker 3 (00:37):
I'm doing well. Thank you so much for having me welcome.
Speaker 2 (00:41):
Oak Tree's credit strategy has one hundred and fifty six
billion dollars of assets under management across a wide range
of strategies ranging from opportunists to credit to private instructored credit.
As a portfolio manager within the firm's flagship multi asset
credit offering and a founding member of its investment committee,
we're excited to hear what Danielle thinks about the current
(01:02):
credit landscape and where we sit in the cycle.
Speaker 1 (01:04):
Thanks Phyl, Yeah, we have loads of questions for you, Danielle.
Credit markets are going through a bit of a rough patch,
and better quality debt is outperforming in general. The weaker
smaller companies with lots of bonds and loans to pay
off are running into trouble. As rates stay high and
earnings are pressured by inflation, trade wars, immigration reform, and
consumer stress. After Trump got reelected, everyone thought risk assets
would get a huge boost from deregulation and pro growth
(01:28):
policies plus deep rate cuts, but that didn't happen. The
April tariff shock through US all for a loop and
credit cracks are spreading from private debt defaults to triple
ACMBS blow ups. Investment grade debt is doing better than
junk in most cases, you're not getting paid to take
the risk. So, Danielle, how do you position in these markets?
Where are the alpha opportunities at this point?
Speaker 3 (01:50):
Well, you highlighted that there is a lot going on
in the macro environment. There certainly is today and continues
to be. At oak Tree macro forecasters were bottom up
credit specialists. So in fact, in these types of markets,
for our active management approach, it's not such a bad
(02:10):
thing when there's some volatility, we can get some bargains
in the market. Credit has been providing, in my opinion,
highly attractive returns driven by yield and income for the
last few years, and this year is no exception. If
you're able to avoid the losers, let the winners take
(02:30):
care of themselves. You're able to access some really attractive
opportunities in the market. So where are the opportunities you
said to level set? Our multi asset portfolios are generally
invested in liquid credit as well as some in private credit,
blending the two together for diversification tractive yield. The core
(02:55):
of our portfolios on the liquid side bonds and loans
sub by G and then we have what we call
our alpha strategies, so this is structured credit clos, real
estate debt, merging markets, convertibles, and then on the private
credit side, it's direct lending but asset back to finance
doing non sponsors as well as you know regular way
(03:18):
sponsor LBOs. So we have a very wide opportunity set,
and that's one of the most important things I think
in this market, because you can be selective and you
can be disciplined. The way we construct the portfolio is
to look for the best ideas across the platform and
then benefit from diversification across all these different asset classes.
Speaker 2 (03:39):
That's really interesting, Danielle, you know, especially because you interact
with the clients. You know perhaps more than a lot
of the portfolio managers at Oak drag, you know, given
their concentration and like this, you know, in distressed opportunistic
what are what are you seeing with twenty twenty five?
(04:02):
It has been pretty exciting. The Trump administrations started, and
you know, we saw the tariffs and there was a
sell America theme. You know, I'm curious have clients shifted
much in terms of what they want in terms of
credit product, you know, perhaps looking for more security or
or perhaps geography. I'm just kind of curious, you know,
(04:25):
how clients have viewed the sell America theme that you
know we saw earlier in the year given, and how
that's migrated with the run up in prices here.
Speaker 3 (04:37):
I think the sell America theme led to a lot
of talk about increasing allocations to Europe in particular, but
we didn't see significant outflows, really outflows at all materialize
from US markets to be redeployed into Europe. So I think,
if anything, it was new dollars that were flowing into
(04:58):
some of the European strategies, but not in significant size.
Now within our portfolios, we found the opportunities that quite
attractive in Europe, not because of a loss of US
exceptionalism or macro bet that we were trying to make,
but simply because those economies had been relatively unloved for
a number of years and the yields looked attractive. We
(05:20):
also hedge everything in our portfolio back to US dollars,
so we're able to get a nice pickup on the carry.
And you know, the issuance has picked up in Europe
and it's been decent quality, and so we've found things
to do so on the margin. You know, we've probably
bought more in Europe this year than we have in
prior years. But given the relative sizes of the market,
(05:41):
the US is still, you know, the largest geography represented
in our portfolio. You know, when I speak with clients,
it's less about an expressed preference for Europe versus the US.
It's really about adding credit to their portfolios. I think
so many of our clients and investures generally have been
underweight credit for a very long time, and understandably so.
(06:06):
I mean, if you look back in the not so
distant past, high you old bonds, you know, we're giving
you a yield of three four percent some are issued
with two handles. That's not a lot of yield to
meet a seven eight percent return target, especially for some
of our state pension plans and endownment's foundations, forget it.
Some of them don't even have credit still today and
(06:28):
are adding so. With higher base rates and the ability
to get equity like returns, many are looking at credit
and taking money away from equities to fund growing credit allocations.
That's the largest trend I see speaking with clients.
Speaker 1 (06:44):
Why credit right now? Given that the spreads are so tight,
You know, you could just take a T bill and chill,
as the expression went earlier this year. Why do you
have to do the extra work?
Speaker 2 (06:56):
Yeah?
Speaker 3 (06:56):
I like that, take a T bill and chill. I
think if you really, if you believe in the ability
to underwrite credit as we do and avoid the non payers,
you can pick up some incremental yield in the sub
investment grade credit market, and you don't need spreads to
tighten where they are today to get an attractive return.
(07:16):
So on average yields and high yield bonds and leverage
loans today they range, you know, from six to eight
percent on average. You go a little bit further out
the risk curve into structure credit clos, you're getting eight
to ten percent type yields and double B clos and
then higher than that when you start thinking about private credit,
(07:39):
you can put those into a diversified portfolio today and
get a high single digit yield, so a bit better
than treasuries, which you know roughly give you, you know,
four to five percent depending.
Speaker 2 (07:50):
Danielle, one of the things that I'm fascinated by is,
you know, we know that private credit has grown to
what some would say is maybe a third the market. Now,
you know, if you split between like the broadly syndicated
loan market, private credit and high yield, and I'm curious,
what are you seeing there in terms of demand and
how it looks. You know, some of the some of
(08:13):
the interesting things about private credit is, you know, one
you didn't have to worry about mark so much, kind
of a lack of liquidity, so that's kind of a negative.
There's a concentrated set of lenders, and you know, I'm
just curious, are you seeing that trend continue where private
credit seems hot, or do you see that potentially reversing.
Speaker 3 (08:34):
I think a lot of money has been raised in
private credit, and the growth has continued such that we're
seeing convergence between public and private markets. I don't think
that they should be pitted against each other as rivals.
We just put out an insights piece on this Friends
not foes. I think the two are settling more into
(08:55):
this symbiotic relationship, which is actually helpful for borrowers and investors,
but you'll have to think about the roles that each
of them play. I do think that if you're giving
up liquidity, you need to be paid for it. You
need to get higher yield than you could get in
the public market, and we are seeing that yield differential compress,
(09:16):
but it has maintained some end. Where I do see
the demand shifting for many in the private credit market
is as they've built up their direct lending portfolios, they're
looking more broadly at private credit opportunities, whether they're in
asset back to finance to diversify some of their exposure,
so thinking about more of a core satellite approach. A
(09:36):
lot of the clients I speak with are looking for
the satellite today ways to add on to what private
credit exposure they have, or they're thinking about being more
tactical and combining the two in more evergreen structures that
can be more opportunistics such that when spreads do compress,
those portfolios can allocate more to public markets, or importantly,
(09:57):
if there's a dislocation, they can buy liquid as assets
at a discount. So I think having a blend of
both is a trend that will continue to see. I
think the private credit markets are here to stay, and
they'll also continue to serve an important role with respect
to financing borrowers in times of stress. I mean private
(10:18):
credit has stepped in when liquid markets have frozen up,
so borrowers are going to continue to have multiple ways
to gain financing, which I think should actually improve the
overall health of the environment for borrowers going forward.
Speaker 1 (10:34):
And on that gap between private and public I mean,
as a total credit geek, I look at that very
closely and have been looking at it for some time.
And we've gone from this time last year when I
think HIMCO was calling it one hundred and fifty bases
points increased spread obviously yield spread that's not return. Things
may change over the course of your investment, to let's
(10:57):
say earlier this year when it was much compressed than
by the middle of the year it was zero. And
then we taught to Blackstone a couple of weeks ago
and it was one hundred and fifty again to two hundred,
and then last week we heard from Double Line that
it was zero. So I'm interested in how you would
quantify that right now and also where is it going.
Speaker 3 (11:16):
It does seem to be a moving target, and I
think it does depend on what part of the private
credit market you play, and it's hard to kind of
paint the private credit market with a single brushstroke today
when I think about our opportunity set, the large kind
of mega deals, so think of you know, over a
(11:36):
billion dollars. Those deals have been increasingly getting financed in
the broadly syndicated market versus the private credit market. We've
seen over the past year just a lot more deals
financed there, and the middle market deals have been going
towards private credit and we're seeing more issuance there. What
we're seeing that middle market pricing kind of on top
(11:58):
of the larger cap ricing, so spreads are contracting for
our opportunity set. On average, we're kind of looking at
that sponsor LBO market today it's sofur plus, you know,
four fifty to five hundred generally in the broadly syndicated market.
If we're kind of targeting single be but higher quality
(12:23):
something we're comfortable with. It's kind of sofur plus three
point fifty, so you're still picking up you know, incremental spread.
But those are just averages, right. There's various different deals
that are pricing different ways, and it's really more for
us about making sure that the underlying credit risk is limited,
that we're lending to a company that's not over levered,
(12:45):
that's going to pay us back those those high yields.
