How Credit Secondaries Fit Into Today's Private Credit Market

[MUSIC] Welcome to the wealth exchange. Your access to the experts addressing the issues affluent families across Canada face every day. For market commentary and planning strategies to leadership and philanthropy, we discuss the subjects that matter to you. >> Hello, everyone, and thanks for joining us for In The Ring with Rob, the Colour Wealth Prevacable Podcast. I'm Robert Olsson, your host. As background, we are managing five and three quarters of billion of assets in our private capital business as led by team of 38 professionals. For the year 2024, we reviewed approximately 835 transactions, totally nearly 13 billion of opportunities, and invested in 83 of those situations that are aggregating $1.5 billion. The first nine months of 2025, we would invest in an additional 105 private capital opportunities aggregating a further 1.5 billion, so 2025 is certainly surpassing our investment pace for 2024. We've created these podcasts to help educate our clients on the evolving world private capital or showcase great partners and leaders operating in the industry. In each episode, we'll bring you face to face with visionary business leaders. We're not just succeeding, but reshaping their fields. These conversations are designed to provide valuable perspectives, both season investors and those curious about the future of private capital. Today, we're diving to the topic, it's really picking up steam credit secondaries. Whether you're a season investor, just curious about private capital, I think you'll find today's conversation insightful. I'm joined by Stacy Moa-Dab, a director and one of the leaders in our private debt platform. Stacy, always great to have you here. And I'm especially excited about our guest today, Rick Ashor, Rick as he goes by now, Jane. So Rick Jane is a partner in global head of private credit at Pantheon. It's a very large multi-asset manager headquartered in London. Rick joined Pantheon in 2019 to build and lead the private credit strategy. And since then, Pantheon private credit is becoming one of the largest providers of secondary capital, the fund managers and investors globally. Before Pantheon, Rick spent years as a direct credit investor working across strategies like direct lending, special situations, and asset-based finance. He's based in New York now, but he's actually a Toronto native and studied economics and finance at McGill University. Rick, thanks for joining us. Where are you calling in from today? I'm based in New York today. Rob, always nice to talk with you and with our friends up in Canada. It's great to have you on the podcast for sure. Let's start with something guys like to do, which is a bit of a nice breaker. You grew up in Toronto, but now live in New York as you just mentioned. I have to ask you, who did you cheer for when the American League Division of Series was on? The Jays or the Yankees? Oh, of course. Of course, the Jays, of course. I was thankful enough to go to the first ever Blue Jays game in April 1977. My dad took me when there was snow on the grounds of extra-bistroom stadium. So it's been, they've been close to my heart for a long, long time. Someone who sticks it out through snow and sleet in that old stadium watching the Jays and April has to be a baseball fan forever. So glad you did. Absolutely. It was a great series. Unfortunately, we didn't come on top this year, but I think universally, everyone loved this series above all others that we've seen in the last few years. Yeah. All right, so let's dive in the heart of the podcast. Rick, I want to unpack how you went from McGill University to leading the private credit team at a massive asset management company like Bantion. But start, perhaps, with what drew you to private credit, a big challenge is your face and shape your investing approach. Can you take us along the path to where you've ended up today? Sure. Well, I guess I've now spent over 30 years in the United States and my professional career involved in private markets. But the reason I got there or got here, I should say, was because of my family. So my parents immigrated to Canada in the 1960s. My father was a successful small business owner. And I really had a lot of affinity working with small businesses and family owned businesses and entrepreneurs who really bootstrapped their businesses or were successful in creating a product or service that really created a lot of wealth and value. And so that really drew me to finance. So my first job out of McGill was working at Morgan Stanley where I learned how to do corporate finance and M&A and merchant banking for insurance companies and asset managers. You meet a lot of asset managers and insurance company folk. You learn a lot about risk. You learn a lot about the asset and liability side of balance sheets. So really early on, I was interested in the intersection of family businesses, private capital, and entrepreneurship. And I guess what drew me to private credit over the years was really just understanding the business of investing. So I definitely started my career being more of a private equity investor but really developed skill sets where I could invest up and down the balance sheets of companies. My view was if you could look at a business and understand it from both a credit standpoint as well as an equity standpoint, you could be really successful in figuring out where you could drive value as an investor. And so when I came to the United States, like many people started off an investment banking, spent time at large investment banks, learning both that business as well as the asset management