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On today’s show hosts Mary Spencer and Dan Mikulskis are joined by LCP investment partner and lead Private Credit researcher Steve Hodder. 

They discuss:

• What is private credit and how the investment opportunity has arisen in Europe as banks stepped back from lending to small-to-medium sized businesses since the 2008 financial crisis.
• What private credit offers investors (why invest in something that is illiquid)?
• How the fund structures used in private credit are key in helping the managers be patient and take a longer view allowing them to put in place turnarounds or restructure a business
• The imbalance between the supply and demand for lending that created an opportunity for investors in the first half of the last decade
• Why covenants matter in credit investing, and in private credit in particular
• The skills you need in a good private credit manager
• Our more recent focus on what we can “opportunistic” credit managers and why we think this is a great investment idea at the moment.
• Why stories like “good company bad balance sheet” are key to this idea
• The fine line between being a White Knight and a loan shark in circumstances like today, and how we ensure the managers we recommend are behaving like the infamous “vulture” funds of the type portrayed by Michael Douglas in the movie Wall Street.
• What portfolios and individual deals look like in opportunistic credit.
• Fund size and asset gathering – the big conflict in asset management
• Where the risks lie, and what returns investors should expect

Useful links referred to in our podcast this week

• Prequin - £100bn a year of flows into Private Credit    

• The Economist stories on the rise of Private Credit - Lenders of first resort

• The Economist stories on the rise of Private Credit - The rise and rise of private capital
• The Economist stories on the rise of Private Credit - Distressed debt funds are waiting for a downturn 
• The Economist stories on the rise of Private Credit - Can private equity firms turn a crisis into a opportunity
• Steve Hodder - LCP profile 

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Each LCP investment uncut podcast is for information and marketing purposes only and does not constitute any form of investment or financial advice or a financial promotion (under the Financial Services and Markets Act 2000). All views expressed by the podcast hosts and guests are purely their own opinions and do not represent those of LCP, its clients or affiliates. Our podcast listeners should always seek independent financial or legal advice before making any financial or investment decisions. Please refer to the Legal Notices section on the LCP website for further information.​