So and then outside of the kind of direct lending market,
the asset back to finance deals are pricing you know,
quite a bit wider. You can get you know, or
plus six hundred eight hundred or higher. And the asset
back to finance that we're focused on, because there has
(13:05):
a lot of different type of asset binance is the
contractual type. So we're looking for cash flowing assets, whether
the loans or leases that are you know, supporting those pools.
Speaker 2 (13:18):
Danielle, you know, one of the things that I think
is really interesting is how late we are in this cycle.
You Know, one of the things that I do is
I look at what's the distressed market telling us about
the credit cycle, and in particular, you know, what caught
my eye is that we're now sixty three months where
the distress ratio and given that's a high yield bond measurement,
(13:42):
but it's been sixty three months since it's crossed eleven percent.
And most cycles, you know, we have more of I
guess a cleansing where you know, like everyone's selling and
you get this big supply surge and distressed debt. We
haven't had them for so long. Can you talk about
out what you're looking for, you know, and how it
(14:03):
affects maybe the private credit broadly, SA, what would what
do you think investors should be in at this point
in the cycle. It is pretty late, I I you know,
my inkling is that being in lesliquid paper might be
a dangerous place to be. But I'm curious what you're
hearing from clients, maybe what they're concerned with and uh
(14:23):
and you know how Old Tree manages to keep their
investment discipline in this, you know, in these times when
it's you know, pretty late in a credit cycle.
Speaker 3 (14:34):
Yeah, it is. It is late in the credit cycle.
Or maybe we just haven't had a cycle for a while.
We're waiting for one at Oak J I'll tell you,
you know, that's really in our DNA as being opportunistic
and lending. In those periods, we are very active in
the rescue finance space as well as doing you know,
distressed opportunistic lending. And the distressed ratio, which I think
(14:57):
Phil you just reported on your latest podcast, is around
four percent. So there's not as much to do right
now in that space, but we are, you know, later
in the cycle. When I'm talking with clients, we tend
to focus on kind of three trends with respect to default.
The high yield market in particular is kind of below average.
(15:19):
It's usual for there to be you know, one to
two percent defaults in the market, higher than that of
course in periods of stress, which is why the overall
default rate is higher. Today, We're just we're not seeing it.
And it's a higher quality market because of that cleansing
event that happened in twenty twenty with some of the
worst companies kind of defaulting from the index. So it's
(15:41):
hard to imagine a significant spike in the high yield
bond market of defaults just given the quality of the market,
the secured issuance we've seen, the shorter duration. Now I
compare that with the broadly syndicated market where defaults actually
have been elevated for the last couple of years. They
(16:02):
are above kind of historical averages. It's not a new thing,
it's a trend we've been monitoring and it makes sense.
You've had an increase in base rates, borrowers have to
pay more, so we are seeing more elevated faults in
that market. The quality is not there, the trends are
the opposite, and so we do expect to see you know,
(16:23):
continued defaults there. Now, we benefited oak Tree from having
the distressed expertise that I mentioned and really going after
those rescue financing, so we tend to know what to
avoid in the broadly syndicated market, there's a good synergy
for us and information sharing. And then the third area
(16:43):
of default that we speak about with clients is the
private credit market. So you've got low default and high yield,
elevated and broadly syndicated loans and dare I say masked
default in the private credit market. It's hard to get
a good sense there. I mean estimates range, you know,
I see two to five percent reported. I'm focused more
(17:03):
on you know, non accrules. You can get some of
that data in the BDCs that publicly report. There's been
some recent reports on pick and dissecting, you know, good
pick versus bad picks, So our amendments happening. I think,
you know, bad picks roughly reported around six percent today,
so maybe six percent default that it's quite significant actually
(17:27):
for that market, and I think it does speak to
us being a little bit later in the cycle, and
so it is very very important then to be mindful
that there are tails in these markets. There are things
that you have to avoid, and you have to understand
that the game has changed. You don't have as many
(17:48):
in court restructurings and bankruptcies. We've seen a certainly a
rise of lems, which you both have talked to at
length on many of your podcasts, and it's it's just
it's a state of play. But I do think that
if you have a good underwriting process, you have credit discipline,
you can avoid these things and you can collect that
(18:09):
really high income today. So I do think it's a
good time to be invested. And I don't think we're
at a tipping point by any means, but at.
Speaker 1 (18:18):
The time when we are, I think I'm under supplied
in the market in terms of net new issuance and
there is a lot of cash looking for yield at
this point in the cycle. How easy is it to
maintain that discipline.
Speaker 3 (18:30):
Yeah, a lot of the issuance has been refinancing, so
you are looking at a tighter spread environment. And also
just given the high interest, you're getting a lot of
cash by a way of interest in your portfolio. So
it is tough if you are a private credit lender
to stay fully deployed, especially with some of these evergreen
vehicles that have been popularized. And so what we urge
(18:54):
is that as a private lender, you stay disciplined in
this type of a market, that you're not in investing
in everything that you are okay seeing the overall yield
of your portfolio go down, that you're not stretching for
risk to keep it high. And I think it also
speaks to the benefit then of having an approach where
you can invest in both public and private. It's a
(19:17):
high bar for us to add private exposure to those portfolios.
We're finding good opportunities in the liquid market.
Speaker 1 (19:23):
We are, but how much of the deals do you
see do you say that's crazy, I'm not doing it.
You know, in the lights of Trecolo and the lights
of First Brands. You know, these sort of things kind
of coming to light now that you know maybe the
cycle is coming towards the end.
Speaker 3 (19:39):
As Spill says, we pass on more than we invest
in today, this is a time for caution. We're so
lucky to have Howard Marks guiding us on, you know,
mastering the market cycle, and it's just an environment right
now where discipline is going to be rewarded. We publicly,
(20:03):
you know, passed passed on on Tricoloro when it came
to us, and with First Brands, as Howard wrote about,
it was a name that we had owned in our
portfolio and sold out of it this summer with credit concerns,
So we don't get them all right, But the process,
you know, is in place and we're focused on avoiding
those situations.
Speaker 1 (20:24):
You've talked to recently about there being some problems with
certain vintages of private credit deals. Can you expand a
bit on that. Which vintage you'll be talking about and
when do those deals start to become a problem for us?
Speaker 3 (20:34):
Yeah, I did say that, and then Jamie Diamond said
it better with the cockroaches. But I think there's just
there's going to be issues because the best of the
worst of deals get done in the best of times, right,
That's that's what they say. And we did have kind
of a surge of issuance following COVID twenty twenty twenty
(20:57):
twenty one, when rates were very low and maybe lending
standards were a little bit less stringent than they are today,
so you didn't have the types of protections in place
that kind of keep open these situations, which is why
we've seen so many lemes, right, because of the holes
in these documents, and we've been working through a lot
(21:19):
of them, and I actually think we're getting to a
point where most of kind of the lemes. It slowed
a little bit for us as we've worked through a
lot of that, but I still think there will be,
you know, some of those vintage deals, if you will,
when rates were you know, lower, that still are going
to come to bear, especially for lower rated borrowers with
(21:40):
upcoming maturities that just don't look refinancible. It's the tail, really, And.
Speaker 1 (21:47):
You think covenants are actually getting better because everything I
see suggest that they're getting.
Speaker 3 (21:51):
Worse, probably overall, like recently, getting a bit worse, but
better compared to that time. In particular so various different covenants.
You know, you can insist on whether they're you know, financial,
operational in nature liquidity. Having some covenants in place is
a good thing just to level set with the company's
(22:13):
a spot signs early. It's especially important in the private markets.
So we are insisting still on covenants. One we are lending,
which is probably why we're not lending as actively and
passing on more deals today than we have been.
Speaker 2 (22:29):
You mentioned lmes, and you know, I'm fascinated by it,
and also how investors you know, have ebbed them flowed
with them, you know, because first lean loans. You know,
there's not necessarily that first lean that you thought you had.
You know, you're going to find out later on that
you know, you're you're forced into a deal that your
(22:51):
face is now your one hundred cents on the dollars
now eighty cents on the dollar, and they kind of
whittle you down. And you know, we have been avoiding
bankruptcy on that account. And I'm just curious. We're seeing elms,
they're starting to talk about doing things in the UK,
you know, the part twenty six restructuring schemes of the arrangement,
(23:15):
and I'm you know it's getting exported. I'm just curious
that are you seeing clients kind of are they taking
a haircut down on, you know, what they expect in
terms of return on first lene loans at this point
because because of these enemies, or are they losing confidence
in the asset class or is that kind of like
(23:36):
so long term as a trend that it might not
impact their immediate views.
Speaker 3 (23:42):
Before I answer, I will plug podcasts that you did
with Ross Ross Rosinfalt, who leads our restructuring efforts at
oak Tree and expert in this area. It was really
great to here you both dive into this. I think
you know, we did hear more chatter about it from
clients earlier in the year and late last year. In
(24:03):
some ways, it's kind of died down, and I think
it's becoming a longer term issue because you have seen
a lot of these lemies and we all know that
once one does occur, there's further likelihood of a default
later and a lower recovery. But for the most part,
a lot of the larger lenders who were really able
to provide fresh and priming capital, to your point, we're
(24:25):
probably able to put themselves in a better position for
that future bankruptcy or event down the road. So in
some ways the can has been kicked down the road.