business. And then over time, I started my own firm. I sold my own firm. I've helped build three different credit organizations before I even helped build the business here at Pantheon. So that's where the entrepreneurship part of the business and the origin story started feeding into things. But what I learned, I think, over that long period of time, was really how to invest across different cycles, different investing environments, and figure out where you can add value, right? Because capital is a commodity. So if you can, through your own skill sets, create value, create alpha, whether that's through sourcing, through investing, through portfolio management, through building access points of scale for investors, that's what I think is kind of really shaped like career up until this point. - Someone said to me years ago, 'cause I had a private credit business meeting another guy and a small team of 10 people, he said, "Oh, it's the perfect job. You have your own business in private capital. You'll never leave it." And of course, I did. I'm interested because YouTube left, 'cause it does kind of make sense that if you've got that, it is the ultimate, but of course, not every person that comes to that conclusion. - What I learned was investing as a team sport, and I think you need three things to really be successful in building an asset management business. You need to be a good investor. You need to be a good fundraiser, you need to be good at all the other stuff that comes with number one and number two, which is successful scaling of operations, and technology, and compliance, and risk, and all of those things. The world has gone away from kind of the one person band and a Bloomberg who can invest and create value, right? If you really want to build, especially in private credit, institutional scaled quality solutions that investors of all types can access, whether it's someone who wants to invest several hundred thousands of dollars as a private wealth investor to someone in Korea, Japan, or the Middle East, with hundreds of millions of dollars to commit, you have to be able to design an engine that allows you to do that. So what I realized a little early on was, I'm really good at number one. I'm pretty good at number two. The third part I'm probably less good at, and there's a lot of really smart people who can help bring all of that together. And that was the real, I think, excitement for me to come to Pantheon was to say, look, it's not so big a firm as to be bureaucratic. It's not so start-up-y as to be risky. It's really this nice balance of a longstanding 40-year-old firm with real expertise in secondary solutions, first in private equity, and then in infrastructure. And then when I joined really helped stand up and invigorate the private credit secondary solutions business in the way we have, that was the real interesting opportunity for me. So really leveraging a lot of the strengths that we had, and we continue to have as an organization around those important points of how to deliver solutions to clients. - When you joined Pantheon, was it clear to you that the path would be quite a bit better with them than continue doing what you're doing before that? And what were the things that kind of made that true for you? - I think it comes down to people and culture at the end of the day, and how you design systems that allow you to make decisions well. What I realized was there was a really a massive opportunity to take advantage of providing credit liquidity solutions in the market. And you could do this inside of a credit firm, but one of the challenges of doing that is you end up being boxed in from an opportunity set standpoint 'cause you're perceived as a competitor to many of the other GPs in the market with whom you're trying to develop solutions. And so for me, it was really finding a firm that had the right positioning in the marketplace as a partner, not a competitor to the GPs landscape which is so important from a sourcing and information perspective. And then saying, look, I can bring the team expertise and design how we're gonna underwrite and design how we're gonna portfolio manage and really have the freedom and flexibility to do that, I think has really allowed us to succeed in the way that we have. - We've done a couple, last couple of years, we've done a couple of podcasts on secondaries, but they've both basically been about private equity secondaries. Now we're talking about credit secondaries. So I'm not sure how much of a difference, but love for you to kind of explain in layman's terms what a credit secondary is and maybe if you could illustrate with an example, that'd be great. And maybe the any differences in your mind from private equity secondaries for some of those listeners who might remember the podcast that we might have done previously. - Yeah, absolutely. So very simply, what we're trying to do is provide a liquidity solution to a holder of a portfolio of credit assets. And there's many reasons as to why they would be looking for that liquidity, but effectively what we're trying to do is by a seasoned, well performing, visible and diligenceable set of assets, added attractive price to achieve a premium return on one hand and hopefully a better risk adjusted return secondarily. And we do that by sourcing what we call LP interests from holders of various credit funds. So very similar to what you might see on the private equity side. And usually these portfolios are very diversified. There could be 20, 50 or 100 different assets in that portfolio. And then the other types of transactions that we're focused on, which are kind of in the, what we call the GP solution category, are really portfolios that we create alongside the GP where we customize what those assets and diversification and credit quality look like and then use a lot of our expertise to kind of really take that to the next level in terms of value creation. So an example might be earlier this year, we acquired about $700 million of LP interests across 10 different credit managers from a large international insurance company. That insurance company experienced a change in their CIO and was experiencing pressure on their business from adverse events related to their insurance business. And so when insurance companies are faced with some of those factors, they end up deciding to rebalance and portfolio adjust what they own. And they decided that those credit assets, which encompassed about $700 million of net asset value are ones that they would rather get liquidity on rather than continuing to support those managers for an extended duration or period of time. So we would go in and diligence those managers, diligence those portfolios. First, managers second and come up with a price and a solution that allowed LP to get liquidity. - Now, Rick, in both cases, when you talked about a GP lead or a GP lead transaction, it involved the portfolio. So is that to say that you wouldn't typically do a single asset secondary investment for you guys, that wouldn't be a fit. And if that is the case, why not? And the only reason I ask, when I've talked to some folks, what they love when they hear about these GP lead private equity deals, secondary deals, they're always talked about in the terms of a, it's a trophy asset, it's the best asset that they have. And they wanna stay with that asset longer. And that has a course of an appeal, but of course, when you look at the other side of it, half the secondary deals done in the street are pools of assets. And there is a reason why that makes the same or better sense. I'd love to get your perspective on the ground floor, particularly from a credit perspective. - Yeah, so to go back to your other question around that comparing the differences between private equity and private credit, credit is a defense first business, right? We are in a negative convexity product where you are trying to protect capital and trying to solve for the right risk adjusted return in a diverse portfolio of assets, right? We don't wanna take binary risk on one asset as you correctly point out. And we don't wanna necessarily step into someone else's credit problems that have challenges. I think that is definitely a big difference between how someone thinks about driving return in a credit asset versus a private equity asset. Private equity assets think about single assets, you think about, well, what kind of discount can I get to some set price? Maybe that discounts the right price to buy in, maybe it's not, time will tell, but for us in credit, we're really trying to protect capital first, and we're trying to get paid for providing the liquidity solution versus trying to take on excess credit risk. So that means for us in terms of our approach, is we're not chasing discounts because in our world, discount is only one portion of the value creation that happens in a credit secondary portfolio. It's about avoiding losses. It's about reducing fees and expense leakage. It's about optimizing the structure. It's about realigning the GP around those portfolios. Sometimes we can get the benefits of buying assets that are already held at a discount to par and we can get a pull to par value creation dynamic. And sometimes we're buying little bits of warrants or equity or other things that can help drive upside. So I think the mentality around how you think about private credit and private equity is very, very different. We think about risk different on the credit side. We think about protection of capital differently. But what is interesting about credit secondaries is that we can actually drive some convexity to the upside in our types of strategy which you don't get in typical private credit strategies where you're originating at or close to par. If we're buying senior secured risk at average discounts of 10 to 12% or opportunistic risk at 18 to 20%. There's a lot of room there to budget for things going wrong. And if those things aren't projected to go wrong or don't manifest themselves going wrong, then your base case returns can really outperform and drive the alpha that many of our clients are looking for. - Interesting, I love the way you describe that. - Now what you focus on include kind of all private credit strategies or the ones that more align themselves to what you guys are targeting and I think about distressed debt or mezzanine. I mean, Greg Lening clearly works. But are there some, sometimes in the private credit space that don't really work and probably less a focus feed? - Yeah, great question. So very early on when we were designing this program we said to ourselves, the risk reward is very different in private credit both geographically as well as by strategy. And the way in which investors invest in private credit also aligns both geographically and by strategy. So we very early on created separate pools and separate portfolio constructions to go after the entire market of private credit. So we do have vehicles that focus on senior secured, sponsor backed floating rate first dollar risk for both the US and European markets because the dynamics in each of those markets, although very big when you zoom into them have very different dynamics depending on the size of company or strategy that a manager is pursuing. So we created separate access points