I don't think that we'll stop seeing these, but a
lot have happened, and so there has been, you know,
a bit of a slowdown the lender. Maybe on lender
(24:48):
violence has toned down. I think we're seeing friendlier kind
of cooperation and a lot of these situations With oak Tree,
you know, we have found situations to provide some of
the rescue financing and look at unencumbered assets and kind
of participate in this as an opportunity, but we also
(25:08):
still really view it as a risk on the broadly
syndicated market and wanting to avoid those situations. And it's
hard to do when ninety percent of the broadly syndicated
market doesn't have covenants. It's an issue so far, still
seeing most of it in the US, not as much
in Europe. Again I'm not the expert, but I do
(25:29):
hear that some of it has to do with board
director duties and the liability that they have there. Letting
a company go and doo insolvency in Europe is a
pretty big deal because the board directors can face criminal
charges in some case, and so they're very incentivized to
work things out in a restructuring. So I think until
(25:50):
some of that law changes, we probably won't see a
lot of these situations in Europe, but it's very possible
that we start seeing some.
Speaker 1 (26:00):
We got the sense that the Europeans thought of themselves
as too genteel and kind to each other too to
engage in such American practices. But I don't believe that
for a minute. On the enemies sort of dying down
in the violence subsiding a little bit, I'm just as
interested in why that might be happening. And you know,
the lawyers we talk to say, it's just really on hiatus.
(26:22):
They did so much and you know they've now now
they going to get back to work. And one of
our guests I think last year described it as capitalism
at work. So you know what stops this getting more violent?
I can't see it myself.
Speaker 3 (26:34):
I think you hit on something with the banks and
the lawyers and the fees. It costs a lot of
money to do these things, and so there's a desire
to limit cost.
Speaker 1 (26:43):
As you're a lawyer in case you're making more money.
Speaker 3 (26:45):
Yes, indeed, and I don't know that. Really, ever, it
was the creditors lenders maybe in some situations but not overall,
that we're going to the sponsors, you know, and saying
let's let's do this, let's leave out others. I think
it was the sponsors saying that the situation and approaching
the largest creditors first, right, And really what it speaks
(27:05):
to is just being a large creditor and having scale
and size puts you in a position to be able
to act on these opportunistically. That's really the key.
Speaker 1 (27:16):
Okay, So the problems we are having right now in
the market, you know, the cockroaches, all that stuff, It
seems like it is kind of you know, being contained.
It's blowing over. People aren't worried about it spreading. But
you know, you've pointed out that a lot of people
in the market haven't been in the market that long,
and you know that these things can turn, and you
know how fast they can turn, and when liquidity disappears,
(27:38):
you know, we have a lot of problems in credit.
How far away do you think we are from that?
What might trigger it? What gives you pause to you know,
be a bit more rigorous about you know, the idea
that you know, maybe this isn't a one off, maybe
there are more cockroaches out there.
Speaker 3 (27:53):
Well, we focused and of investment, greed, credit and just
being in credit in general. I think I have a
pretty pessimistic view of things already, and so for me,
the quality has actually been decent compared to history, and
I think there's still this opportunity to find good performing
companies on the liquid side. But what does give me
(28:15):
pause is the lack of experience in the market. I've
been with oak Tree, you know, over a decade, but
I benefit from you know, Howard's experience being one of
the few having invested through the seventies. I mean, I've
here to stagflation and Bruce Karsh's partner being the godfather
of distressed and a team with wealth of experience. We
(28:36):
started our private credit efforts back in two thousand and
one doing mezzanine financing junior capital, and now we're doing
you know, higher up in the capital structure, not kind
of the reverse. But the stat that I saw that
was staggering to me is that seventy percent of private
credit managers have less than ten years experience. That puts
(28:56):
COVID at the mid range and less than three and
a half have been investing through the GFC. I think
there's twenty one managers our self included, that have been
around since then. So you do have a lack of
experience working through these cycles, and then probably a view
that rates are going to fall and bail things out,
(29:19):
and you're used to a different environment, and so I
think that's impacting some of the psychology today and I
think we just have to realize that and be aware
of it. And again it's influencing this more conservative view
on how to stay disciplined and kind of construct portfolios
that are not going to get into trouble.
Speaker 1 (29:38):
The flip side, though, is if you don't lean into
the risk, you kind of underperform. So and that's what
everyone's been saying that you know, you need to just
take advantage of it because it's just so good. It
seems too good to be true to me. But do
you also feel pressure that you've just got to keep
up with everyone else in terns of performance?
Speaker 3 (29:58):
No, I don't feel pressure because I think oak Tree
we've developed our track record of strong kind of superior
risk adjusted returns through consistency with us. I really feel
like we're we're always good, we're sometimes great, we're never terrible.
(30:20):
So I think avoiding the losers, letting the winners take
care of themselves, staying out of credit issues, that's the
surest way to develop a long term track record and
keep clients happy over multiple market cycles. Now, the opposite
of that is what you mentioned leaning into risk. We
love to lean into risk when it makes sense, when
(30:41):
there's really a dislocation in the market. So we got
a little bit of one right with the tariffs earlier
this year. That was a great period to go out
and buy discounted bonds in the market. That's why we
keep some dry powder in our portfolios. We did the
same thing during COVID. I mean, these periods of buying
opportunities are really shortening, are fewer and far between, but
(31:02):
if you're ready for them, that's also a way that
you can really increase your total return. You don't have
to stretch for risks to kind of keep up. So,
with everything going on in the macro environment that you
brought up earlier, James, I just have to believe that
more volatility is ahead, especially in equity is I just
don't think it's going to continue to be a straight line,
(31:22):
and that's when we really need to lean in.
Speaker 2 (31:26):
You know, it's interesting you mentioned the equities, because see,
it does seem like there's a you know, I've been
pointing it out. The video is trading it like fifty
times deep. And it's when things like that sort of
collapse that you all of a sudden get a rush
to the exit doors. And you know, to your point,
(31:48):
oak Tree's got the deep experience they've they've always you know,
it's a name synonymous with distress, at least in my mind.
I love the line from Logan Roy where he talks
about his children. He says, these are not serious people.
And you know, to some extent, you wonder some with
the newbies in private credit, you know, perhaps you might
have that same sort of you know, experience, especially when
(32:11):
it comes to restructuring, which we still haven't seen a
private credit structuring cycle. And I guess all of that is,
you know, how how do you see, you know, in
terms of taking advantage of that opportunity set when it happens,
because you do have to be that nimble. What are
some of the things that you guys, you know, do
(32:34):
when those opportunities are you able to shift personnel assets
like quickly across like different strategies and that sort of
thing when it when it ultimately happens, we.
Speaker 3 (32:46):
Can be very flexible then opportunistic, especially in our multi
asset portfolios, where we've got liquid assets that are deployed,
that are ready to be sold and reallocated if there's
a sell off. We also, you know, meanin some liquidity
in the form of cash which we invest in short
duration investment grade gives us a little bit of yield today,
(33:07):
but it's there, and so we're positioned for these types
of opportunities, even in kind of on the run funds
that aren't the traditional draw down funds. The drawdown funds
are very well positioned. We're sitting on a lot of
dry powder and being very disciplined and waiting for a
bigger dislocation before we really start meaningfully deploying those But
(33:28):
even in kind of performing credit, we have the ability
to be very tactical. One of the ways that we
position ourselves too, is just the communication we have across
the firm. Could be remiss if I didn't highlight our
Global Credit Investment Committee. It's led by Bruce carsh It's
attended by all of our credit portfolio managers. We sit
(33:50):
in a conference room every other week for a couple hours,
and we go around and we talk about what's happening
in each of our areas, and we all kind of
collective own asset allocation and making relative value decisions for
a multi strategy fund. And so when you have those conversations,
you're really kind of positioned to act quickly. That's that's
(34:12):
very important as well.
Speaker 1 (34:13):
And when you had the last one, you talked earlier
about best ideas, what were the best ideas that came up?
Speaker 3 (34:20):
Well, you know, maybe going back to to equities, right,
valuations are stretched. I think there's going to be more
volatility in the equity markets. We have a convertible bond
strategy that's actually done very well this year, not by
taking excess, you know, equity risk. It's a relatively low
delta strategy. We tend to focus more on balanced and
(34:41):
even busted converts. That strategy has done very well this year,
but I think some of its best opportunities are ahead.
We could meaningfully grow that in an equity dislocation. So
I think that that's an interesting area that we could
lean into.
Speaker 1 (34:55):
And if they contect to them, and they can both well.
Speaker 3 (34:57):
It tends to be dominated by tech, healthcare. Those are
just the largest parts of the market. The convert market's
been growing though. It's over five hundred billion of market
value today from you know, three hundred maybe just a
couple of years ago. So the issuance is there.
Speaker 1 (35:15):
I'm sorry for our listeners who don't know what busted
converts out. Do you want to tell us in basic terms?
Speaker 3 (35:21):
Yeah, the very very basic level. You know, we kind
of we invest in convertible bonds more so as a
debt investor, so you get kind of the safety of
debt and credit, but you also get the ability to
kind of participate in equity. Upside, We're not converting them,
as the name might imply, but definitely the prices go
(35:42):
up with the underlying equity when it goes up. The
busted converts have really, you know, lost their convertibility, their optionality.
They're not trading like equities anymore. They're much more like
fixed income instruments. So they give you a yield today,
you know, four ish percent, whereas as a more equity
sensitive convertible would have you know, a negative yield. So
(36:05):
think of them as more fixed income instruments, they're just
out of the money. The optionality's gone, but there is
a little bit there if things really do work out.
Speaker 1 (36:16):
And the other stuff you like is structured clos. You
mentioned one of our guests in earlier this year called
them bulletproof. Do you are you that much for a
believer in clos that you think they're indestructible.
Speaker 3 (36:28):
Well, we can't forget the underlying assets, and colos are
broadly syndicated loans, and so you need to underwrite those
portfolios and the loans in those portfolios. You need to
underwrite the managers that are managing them. Not colos are
created equal. We're prioritizing, you know, newer vintage clos as well,
(36:49):
and you need to look exactly when they were issued
and what's in there. Was the manager trying to stretch
for risk, to create an arbitrage, et cetera. So I
never like to use bulletproof for anything, and history would
suggest not. But I will say, you know, the default
and loss races rates for clos much less than bonds
(37:13):
and loans through the cycle, and they do get a
bad rap and confused with you know, CDOs of the crisis.
This is this is not that. I think they're much
more well understood today, even just in the last few years.
And you do need such a meaningful part of the
collateral pool to default before you take, you know, a
first loss, even in a double B tranch, that I
(37:33):
do think it presents a compelling opportunity. One of the
reasons I like double B clos in particular is because
their spreads are still slightly wide of historical averages. You
cannot say that for many other asset classes. So on average,
for a double B CLO, you're still getting almost five
hundred basis point pickup compared to a double B bond.
(37:56):
And I think that that exists for a couple reasons,
and one is because banks and insurers have been big
buyers of colos, but they've focused more on the investment
grade tranches. The sub investment grade tranches usually go to
alternative managers like US.
Speaker 1 (38:10):
Can you do that in size at the moment.
Speaker 3 (38:11):
It's a much smaller market, So definitely, the triple A
is the largest part of the capital structure. It gets
placed first. The double B is small, but there's ample opportunity.
Speaker 1 (38:22):
There and the equity as well.
Speaker 3 (38:23):
Would you buy that, I would you know, the strategy
manages more of a credit products. We want to be
mindful of that. But I think COLO equity is attractive,
and we have other products that invest in that exclusively.
Speaker 1 (38:34):
So a clobb right now is providing potentially equity like returns.
Speaker 2 (38:38):
Is that right?
Speaker 1 (38:38):
That's right, It's pretty pretty interesting. And the other stuff
you mentioned before we got in the studio was CMBs.
That's something that people have kind of blown hot and
cold them Why is it hot now?
Speaker 3 (38:49):
Well, it's hot now because of financing, data centers and
digital infrastructure.
Speaker 1 (38:55):
Is that a bubble? Because we've heard a lot about
the AI bubble? Now, is it a Is it a
fear that that all that stuff is just pie in
the sky.
Speaker 3 (39:03):
Yeah, you know, the part of the market that I
prefer right now in real estate is more on the
R and BAS side. We do both, but I just
think the opportunity and data centers, the financing, the spreads,
it's tight, and so where we can find more interesting
opportunity today is and residential. And we're focused on non
(39:24):
qualified mortgages non QM real estate. So these aren't your
Franny Fetti government backed mortgages, but it doesn't mean it's
legacy subprime mortgage exposure. Either. It means that if you're
self employed, you have a small business like my husband does,
you're taking out a private loan. You're not going through
the government, so your credit scores are actually decent, your
(39:47):
loan to values reasonable. I can actually buy these at
a discount. In the market today, you can't buy much
at a discount. And really the bet there is that
rates fall, prepayments pickback up. These pulled apar you're out
yielding high yield, you're doing so with diversification in the portfolio.
Speaker 1 (40:06):
These all sound like interesting ideas. When we had oatry
loss on the show that was about a year ago,
David Rosenberg, your colleague, said that rescue financing was quote
one of the greatest opportunities we've seen in a decade.
So I'm interested in, you know, the twelve months off
to how did that trade pan out for you.
Speaker 3 (40:21):
Well, we found pockets of opportunity to do rescue financing,
and given oak Trees scale, I mean, we see a
lot of opportunities, but given how wide open capital markets
have been, how much money there is, the opportunity and
rescue financing has probably been lighter than we would have expected.
I was right there along with David, really rooting for it.
(40:43):
But I think the better opportunities are still ahead.
Speaker 2 (40:47):
Okay, I'm curious, So, since we're going across asset classes
commercial real estate, is that something that is also on
the radar?
Speaker 3 (40:57):
It is, you know, James and I were just focused
on the residential, which I find more attractive, But it
doesn't mean that we're not in the commercial space. You've
actually seen some issuance come back in office and single asset,
single borrower. Finally, it feels like office is hit a
bottom and that's coming back. And we do industrial, we
do last mile logistics. We're really wherever relative value is,
(41:21):
we're there.
Speaker 1 (41:23):
So where is the best rounds of value?
Speaker 3 (41:25):
I do think it's in the residential.
Speaker 1 (41:27):
And the potential mortgage backed security.
Speaker 3 (41:29):
Yeah, residential mortgage backed securities at least an hour opportunity set.
And I say that because I think we're under built
in the US. You know, we don't have oversupply. You
haven't seen a loosening of lending standards in that space.
And we have an interesting dynamic right now where most
Americans who own homes have mortgage rates that are less
(41:50):
than five percent the average is three percent. So because
of the prevailing six seven percent mortgage rates that have
been out there, you haven't seen a lot of activity,
you know, a lot of home sales, certainly not refinancings.
And so I do think that that's a part of
the market where rates fall, you're going to see some
activity there and it's going to lead to, you know,
(42:10):
some nice opportunities for that segment of the market. Now,
generally we feel like rates are saying higher for longer,
and we've been in that camp. But it is nice
to have some things in the portfolio that are a
hedge to that view.
Speaker 1 (42:21):
Okay, and what sort of returns are you guessing on
the R and.
Speaker 3 (42:24):
BS a little bit more than high yield right now?
Speaker 1 (42:28):
Okay?
Speaker 3 (42:29):
Yeah, so you know, call it seven seven and a
half percent?
Speaker 1 (42:33):
Okay, very interesting. So all it all sounds pretty rosy.
But you know, we've been doing this for a while, Phil,
and I worry is what really worries you about the
setup in terms of global credit markets right now?
Speaker 3 (42:48):
I think the lack of discipline that we talked about,
just how much money is chasing you know, deals, I
think you need to be mindful of that. And then
also we hit on a little bit, but AI, you
can't not be skeptical. I know it's real and I
see the impact, but we all have to admit we
(43:10):
don't know. It's not going to be a linear development.
And a lot of the AI is let as not
yet commercialized revenue. So a lot of these companies are
spending a lot of their cash flows and development for
the promise of kind of future investment gains. And I
think if the market feels that that's not materializing, you
(43:32):
could see outflows from that space, and that's going to
have a big impact on the market, given just how
much AI spending has kind of kept the economy going
in this cycle.
Speaker 1 (43:43):
On the lack of discipline, I'm interested in how that
manifests itself. Is it deals getting done that you just
shake your head and say, how did that deal get done?
Or how did that company get money? Or you know,
I can't believe they're doing that nowadays. And what stands
out for you in terms of lack of discipline.
Speaker 3 (43:55):
What stands out is that anything with AI is just
getting done right. You have that the title, and your
chances of getting it done are pretty good. And so
I think a lot of the excess we're seeing is
in that space right now.
Speaker 1 (44:10):
When you go fundraising, you are you have been talking
to investors? What do they ask you about credit at
the moment, because there is seemingly much more interest in
the asset class. You know, we are getting a lot
more listeners, a lot more readers, a lot.
Speaker 2 (44:24):
More like what is that?
Speaker 1 (44:25):
How does that work? People who maybe only look at
equities now they're looking at credit. So what what? What
sort of questions you get from your end users?
Speaker 3 (44:32):
Mostly oh, very similar questions you know, to to you.
They want to understand the underlying risks and really the
certainty of that yield. How much of that yield potentially
are you going to give back, you know, to to defaults?
What is kind of lurking out there? So we spend
a lot of time talking about the quality of the
underlying market and where we started the conversation that high
(44:55):
yield looks pretty good in terms of quality loans. You know,
you need to be a little bit more picky and
private credit. There's been you know, some excess, and we
talk a lot about too, what are their objectives? You know,
what type of liquidity do they need? What makes most
sense for them? And kind of constructing solutions that accomplish that.
You have a lot of options in today's market, and
(45:17):
so it does depend too where an investor's coming from.
You know, endowment foundation clients that I speak with that
don't have much credit are kind of happy to take
some chips off the table and equities to fund credit,
and then maybe others that already have credit are kind
of thinking about how do I diversify what I have
and how do I make sure what I have is
(45:39):
what I think it is?
Speaker 1 (45:41):
Great stuff, Daniel Polly from Oakrey has been a real
pleasure having you on the Credit Edge. Many thanks, many thanks.
And Phil Brandle with Bloomberg Intelligence, thank you so much
for joining us today. Thank you, and for even more analysis.
Read all of Fill's great work on the Bloomberg terminal.
It's great stuff. I've been reading it for years. Bloomberg
Intelligence is part of our research department, with five hundred
(46:01):
analysts and strategists working across all markets. Coverage includes over
two thousand equities and credits and outlooks on more than
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Please do subscribe to the Credit Edge wherever you get
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(46:23):
at jcrombieight at Bloomberg dot net. I'm James Crombie. It's
been a pleasure having you join us again. Next week
on the Credit Edge
Hello, Welcome to Credit Edge Weekly Markets Podcast. My name
is James Crombie. I'm a senior editor at Bloomberg and.
Speaker 2 (00:24):
I'm Phil Brendall, of senior distressed Credit analyst at Bloomberg Intelligence.