there and then we also created broadly defined a more opportunistic portfolio of private credit that encompasses junior capital, mezzanine but all sorts of other strategies that have been around for a long time but are starting to get well known again, right? So those include things like asset-based lending. So we've done some things in aircraft lease finance as an example. We do things in growth company lending. We just completed a very interesting deal in the music royalties and film royalties space which has yield-like characteristics as well as the potential for nav appreciation. We do things in capital solutions or opportunistic credit. So we're really trying to cover the whole pinwheel of private credit in terms of opportunities that are there. Mostly focused on privates, not necessarily focused on things like CNBS or RMBS or CLO equity per se or other esoteric forms of private credit but really areas where we have a competitive advantage in terms of experience and data and information. - If you're an investor, particularly a private wealth investor, just broadly, why would one think about private credit secondaries versus investing in a private credit fund or maybe hard to do a pool of funds that might be part of the answer? But I'd love to get your perspective on why that might be appealing or not to an investor. I guess it doesn't just have to end at private wealth to be any investor, I suppose. - Yeah, absolutely. I think so we talk about this as being the value proposition of credit secondaries. And it really holds true whether you're a large insurance company, institutional investor, family office or private wealth investor. And I think what we've noticed in private credit on the primary side for many years is that in many parts of private credit it's gotten extremely competitive and extremely commoditized. And one of the other challenges we're seeing is that depending on the strategy or manager you pick, the dispersion of outcomes in terms of returns can be very wide. And as we head into a new interest rate cycle, that dispersion we think will increase. So a lot of our clients are looking for, on one hand, alpha, they're looking for areas where supply of opportunity exceeds the capital available for it. So hopefully there's an opportunity to drive alpha and premium returns. And the second thing they're looking for is to reduce the probability of losing money, slash risk and dispersion outcomes. And so if you're able to, through our strategies, create assets at interesting entry prices that are often discounts to net asset value. And you can do that multiple times and create diversification across so many different metrics, right? It's not just by company, but it can be by vintage year, by GP, by industry, recognizing that every strategy in private credit sometimes has good times and sometimes has less good times and sometimes has bad times, right? Not everything works at all points in the market. So from our standpoint, if we can create that diversification, do it in seasoned high quality credit, generate yield, generate diversification, do it on a shorter duration basis. The probability of achieving both that alpha and the compressed dispersion of outcomes is really, really interesting. So if you think about insurance companies, they love that outcome, right? They really want to be able to solve for their liability set. For private wealth, we're obviously talking about that in market today. It's just another great option to complement what they already own in private credit. So we find many high net worth investors already have exposure to, let's say, BDCs or regular way direct lending funds. But to get access to credit secondaries can help drive a little bit of alpha. And in some cases, some downside protection versus other assets they might own at part. So when I think it has a lot of different exciting use cases. - Okay, well let's jump a bit more into the market side of things. You joined shortly after Panty and Longshed's first credit fund. Can you talk a little bit about the market has changed since you joined? What's driving the growth in credit secondaries specifically? And maybe why the credit secondary space evolved a little bit after the private equity secondaries market? Or at least it does in my mind, 'cause I've heard so much about private equity, but not so much about private credit so far. - Yeah, absolutely. So the growth of the private credit secondaries market has followed the growth of the private credit primary market or AUM that exists today. So about maybe five or six years ago, our market was on the primary side just north of maybe a trillion. Today it's a $1.7, $1.8 trillion asset class. And according to various estimates is growing at 10 to 15% per year. So the stock of private credit assets that are unrealized as well as the, call it $200 billion of institutional capital formation in private credit continues to increase the stock of that capital. Then you add in the fact that it was around maybe 1,100, 1,200 credit managers, all competing globally in private credit through all different forms of that pinwheel of private credit we talked about. Each of those vehicles or each of those fund managers has dozens to hundreds of different types of vehicles as well as different types of investors. So fundamentally what's happened is you have a maturation of a very large asset class with many different GPs, LPs and structures that all need some level of liquidity management within them. And if you look at what's happened in private equity secondaries, you know, that market's been around for 35 years, you know, has 300 plus competitors all doing different