This week, we're very pleased to welcome Danielle Pauley, a
portfolio manager within the Global credit strategy at oak Tree. Danielle,
how are you?
Speaker 3 (00:37):
I'm doing well. Thank you so much for having me welcome.
Speaker 2 (00:41):
Oak Tree's credit strategy has one hundred and fifty six
billion dollars of assets under management across a wide range
of strategies ranging from opportunists to credit to private instructored credit.
As a portfolio manager within the firm's flagship multi asset
credit offering and a founding member of its investment committee,
we're excited to hear what Danielle thinks about the current
(01:02):
credit landscape and where we sit in the cycle.
Speaker 1 (01:04):
Thanks Phyl, Yeah, we have loads of questions for you, Danielle.
Credit markets are going through a bit of a rough patch,
and better quality debt is outperforming in general. The weaker
smaller companies with lots of bonds and loans to pay
off are running into trouble. As rates stay high and
earnings are pressured by inflation, trade wars, immigration reform, and
consumer stress. After Trump got reelected, everyone thought risk assets
would get a huge boost from deregulation and pro growth
(01:28):
policies plus deep rate cuts, but that didn't happen. The
April tariff shock through US all for a loop and
credit cracks are spreading from private debt defaults to triple
ACMBS blow ups. Investment grade debt is doing better than
junk in most cases, you're not getting paid to take
the risk. So, Danielle, how do you position in these markets?
Where are the alpha opportunities at this point?
Speaker 3 (01:50):
Well, you highlighted that there is a lot going on
in the macro environment. There certainly is today and continues
to be. At oak Tree macro forecasters were bottom up
credit specialists. So in fact, in these types of markets,
for our active management approach, it's not such a bad
(02:10):
thing when there's some volatility, we can get some bargains
in the market. Credit has been providing, in my opinion,
highly attractive returns driven by yield and income for the
last few years, and this year is no exception. If
you're able to avoid the losers, let the winners take
(02:30):
care of themselves. You're able to access some really attractive
opportunities in the market. So where are the opportunities you
said to level set? Our multi asset portfolios are generally
invested in liquid credit as well as some in private credit,
blending the two together for diversification tractive yield. The core
(02:55):
of our portfolios on the liquid side bonds and loans
sub by G and then we have what we call
our alpha strategies, so this is structured credit clos, real
estate debt, merging markets, convertibles, and then on the private
credit side, it's direct lending but asset back to finance
doing non sponsors as well as you know regular way
(03:18):
sponsor LBOs. So we have a very wide opportunity set,
and that's one of the most important things I think
in this market, because you can be selective and you
can be disciplined. The way we construct the portfolio is
to look for the best ideas across the platform and
then benefit from diversification across all these different asset classes.
Speaker 2 (03:39):
That's really interesting, Danielle, you know, especially because you interact
with the clients. You know perhaps more than a lot
of the portfolio managers at Oak drag, you know, given
their concentration and like this, you know, in distressed opportunistic
what are what are you seeing with twenty twenty five?
(04:02):
It has been pretty exciting. The Trump administrations started, and
you know, we saw the tariffs and there was a
sell America theme. You know, I'm curious have clients shifted
much in terms of what they want in terms of
credit product, you know, perhaps looking for more security or
or perhaps geography. I'm just kind of curious, you know,
(04:25):
how clients have viewed the sell America theme that you
know we saw earlier in the year given, and how
that's migrated with the run up in prices here.
Speaker 3 (04:37):
I think the sell America theme led to a lot
of talk about increasing allocations to Europe in particular, but
we didn't see significant outflows, really outflows at all materialize
from US markets to be redeployed into Europe. So I think,
if anything, it was new dollars that were flowing into
(04:58):
some of the European strategies, but not in significant size.
Now within our portfolios, we found the opportunities that quite
attractive in Europe, not because of a loss of US
exceptionalism or macro bet that we were trying to make,
but simply because those economies had been relatively unloved for
a number of years and the yields looked attractive. We
(05:20):
also hedge everything in our portfolio back to US dollars,
so we're able to get a nice pickup on the carry.
And you know, the issuance has picked up in Europe
and it's been decent quality, and so we've found things
to do so on the margin. You know, we've probably
bought more in Europe this year than we have in
prior years. But given the relative sizes of the market,
(05:41):
the US is still, you know, the largest geography represented
in our portfolio. You know, when I speak with clients,
it's less about an expressed preference for Europe versus the US.
It's really about adding credit to their portfolios. I think
so many of our clients and investures generally have been
underweight credit for a very long time, and understandably so.
(06:06):
I mean, if you look back in the not so
distant past, high you old bonds, you know, we're giving
you a yield of three four percent some are issued
with two handles. That's not a lot of yield to
meet a seven eight percent return target, especially for some
of our state pension plans and endownment's foundations, forget it.
Some of them don't even have credit still today and
(06:28):
are adding so. With higher base rates and the ability
to get equity like returns, many are looking at credit
and taking money away from equities to fund growing credit allocations.
That's the largest trend I see speaking with clients.
Speaker 1 (06:44):
Why credit right now? Given that the spreads are so tight,
You know, you could just take a T bill and chill,
as the expression went earlier this year. Why do you
have to do the extra work?
Speaker 2 (06:56):
Yeah?
Speaker 3 (06:56):
I like that, take a T bill and chill. I
think if you really, if you believe in the ability
to underwrite credit as we do and avoid the non payers,
you can pick up some incremental yield in the sub
investment grade credit market, and you don't need spreads to
tighten where they are today to get an attractive return.
(07:16):
So on average yields and high yield bonds and leverage
loans today they range, you know, from six to eight
percent on average. You go a little bit further out
the risk curve into structure credit clos, you're getting eight
to ten percent type yields and double B clos and
then higher than that when you start thinking about private credit,
(07:39):
you can put those into a diversified portfolio today and
get a high single digit yield, so a bit better
than treasuries, which you know roughly give you, you know,
four to five percent depending.
Speaker 2 (07:50):
Danielle, one of the things that I'm fascinated by is,
you know, we know that private credit has grown to
what some would say is maybe a third the market. Now,
you know, if you split between like the broadly syndicated
loan market, private credit and high yield, and I'm curious,
what are you seeing there in terms of demand and
how it looks. You know, some of the some of
(08:13):
the interesting things about private credit is, you know, one
you didn't have to worry about mark so much, kind
of a lack of liquidity, so that's kind of a negative.
There's a concentrated set of lenders, and you know, I'm
just curious, are you seeing that trend continue where private
credit seems hot, or do you see that potentially reversing.
Speaker 3 (08:34):
I think a lot of money has been raised in
private credit, and the growth has continued such that we're
seeing convergence between public and private markets. I don't think
that they should be pitted against each other as rivals.
We just put out an insights piece on this Friends
not foes. I think the two are settling more into
(08:55):
this symbiotic relationship, which is actually helpful for borrowers and investors,
but you'll have to think about the roles that each
of them play. I do think that if you're giving
up liquidity, you need to be paid for it. You
need to get higher yield than you could get in
the public market, and we are seeing that yield differential compress,
(09:16):
but it has maintained some end. Where I do see
the demand shifting for many in the private credit market
is as they've built up their direct lending portfolios, they're
looking more broadly at private credit opportunities, whether they're in
asset back to finance to diversify some of their exposure,
so thinking about more of a core satellite approach. A
(09:36):
lot of the clients I speak with are looking for
the satellite today ways to add on to what private
credit exposure they have, or they're thinking about being more
tactical and combining the two in more evergreen structures that
can be more opportunistics such that when spreads do compress,
those portfolios can allocate more to public markets, or importantly,
(09:57):
if there's a dislocation, they can buy liquid as assets
at a discount. So I think having a blend of
both is a trend that will continue to see. I
think the private credit markets are here to stay, and
they'll also continue to serve an important role with respect
to financing borrowers in times of stress. I mean private
(10:18):
credit has stepped in when liquid markets have frozen up,
so borrowers are going to continue to have multiple ways
to gain financing, which I think should actually improve the
overall health of the environment for borrowers going forward.
Speaker 1 (10:34):
And on that gap between private and public I mean,
as a total credit geek, I look at that very
closely and have been looking at it for some time.
And we've gone from this time last year when I
think HIMCO was calling it one hundred and fifty bases
points increased spread obviously yield spread that's not return. Things
may change over the course of your investment, to let's
(10:57):
say earlier this year when it was much compressed than
by the middle of the year it was zero. And
then we taught to Blackstone a couple of weeks ago
and it was one hundred and fifty again to two hundred,
and then last week we heard from Double Line that
it was zero. So I'm interested in how you would
quantify that right now and also where is it going.
Speaker 3 (11:16):
It does seem to be a moving target, and I
think it does depend on what part of the private
credit market you play, and it's hard to kind of
paint the private credit market with a single brushstroke today
when I think about our opportunity set, the large kind
of mega deals, so think of you know, over a
(11:36):
billion dollars. Those deals have been increasingly getting financed in
the broadly syndicated market versus the private credit market. We've
seen over the past year just a lot more deals
financed there, and the middle market deals have been going
towards private credit and we're seeing more issuance there. What
we're seeing that middle market pricing kind of on top
(11:58):
of the larger cap ricing, so spreads are contracting for
our opportunity set. On average, we're kind of looking at
that sponsor LBO market today it's sofur plus, you know,
four fifty to five hundred generally in the broadly syndicated market.
If we're kind of targeting single be but higher quality
(12:23):
something we're comfortable with. It's kind of sofur plus three
point fifty, so you're still picking up you know, incremental spread.
But those are just averages, right. There's various different deals
that are pricing different ways, and it's really more for
us about making sure that the underlying credit risk is limited,
that we're lending to a company that's not over levered,
(12:45):
that's going to pay us back those those high yields.
So and then outside of the kind of direct lending market,
the asset back to finance deals are pricing you know,
quite a bit wider. You can get you know, or
plus six hundred eight hundred or higher. And the asset
back to finance that we're focused on, because there has
(13:05):
a lot of different type of asset binance is the
contractual type. So we're looking for cash flowing assets, whether
the loans or leases that are you know, supporting those pools.
Speaker 2 (13:18):
Danielle, you know, one of the things that I think
is really interesting is how late we are in this cycle.
You Know, one of the things that I do is
I look at what's the distressed market telling us about
the credit cycle, and in particular, you know, what caught
my eye is that we're now sixty three months where
the distress ratio and given that's a high yield bond measurement,
(13:42):
but it's been sixty three months since it's crossed eleven percent.
And most cycles, you know, we have more of I
guess a cleansing where you know, like everyone's selling and
you get this big supply surge and distressed debt. We
haven't had them for so long. Can you talk about
out what you're looking for, you know, and how it
(14:03):
affects maybe the private credit broadly, SA, what would what
do you think investors should be in at this point
in the cycle. It is pretty late, I I you know,
my inkling is that being in lesliquid paper might be
a dangerous place to be. But I'm curious what you're
hearing from clients, maybe what they're concerned with and uh
(14:23):
and you know how Old Tree manages to keep their
investment discipline in this, you know, in these times when
it's you know, pretty late in a credit cycle.
Speaker 3 (14:34):
Yeah, it is. It is late in the credit cycle.
Or maybe we just haven't had a cycle for a while.
We're waiting for one at Oak J I'll tell you,
you know, that's really in our DNA as being opportunistic
and lending. In those periods, we are very active in
the rescue finance space as well as doing you know,
distressed opportunistic lending. And the distressed ratio, which I think
(14:57):
Phil you just reported on your latest podcast, is around
four percent. So there's not as much to do right
now in that space, but we are, you know, later
in the cycle. When I'm talking with clients, we tend
to focus on kind of three trends with respect to default.
The high yield market in particular is kind of below average.
(15:19):
It's usual for there to be you know, one to
two percent defaults in the market, higher than that of
course in periods of stress, which is why the overall
default rate is higher. Today, We're just we're not seeing it.
And it's a higher quality market because of that cleansing
event that happened in twenty twenty with some of the
worst companies kind of defaulting from the index. So it's
(15:41):
hard to imagine a significant spike in the high yield
bond market of defaults just given the quality of the market,
the secured issuance we've seen, the shorter duration. Now I
compare that with the broadly syndicated market where defaults actually
have been elevated for the last couple of years. They
(16:02):
are above kind of historical averages. It's not a new thing,
it's a trend we've been monitoring and it makes sense.
You've had an increase in base rates, borrowers have to
pay more, so we are seeing more elevated faults in
that market. The quality is not there, the trends are
the opposite, and so we do expect to see you know,
(16:23):
continued defaults there. Now, we benefited oak Tree from having
the distressed expertise that I mentioned and really going after
those rescue financing, so we tend to know what to
avoid in the broadly syndicated market, there's a good synergy
for us and information sharing. And then the third area
(16:43):
of default that we speak about with clients is the
private credit market. So you've got low default and high yield,
elevated and broadly syndicated loans and dare I say masked
default in the private credit market. It's hard to get
a good sense there. I mean estimates range, you know,
I see two to five percent reported. I'm focused more
(17:03):
on you know, non accrules. You can get some of
that data in the BDCs that publicly report. There's been
some recent reports on pick and dissecting, you know, good
pick versus bad picks, So our amendments happening. I think,
you know, bad picks roughly reported around six percent today,
so maybe six percent default that it's quite significant actually
(17:27):
for that market, and I think it does speak to
us being a little bit later in the cycle, and
so it is very very important then to be mindful
that there are tails in these markets. There are things
that you have to avoid, and you have to understand
that the game has changed. You don't have as many
(17:48):
in court restructurings and bankruptcies. We've seen a certainly a
rise of lems, which you both have talked to at
length on many of your podcasts, and it's it's just
it's a state of play. But I do think that
if you have a good underwriting process, you have credit discipline,
you can avoid these things and you can collect that
(18:09):
really high income today. So I do think it's a
good time to be invested. And I don't think we're
at a tipping point by any means, but at.
Speaker 1 (18:18):
The time when we are, I think I'm under supplied
in the market in terms of net new issuance and
there is a lot of cash looking for yield at
this point in the cycle. How easy is it to
maintain that discipline.
Speaker 3 (18:30):
Yeah, a lot of the issuance has been refinancing, so
you are looking at a tighter spread environment. And also
just given the high interest, you're getting a lot of
cash by a way of interest in your portfolio. So
it is tough if you are a private credit lender
to stay fully deployed, especially with some of these evergreen
vehicles that have been popularized. And so what we urge
(18:54):
is that as a private lender, you stay disciplined in
this type of a market, that you're not in investing
in everything that you are okay seeing the overall yield
of your portfolio go down, that you're not stretching for
risk to keep it high. And I think it also
speaks to the benefit then of having an approach where
you can invest in both public and private. It's a
(19:17):
high bar for us to add private exposure to those portfolios.
We're finding good opportunities in the liquid market.
Speaker 1 (19:23):
We are, but how much of the deals do you
see do you say that's crazy, I'm not doing it.
You know, in the lights of Trecolo and the lights
of First Brands. You know, these sort of things kind
of coming to light now that you know maybe the
cycle is coming towards the end.
Speaker 3 (19:39):
As Spill says, we pass on more than we invest
in today, this is a time for caution. We're so
lucky to have Howard Marks guiding us on, you know,
mastering the market cycle, and it's just an environment right
now where discipline is going to be rewarded. We publicly,
(20:03):
you know, passed passed on on Tricoloro when it came
to us, and with First Brands, as Howard wrote about,
it was a name that we had owned in our
portfolio and sold out of it this summer with credit concerns,
So we don't get them all right, But the process,
you know, is in place and we're focused on avoiding
those situations.
Speaker 1 (20:24):
You've talked to recently about there being some problems with
certain vintages of private credit deals. Can you expand a
bit on that. Which vintage you'll be talking about and
when do those deals start to become a problem for us?
Speaker 3 (20:34):
Yeah, I did say that, and then Jamie Diamond said
it better with the cockroaches. But I think there's just
there's going to be issues because the best of the
worst of deals get done in the best of times, right,
That's that's what they say. And we did have kind
of a surge of issuance following COVID twenty twenty twenty
(20:57):
twenty one, when rates were very low and maybe lending
standards were a little bit less stringent than they are today,
so you didn't have the types of protections in place
that kind of keep open these situations, which is why
we've seen so many lemes, right, because of the holes
in these documents, and we've been working through a lot
(21:19):
of them, and I actually think we're getting to a
point where most of kind of the lemes. It slowed
a little bit for us as we've worked through a
lot of that, but I still think there will be,
you know, some of those vintage deals, if you will,
when rates were you know, lower, that still are going
to come to bear, especially for lower rated borrowers with
(21:40):
upcoming maturities that just don't look refinancible. It's the tail, really, And.
Speaker 1 (21:47):
You think covenants are actually getting better because everything I
see suggest that they're getting.
Speaker 3 (21:51):
Worse, probably overall, like recently, getting a bit worse, but
better compared to that time. In particular so various different covenants.
You know, you can insist on whether they're you know, financial,
operational in nature liquidity. Having some covenants in place is
a good thing just to level set with the company's
(22:13):
a spot signs early. It's especially important in the private markets.
So we are insisting still on covenants. One we are lending,
which is probably why we're not lending as actively and
passing on more deals today than we have been.
Speaker 2 (22:29):
You mentioned lmes, and you know, I'm fascinated by it,
and also how investors you know, have ebbed them flowed
with them, you know, because first lean loans. You know,
there's not necessarily that first lean that you thought you had.
You know, you're going to find out later on that
you know, you're you're forced into a deal that your
(22:51):
face is now your one hundred cents on the dollars
now eighty cents on the dollar, and they kind of
whittle you down. And you know, we have been avoiding
bankruptcy on that account. And I'm just curious. We're seeing elms,
they're starting to talk about doing things in the UK,
you know, the part twenty six restructuring schemes of the arrangement,
(23:15):
and I'm you know it's getting exported. I'm just curious
that are you seeing clients kind of are they taking
a haircut down on, you know, what they expect in
terms of return on first lene loans at this point
because because of these enemies, or are they losing confidence
in the asset class or is that kind of like
(23:36):
so long term as a trend that it might not
impact their immediate views.
Speaker 3 (23:42):
Before I answer, I will plug podcasts that you did
with Ross Ross Rosinfalt, who leads our restructuring efforts at
oak Tree and expert in this area. It was really
great to here you both dive into this. I think
you know, we did hear more chatter about it from
clients earlier in the year and late last year. In
(24:03):
some ways, it's kind of died down, and I think
it's becoming a longer term issue because you have seen
a lot of these lemies and we all know that
once one does occur, there's further likelihood of a default
later and a lower recovery. But for the most part,
a lot of the larger lenders who were really able
to provide fresh and priming capital, to your point, we're
(24:25):
probably able to put themselves in a better position for
that future bankruptcy or event down the road. So in
some ways the can has been kicked down the road.