forms of private equity, right? The adoption curve there took a very long time to happen. But it happened because that asset class got so big. Same thing in infrastructure, we have a $20 billion plus infrastructure secondary's business, the primary market got really, really large. And then investors demanded some form of liquidity. The real big bang moment in private credit secondaries happened when we created the industry's first dedicated credit secondaries vehicle in this case focused on Europe in 2018. So what really changed was both the approach in terms of cost of capital and the skill sets and team that was required to go after that type of market opportunity. So if you were looking at a credit fund prior to that time and you were a private equity secondaries buyer with a very high equity like cost of capital, you would bid on a quality portfolio, let's say in the 80 cents on the dollar range. The seller would say, thanks, but no thanks, that's not interesting to me. And the buyer and seller, you know, did not meet at that point in time. Back in 2018, with a set of German insurance clients, we lowered the cost of capital that was much more relevant for what they were looking at and that aligned better with the underlying assets we were going after. So if you can align the cost of capital to the asset class that you're buying, the spread between buyer and seller narrows, sellers get what they want. They're willing to take a liquidity discount for the opportunity cost of deploying somewhere else. The buyer gets the attractive pricing that they want in order to justify the effort and return that they're going through to provide that liquidity solution. So that was the real big bang moment that created, I think, the notion around that demand for credit secondary. So we've, you know, it's a cheesy line from the field of dreams, but if you build it, they will come and they have come and we've shown it, right? So it'd be created the mouse trap, the origination, the underwriting and the cost of capital altogether. I think we've unlocked a lot of that liquidity that's come to the market. So I think to us, we're kind of the key moments that contributed to the growth. And now what you're seeing on the GP side of our business is a recognition from GPs that they need to be more front-footed and proactive around managing their portfolios for LPs. So I think gone is the day of just saying, I'm gonna invest in a bunch of credit assets and let them naturally a treat over time. That is a difficult thing to do for a number of reasons. We've now recognized as an industry that private credit isn't a self-liquidating asset class as we maybe all think it is. And so you're seeing more GPs say, I wanna simplify my platform or I wanna drive liquidity back to my clients in order to crystallize performance. Maybe I can use the solutions at Pantheon to my benefit to help my LPs help myself as the GP and have Pantheon sit in the middle of constructing that type of liquidity event that makes everyone happier and better off. - It's interesting that, you know, in the private equity sector, he's marked years ago, there's kind of a bad word talking on secondary. So that was hiding some problem. You're using it in a market to get rid of something. Whereas now it almost has evolved to a point of, you're not thinking about secondary, you're doing a disservice to your investor base. You have to at least be thoughtful of our sum of these assets. It's a better to sell them to repurpose the money elsewhere and there's still a good trade for both sides. I guess it's the same for private credit. So in the private credit space, obviously it's evolved that a probably a more quick pace than the private equity space in secondaries is evolving 'cause it's more mature. But you see there's still a huge demand supply and balance between buyers and sellers in the market. That is, it should continue to have reasonable growth in private credit secondaries because of that 'cause it's still in early innings. Or do you see that it's catching up very quickly and it's gonna be very much in balance in a short period of time. How do you think about that? - Yeah, so the adoption, you know, a lot of secondaries investors look at the adoption rate or the turnover rate in terms of deal volume divided by the stock of that capital. And I think it's basis points in private credit versus hundreds of basis points in other asset classes. So we are in the very early innings of where the penetration rate and market understanding and market adoption is in credit secondaries versus those other asset classes to maybe put some statistics on it. You know, we saw and have seen close to 50 to 55 billion dollars of top of the funnel originations for our strategy compared to about 36 billion last year and $24 billion last year. Again, recognize we have one of the widest apertures in terms of sourcing, this type of deal flow and about two thirds of what we look at is done outside of intermediaries. So we think it's a pretty interesting representative set of data points around just the growth of the whole marketplace. And there's only about maybe $15 to $20 billion of deals done at least in this year. Certainly has been a significant deployment year for us with similar deployment this year versus what we completed all of last year which was about $3 billion. But if you just look at kind of the growth of that deal flow and the growth of just the asset class, we think there could be $180 billion of deals sourced over the next three years. And that's simply not changing the penetration rate or the adoption rate of those types of solutions is just simply growing the