I don't think that we'll stop seeing these, but a
lot have happened, and so there has been, you know,
a bit of a slowdown the lender. Maybe on lender
(24:48):
violence has toned down. I think we're seeing friendlier kind
of cooperation and a lot of these situations With oak Tree,
you know, we have found situations to provide some of
the rescue financing and look at unencumbered assets and kind
of participate in this as an opportunity, but we also
(25:08):
still really view it as a risk on the broadly
syndicated market and wanting to avoid those situations. And it's
hard to do when ninety percent of the broadly syndicated
market doesn't have covenants. It's an issue so far, still
seeing most of it in the US, not as much
in Europe. Again I'm not the expert, but I do
(25:29):
hear that some of it has to do with board
director duties and the liability that they have there. Letting
a company go and doo insolvency in Europe is a
pretty big deal because the board directors can face criminal
charges in some case, and so they're very incentivized to
work things out in a restructuring. So I think until
(25:50):
some of that law changes, we probably won't see a
lot of these situations in Europe, but it's very possible
that we start seeing some.
Speaker 1 (26:00):
We got the sense that the Europeans thought of themselves
as too genteel and kind to each other too to
engage in such American practices. But I don't believe that
for a minute. On the enemies sort of dying down
in the violence subsiding a little bit, I'm just as
interested in why that might be happening. And you know,
the lawyers we talk to say, it's just really on hiatus.
(26:22):
They did so much and you know they've now now
they going to get back to work. And one of
our guests I think last year described it as capitalism
at work. So you know what stops this getting more violent?
I can't see it myself.
Speaker 3 (26:34):
I think you hit on something with the banks and
the lawyers and the fees. It costs a lot of
money to do these things, and so there's a desire
to limit cost.
Speaker 1 (26:43):
As you're a lawyer in case you're making more money.
Speaker 3 (26:45):
Yes, indeed, and I don't know that. Really, ever, it
was the creditors lenders maybe in some situations but not overall,
that we're going to the sponsors, you know, and saying
let's let's do this, let's leave out others. I think
it was the sponsors saying that the situation and approaching
the largest creditors first, right, And really what it speaks
(27:05):
to is just being a large creditor and having scale
and size puts you in a position to be able
to act on these opportunistically. That's really the key.
Speaker 1 (27:16):
Okay, So the problems we are having right now in
the market, you know, the cockroaches, all that stuff, It
seems like it is kind of you know, being contained.
It's blowing over. People aren't worried about it spreading. But
you know, you've pointed out that a lot of people
in the market haven't been in the market that long,
and you know that these things can turn, and you
know how fast they can turn, and when liquidity disappears,
(27:38):
you know, we have a lot of problems in credit.
How far away do you think we are from that?
What might trigger it? What gives you pause to you know,
be a bit more rigorous about you know, the idea
that you know, maybe this isn't a one off, maybe
there are more cockroaches out there.
Speaker 3 (27:53):
Well, we focused and of investment, greed, credit and just
being in credit in general. I think I have a
pretty pessimistic view of things already, and so for me,
the quality has actually been decent compared to history, and
I think there's still this opportunity to find good performing
companies on the liquid side. But what does give me
(28:15):
pause is the lack of experience in the market. I've
been with oak Tree, you know, over a decade, but
I benefit from you know, Howard's experience being one of
the few having invested through the seventies. I mean, I've
here to stagflation and Bruce Karsh's partner being the godfather
of distressed and a team with wealth of experience. We
(28:36):
started our private credit efforts back in two thousand and
one doing mezzanine financing junior capital, and now we're doing
you know, higher up in the capital structure, not kind
of the reverse. But the stat that I saw that
was staggering to me is that seventy percent of private
credit managers have less than ten years experience. That puts
(28:56):
COVID at the mid range and less than three and
a half have been investing through the GFC. I think
there's twenty one managers our self included, that have been
around since then. So you do have a lack of
experience working through these cycles, and then probably a view
that rates are going to fall and bail things out,
(29:19):
and you're used to a different environment, and so I
think that's impacting some of the psychology today and I
think we just have to realize that and be aware
of it. And again it's influencing this more conservative view
on how to stay disciplined and kind of construct portfolios
that are not going to get into trouble.
Speaker 1 (29:38):
The flip side, though, is if you don't lean into
the risk, you kind of underperform. So and that's what
everyone's been saying that you know, you need to just
take advantage of it because it's just so good. It
seems too good to be true to me. But do
you also feel pressure that you've just got to keep
up with everyone else in terns of performance?
Speaker 3 (29:58):
No, I don't feel pressure because I think oak Tree
we've developed our track record of strong kind of superior
risk adjusted returns through consistency with us. I really feel
like we're we're always good, we're sometimes great, we're never terrible.
(30:20):
So I think avoiding the losers, letting the winners take
care of themselves, staying out of credit issues, that's the
surest way to develop a long term track record and
keep clients happy over multiple market cycles. Now, the opposite
of that is what you mentioned leaning into risk. We
love to lean into risk when it makes sense, when
(30:41):
there's really a dislocation in the market. So we got
a little bit of one right with the tariffs earlier
this year. That was a great period to go out
and buy discounted bonds in the market. That's why we
keep some dry powder in our portfolios. We did the
same thing during COVID. I mean, these periods of buying
opportunities are really shortening, are fewer and far between, but
(31:02):
if you're ready for them, that's also a way that
you can really increase your total return. You don't have
to stretch for risks to kind of keep up. So,
with everything going on in the macro environment that you
brought up earlier, James, I just have to believe that
more volatility is ahead, especially in equity is I just
don't think it's going to continue to be a straight line,
(31:22):
and that's when we really need to lean in.
Speaker 2 (31:26):
You know, it's interesting you mentioned the equities, because see,
it does seem like there's a you know, I've been
pointing it out. The video is trading it like fifty
times deep. And it's when things like that sort of
collapse that you all of a sudden get a rush
to the exit doors. And you know, to your point,
(31:48):
oak Tree's got the deep experience they've they've always you know,
it's a name synonymous with distress, at least in my mind.
I love the line from Logan Roy where he talks
about his children. He says, these are not serious people.
And you know, to some extent, you wonder some with
the newbies in private credit, you know, perhaps you might
have that same sort of you know, experience, especially when
(32:11):
it comes to restructuring, which we still haven't seen a
private credit structuring cycle. And I guess all of that is,
you know, how how do you see, you know, in
terms of taking advantage of that opportunity set when it happens,
because you do have to be that nimble. What are
some of the things that you guys, you know, do
(32:34):
when those opportunities are you able to shift personnel assets
like quickly across like different strategies and that sort of
thing when it when it ultimately happens, we.
Speaker 3 (32:46):
Can be very flexible then opportunistic, especially in our multi
asset portfolios, where we've got liquid assets that are deployed,
that are ready to be sold and reallocated if there's
a sell off. We also, you know, meanin some liquidity
in the form of cash which we invest in short
duration investment grade gives us a little bit of yield today,
(33:07):
but it's there, and so we're positioned for these types
of opportunities, even in kind of on the run funds
that aren't the traditional draw down funds. The drawdown funds
are very well positioned. We're sitting on a lot of
dry powder and being very disciplined and waiting for a
bigger dislocation before we really start meaningfully deploying those But
(33:28):
even in kind of performing credit, we have the ability
to be very tactical. One of the ways that we
position ourselves too, is just the communication we have across
the firm. Could be remiss if I didn't highlight our
Global Credit Investment Committee. It's led by Bruce carsh It's
attended by all of our credit portfolio managers. We sit
(33:50):
in a conference room every other week for a couple hours,
and we go around and we talk about what's happening
in each of our areas, and we all kind of
collective own asset allocation and making relative value decisions for
a multi strategy fund. And so when you have those conversations,
you're really kind of positioned to act quickly. That's that's
(34:12):
very important as well.
Speaker 1 (34:13):
And when you had the last one, you talked earlier
about best ideas, what were the best ideas that came up?
Speaker 3 (34:20):
Well, you know, maybe going back to to equities, right,
valuations are stretched. I think there's going to be more
volatility in the equity markets. We have a convertible bond
strategy that's actually done very well this year, not by
taking excess, you know, equity risk. It's a relatively low
delta strategy. We tend to focus more on balanced and
(34:41):
even busted converts. That strategy has done very well this year,
but I think some of its best opportunities are ahead.
We could meaningfully grow that in an equity dislocation. So
I think that that's an interesting area that we could
lean into.
Speaker 1 (34:55):
And if they contect to them, and they can both well.
Speaker 3 (34:57):
It tends to be dominated by tech, healthcare. Those are
just the largest parts of the market. The convert market's
been growing though. It's over five hundred billion of market
value today from you know, three hundred maybe just a
couple of years ago. So the issuance is there.
Speaker 1 (35:15):
I'm sorry for our listeners who don't know what busted
converts out. Do you want to tell us in basic terms?
Speaker 3 (35:21):
Yeah, the very very basic level. You know, we kind
of we invest in convertible bonds more so as a
debt investor, so you get kind of the safety of
debt and credit, but you also get the ability to
kind of participate in equity. Upside, We're not converting them,
as the name might imply, but definitely the prices go
(35:42):
up with the underlying equity when it goes up. The
busted converts have really, you know, lost their convertibility, their optionality.
They're not trading like equities anymore. They're much more like
fixed income instruments. So they give you a yield today,
you know, four ish percent, whereas as a more equity
sensitive convertible would have you know, a negative yield. So
(36:05):
think of them as more fixed income instruments, they're just
out of the money. The optionality's gone, but there is
a little bit there if things really do work out.