asset class. And if you assume even like one third of that converts into deals, there's only maybe a third to 40% of the deal flow that's available for that. So I think the market supply demand, it's definitely in favor of the buyers. And I think for players like us that can write $500,700,000,000,000 billion checks, it's even less competitive and more supply demand and balanced compared to other parts of the market. So I think that's where size and scale can be your friend on the larger side of transactions and credit secondaries. And even in the smaller side, although it's probably becoming more competitive, that's where data and technology and in convency and having a under plus GP relationships like we have can be significant advantages there. But we feel really positive about secondary supply and demand generally, whether it's private equity infrastructure and certainly in private credit as well. They certainly like to bring you into the conversation, maybe cheer a bit of a description of your role at Nicole and how you work with a group like Pantheon private credit. - Yep, Rob, thanks for bringing me in here. I'm a director of the Nicole of Private Debt Fund. I sit in our Toronto office where nine-person team split between Vancouver and Toronto. And I've been with the platform for about three and a half years. And not unlike Rick, my background is all, I also started, actually did my undergrad at McGill. And I did start an investment banking, although not in Morgan, Stanley, I was at CIBC here in Toronto for a couple of years. But then I did end up in New York for quite some time and investment banking as well. So my background is largely in credit, underwriting credit as part of leverage finance platforms. And I joined Nicole about three and a half years ago for some of the buy side, but it's been a phenomenal experience watching the fund grow in flourish over these last few years. So I'll start by maybe talking a little bit about how we're partnered with Pantheon within the Nicole of Private Credit Fund. Pantheon has multiple strategies. I don't think Rick has dove into this yet, but we are a partner with Pantheon and their opportunistic credit secondaries strategy. So within our fund today, as you know Rob, we have a limited number of spots that we can make for fund investments. And we're especially selective when making fund investments that are somewhat outside our traditional sponsor back direct lending strategy. So when we decided to zero in on credit secondaries, we had a number of conversations with many players in the space, but Pantheon emerged as a clear leader, having the breadth and depth of expertise that many of the newcomers were lacking. We were really excited about the opportunity to invest with Pantheon and specifically in their Pico 3 strategy. We connect with the Pantheon team on a monthly basis to hear what they're seeing in markets. We learned about innovative ways that they're using secondaries in terms of structuring to hand for turns. And we occasionally see these credit secondary opportunities to invest in them directly alongside Pantheon, depending on the size of the opportunity. So it's been a great partnership so far. We're learning a lot along the way. And I know you asked, you know, how this strategy fits with in our portfolio because it is primarily focused on traditional sponsor back direct lending. We do have a small pocket within our fund to add a little bit of alpha and recolleted some of that alpha earlier. If you think about traditional direct lending there's not a whole lot of upside. You make a loan to a company and if everything goes to plan you're gonna earn your interest income over time and you get repaid and full when the loan returns. But there aren't many surprises to the upside along the way. The borrower isn't inclined to pay back more than what they initially borrowed. With credit secondaries, especially opportunistic credit secondaries, there's gonna be more upside. So you're purchasing a portfolio of loans at a discount and you might negotiate a price for that pool of loans that ascribes less value to certain underperforming loans. So you might get them for a really attractive price which gives us the opportunity to create that alpha. In addition to that, when you invest in a credit secondaries opportunity your capital gets invested immediately. You don't have to wait to have that capital return or accrue interest and you also don't have blind pull risks 'cause you know exactly what you're buying at the end of the day versus investing in a fund that's going to invest in assets over time. So you know what we are getting at the onset. We really like that about the secondary space. And sometimes you also see small equity positions in these underlying portfolios which adds to the possibility of achieving alpha. So I think there are a whole host of reasons why we like credit secondaries for the Nicole Private Dept fund. It isn't this sort of sleeve that is away from our core direct lending strategy. But we have a lot of hope that our partnership with Canteon is really gonna drive some alpha within the fund over the course of the next few years. Canteon is considered a leader in private credit secondaries. What sets you apart from Canteon's platform and others that you talked a little bit about size. So I'm getting a sense that size will matter in the space but love to get your words and what creates the advantages that you guys have. - Yeah, certainly you know from our perspective you know being a pioneer and early entry and early mover in this market has been a huge advantage. The reason it's a huge advantage is because we've really helped articulate to the market the use cases around credit secondaries for both LPs and GPs. And it's allowed us to accumulate significant numbers of data and information leveraging technology as well as relationships. So the more you've sourced, the more you have an advantage in terms of all of the data and things that you've done. So we've completed you know almost $11 billion of transactions across over 220 investments. We've raised $12 billion of capital. We've done some of the largest and most complex GP liquidity solutions in the market which is continuing to be a bigger portion of the market. We've done over 40 of those. Having those relationships and being as I mentioned before kind of a partner first to GPs is so important in terms of relationships, getting access to information and being the first call on transactions. So in many ways, and competency is a huge competitive advantage in terms of what we do. And then stepping back as the platform, you know, we're a large independent secondary solutions business. So we have a $40 billion plus private equity business. We have you know, a dozen plus offices around the world. Capabilities in both North America and Europe. And we have a dedicated team of 25 plus people who do nothing but private credit. We found that many others, you know, are either part timing it from their private equity secondary's business or the approach the business as an allocator and not a direct investor or the approach the world as a competitor to the market which we just think, you know, has its own challenges in terms of capitalizing on the full opportunity set in credit secondary. So I think those factors early mover and competency relationship orientation plus our ability to be of size and scale, I think is a huge advantage and sets us apart from a lot of people. We also tend to focus on quality. We really want to partner with the best. We really feel like we want to avoid adverse selection in our market by partnering on performing assets. So we're unlikely to be the person that chases bad assets through the sake of an enticing price because we know what happens later on to some of those types of portfolios. So from an investment philosophical perspective, you know, coming back to kind of my origin story, growing up in Canada, going to McGill and coming here, I think is really informed how we think about deploying in this market. You know, these are challenging times to be an investor. Everything seems expensive. Everything feels like it's just risk on, but there are a lot of warning signs that we all see out there that I think can be risk-medicated through that type of investment approach. - So you're gonna bring you back into the conversation. That's not pretty compelling. My private credit secondary is make good sense. We've, in our private debt portfolio, our platform has been primarily focused on direct lending. Can you tell us a little bit about how we're thinking about credit secondaries and working with groups like Pantheon Private Credit? - I think we're really excited about our partnership with Pantheon. We think there are a lot of really interesting market opportunities. We have the ability to walk through their pipeline with their team on a monthly basis, right virtue of our partnership. And it's really amazing to see what they've been doing from a structuring perspective. They're not of information they have. Just by way of having a first mover in this space, it's really giving them a strategic advantage. - Rick, I wanna go down the path of kind of the uncertain environment that we're in. And does that, if you're an investor who's a little bit more risk averse, given all the noise that exists geopolitically, is secondary is something more interesting, less interesting, does it matter? Can you invest more wisely in a secondary's private credit transaction than you can? A primary transaction, does it matter? How does one think about this asset class or sub asset class and the general environment? Is there a way to optimize? Is really always, our investors are looking for it. And I somehow get better performance. And does the secondary's market help me do that? - Yeah, I think you hit all the major points, Stacey, I can just set it better myself. I think in terms of just reminding people on the use cases, I do think more and more investors are now gravitating from using credit secondaries as a complement to what they own. And they're using it as a replacement for other areas where it's more challenging to access strategies cost effectively or participate in the depth and breadth of other things that are going on in the market. As an example, it's probably unlikely someone would want to participate in an aircraft, leasing opportunity in an entire fund, but through something like PCO, you can get access to that, finding the right deal at the right time at the right price or music royalties for that matter or something else that becomes more bespoke or dislocated over time. So I think fully think that the use cases are starting to migrate depending on who the client is. - So you've been doing well with strong environment, but even in a more challenging environment, it could be just as many opportunities if not more. It sounds like particularly if you have the assets to do that, you're not scared, I guess. It doesn't sound like you're scared of a more unsettled environment. Well, certainly in credit, that can be the case. So I think in credit secondaries, there's a steady stream of ever increasing deal flow related to simply rebalancing or tactically reallocating one's private credit portfolio as well as, as I mentioned, GPs wanting to be more