Speaker 1 (36:16):
And the other stuff you like is structured clos. You
mentioned one of our guests in earlier this year called
them bulletproof. Do you are you that much for a
believer in clos that you think they're indestructible.
Speaker 3 (36:28):
Well, we can't forget the underlying assets, and colos are
broadly syndicated loans, and so you need to underwrite those
portfolios and the loans in those portfolios. You need to
underwrite the managers that are managing them. Not colos are
created equal. We're prioritizing, you know, newer vintage clos as well,
(36:49):
and you need to look exactly when they were issued
and what's in there. Was the manager trying to stretch
for risk, to create an arbitrage, et cetera. So I
never like to use bulletproof for anything, and history would
suggest not. But I will say, you know, the default
and loss races rates for clos much less than bonds
(37:13):
and loans through the cycle, and they do get a
bad rap and confused with you know, CDOs of the crisis.
This is this is not that. I think they're much
more well understood today, even just in the last few years.
And you do need such a meaningful part of the
collateral pool to default before you take, you know, a
first loss, even in a double B tranch, that I
(37:33):
do think it presents a compelling opportunity. One of the
reasons I like double B clos in particular is because
their spreads are still slightly wide of historical averages. You
cannot say that for many other asset classes. So on average,
for a double B CLO, you're still getting almost five
hundred basis point pickup compared to a double B bond.
(37:56):
And I think that that exists for a couple reasons,
and one is because banks and insurers have been big
buyers of colos, but they've focused more on the investment
grade tranches. The sub investment grade tranches usually go to
alternative managers like US.
Speaker 1 (38:10):
Can you do that in size at the moment.
Speaker 3 (38:11):
It's a much smaller market, So definitely, the triple A
is the largest part of the capital structure. It gets
placed first. The double B is small, but there's ample opportunity.
Speaker 1 (38:22):
There and the equity as well.
Speaker 3 (38:23):
Would you buy that, I would you know, the strategy
manages more of a credit products. We want to be
mindful of that. But I think COLO equity is attractive,
and we have other products that invest in that exclusively.
Speaker 1 (38:34):
So a clobb right now is providing potentially equity like returns.
Speaker 2 (38:38):
Is that right?
Speaker 1 (38:38):
That's right, It's pretty pretty interesting. And the other stuff
you mentioned before we got in the studio was CMBs.
That's something that people have kind of blown hot and
cold them Why is it hot now?
Speaker 3 (38:49):
Well, it's hot now because of financing, data centers and
digital infrastructure.
Speaker 1 (38:55):
Is that a bubble? Because we've heard a lot about
the AI bubble? Now, is it a Is it a
fear that that all that stuff is just pie in
the sky.
Speaker 3 (39:03):
Yeah, you know, the part of the market that I
prefer right now in real estate is more on the
R and BAS side. We do both, but I just
think the opportunity and data centers, the financing, the spreads,
it's tight, and so where we can find more interesting
opportunity today is and residential. And we're focused on non
(39:24):
qualified mortgages non QM real estate. So these aren't your
Franny Fetti government backed mortgages, but it doesn't mean it's
legacy subprime mortgage exposure. Either. It means that if you're
self employed, you have a small business like my husband does,
you're taking out a private loan. You're not going through
the government, so your credit scores are actually decent, your
(39:47):
loan to values reasonable. I can actually buy these at
a discount. In the market today, you can't buy much
at a discount. And really the bet there is that
rates fall, prepayments pickback up. These pulled apar you're out
yielding high yield, you're doing so with diversification in the portfolio.
Speaker 1 (40:06):
These all sound like interesting ideas. When we had oatry
loss on the show that was about a year ago,
David Rosenberg, your colleague, said that rescue financing was quote
one of the greatest opportunities we've seen in a decade.
So I'm interested in, you know, the twelve months off
to how did that trade pan out for you.
Speaker 3 (40:21):
Well, we found pockets of opportunity to do rescue financing,
and given oak Trees scale, I mean, we see a
lot of opportunities, but given how wide open capital markets
have been, how much money there is, the opportunity and
rescue financing has probably been lighter than we would have expected.
I was right there along with David, really rooting for it.
(40:43):
But I think the better opportunities are still ahead.
Speaker 2 (40:47):
Okay, I'm curious, So, since we're going across asset classes
commercial real estate, is that something that is also on
the radar?
Speaker 3 (40:57):
It is, you know, James and I were just focused
on the residential, which I find more attractive, But it
doesn't mean that we're not in the commercial space. You've
actually seen some issuance come back in office and single asset,
single borrower. Finally, it feels like office is hit a
bottom and that's coming back. And we do industrial, we
do last mile logistics. We're really wherever relative value is,
(41:21):
we're there.
Speaker 1 (41:23):
So where is the best rounds of value?
Speaker 3 (41:25):
I do think it's in the residential.
Speaker 1 (41:27):
And the potential mortgage backed security.
Speaker 3 (41:29):
Yeah, residential mortgage backed securities at least an hour opportunity set.
And I say that because I think we're under built
in the US. You know, we don't have oversupply. You
haven't seen a loosening of lending standards in that space.
And we have an interesting dynamic right now where most
Americans who own homes have mortgage rates that are less
(41:50):
than five percent the average is three percent. So because
of the prevailing six seven percent mortgage rates that have
been out there, you haven't seen a lot of activity,
you know, a lot of home sales, certainly not refinancings.
And so I do think that that's a part of
the market where rates fall, you're going to see some
activity there and it's going to lead to, you know,
(42:10):
some nice opportunities for that segment of the market. Now,
generally we feel like rates are saying higher for longer,
and we've been in that camp. But it is nice
to have some things in the portfolio that are a
hedge to that view.
Speaker 1 (42:21):
Okay, and what sort of returns are you guessing on
the R and.
Speaker 3 (42:24):
BS a little bit more than high yield right now?
Speaker 1 (42:28):
Okay?
Speaker 3 (42:29):
Yeah, so you know, call it seven seven and a
half percent?
Speaker 1 (42:33):
Okay, very interesting. So all it all sounds pretty rosy.
But you know, we've been doing this for a while, Phil,
and I worry is what really worries you about the
setup in terms of global credit markets right now?
Speaker 3 (42:48):
I think the lack of discipline that we talked about,
just how much money is chasing you know, deals, I
think you need to be mindful of that. And then
also we hit on a little bit, but AI, you
can't not be skeptical. I know it's real and I
see the impact, but we all have to admit we
(43:10):
don't know. It's not going to be a linear development.
And a lot of the AI is let as not
yet commercialized revenue. So a lot of these companies are
spending a lot of their cash flows and development for
the promise of kind of future investment gains. And I
think if the market feels that that's not materializing, you
(43:32):
could see outflows from that space, and that's going to
have a big impact on the market, given just how
much AI spending has kind of kept the economy going
in this cycle.
Speaker 1 (43:43):
On the lack of discipline, I'm interested in how that
manifests itself. Is it deals getting done that you just
shake your head and say, how did that deal get done?
Or how did that company get money? Or you know,
I can't believe they're doing that nowadays. And what stands
out for you in terms of lack of discipline.
Speaker 3 (43:55):
What stands out is that anything with AI is just
getting done right. You have that the title, and your
chances of getting it done are pretty good. And so
I think a lot of the excess we're seeing is
in that space right now.
Speaker 1 (44:10):
When you go fundraising, you are you have been talking
to investors? What do they ask you about credit at
the moment, because there is seemingly much more interest in
the asset class. You know, we are getting a lot
more listeners, a lot more readers, a lot.
Speaker 2 (44:24):
More like what is that?
Speaker 1 (44:25):
How does that work? People who maybe only look at
equities now they're looking at credit. So what what? What
sort of questions you get from your end users?
Speaker 3 (44:32):
Mostly oh, very similar questions you know, to to you.
They want to understand the underlying risks and really the
certainty of that yield. How much of that yield potentially
are you going to give back, you know, to to defaults?
What is kind of lurking out there? So we spend
a lot of time talking about the quality of the
underlying market and where we started the conversation that high
(44:55):
yield looks pretty good in terms of quality loans. You know,
you need to be a little bit more picky and
private credit. There's been you know, some excess, and we
talk a lot about too, what are their objectives? You know,
what type of liquidity do they need? What makes most
sense for them? And kind of constructing solutions that accomplish that.
You have a lot of options in today's market, and
(45:17):
so it does depend too where an investor's coming from.
You know, endowment foundation clients that I speak with that
don't have much credit are kind of happy to take
some chips off the table and equities to fund credit,
and then maybe others that already have credit are kind
of thinking about how do I diversify what I have
and how do I make sure what I have is
(45:39):
what I think it is?
Speaker 1 (45:41):
Great stuff, Daniel Polly from Oakrey has been a real
pleasure having you on the Credit Edge. Many thanks, many thanks.
And Phil Brandle with Bloomberg Intelligence, thank you so much
for joining us today. Thank you, and for even more analysis.
Read all of Fill's great work on the Bloomberg terminal.
It's great stuff. I've been reading it for years. Bloomberg
Intelligence is part of our research department, with five hundred
(46:01):
analysts and strategists working across all markets. Coverage includes over
two thousand equities and credits and outlooks on more than
ninety industries and one hundred market indices, currencies and commodities.
Please do subscribe to the Credit Edge wherever you get
your podcasts. We're on Apples, Spotify, and all other good
podcast providers, including the Bloomberg Terminal at bpod go. Give
us a review, tell your friends, or email me directly
(46:23):
at jcrombieight at Bloomberg dot net. I'm James Crombie. It's
been a pleasure having you join us again. Next week
on the Credit Edge
Host
James Crombie
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