front-footed from a fund management perspective with their clients. But there do occur instances where there is dislocation in the market and you can transfer from being kind of a regular all-weather type of strategy into one that becomes a little bit more tactical and opportunistic. So maybe a good example of that was during COVID, we were in the middle of a transaction with a large Midwest pension plan and around a senior direct lending portfolio. We knew the assets extremely well. We liked the quality of the information we were getting access to. And because of the uncertainty with respect to COVID, we used it as a great transaction dynamic to dictate price during that process in a more aggressive way to take advantage of, you know, one's the seller's perception of risk and closing that transaction and our perception of risk and the additional margin of safety that we wanted to price into that type of deal. During the guilt crisis in the UK, we also got a very opportunistic buy at a very high discount around a portfolio of assets where the seller was suffering from that liquidity challenge, a regulatory challenge plus a timing challenge. So you can use these dynamics as a secondary's player to drive even more alpha above and beyond what you might normally see in the market. You kind of summed up all the reasons why credit secondaires can continue to be a great opportunity in the future. Stay so I'll give you one last jump in, anything to add to what Rick was saying on the secondary's market and kind of where it's going. - No, I think he's done a great job. Nothing really to add and then very excited to be invested in the space and to be partnered with him. Yeah. - That's where I guess the experience of investing for almost 30 years comes into play. You have to know when there's opportunity and know where your edge and angle is to take advantage of that type of opportunity. The great thing about secondaries though, particularly in credit is the dynamics of credit secondary cash flows and the diversification can really be downside mitigating versus other types of strategies, right? Because what I mentioned before in terms of compressing the return profile or the dispersion of returns is such that when we underwrite a return in a deal, we can often factor in high levels of loss into our downside case that are often three to 10 times higher than what the GP has ever experienced before. So if you have a major event or challenge with that GP or in an asset class, one, you're protected through diversification by manager, by strategy, by asset, by sector. Number two, you're protected by the fact that at least with our senior secured assets, you have a lot of loan to value or value beneath you that needs to get impacted first before you start losing capital. And the number three, we ourselves are buying these portfolios at attractive discounts. So if you have discounts being top of the capital stack and diversification and doing it over shorter duration, those are tremendous risk mitigating attributes as you invest in an asset class that has its competitive challenges, has things that we're all worried about, whether it's spread compression or the expectation of higher defaults or losses. But the great thing about, again, about the strategy is that you can tactically shift how you view the investent environment through your own underwriting. So if we think the losses in the investment environment are going to increase, well, we can dictate that in our models and what we expect to pay for the portfolios. If we think interest rates are going to stay higher for longer or get cut quicker, we can factor that into how we think about duration and the rate curve and the like. So it's really one of those interesting strategies where there's a lot of different levers and toggles to drive either asset or capital protection or to take advantage of dislocated opportunities when they do arise. - Well said, first mover advantage in 30 years of experience, I think always matters in any investing class, particularly credit. - The other thing I would add on that, like we always, we talk about the first mover, which is helpful, but I definitely remember some of my history books where they say sometimes being the pioneer can be the ones, you know, bear all the brunts and scars of being that pioneer. I think what's more important in terms of competing in any marketplace is really knowing your terrain. So it's great to be the pioneer, but it's really important to know the terrain, where the landmines are, where the opportunities can be. Learning from, you know, your own failures are learning from where things haven't gone as well and understanding what other people are doing. And I think that's the real advantage that we do have is that, you know, we've been a pioneer, but now we know the terrain extraordinarily well and we're continuing to climb up the mountain, at a pace that is having other people having challenges and keeping up. And so those folks will make mistakes along the way and they'll have to learn a lot of the hard challenges and issues that come along with building and scaling a business. So that's my perspective on it. So it's great to be first, but you'll all have to know where you are as well. - Yeah, well said. Trivik dialogue, Rick, stay safe, thanks to both of you for joining and sharing your thoughts and insights, trivac discussion. And although similar to PE Secondaries, clearly some differences. Thanks to each of you as well for joining our podcast with Rick Jane and keeping an eye out for our next podcast where we'll explore why commercial mortgages and even residential mortgages remain poorly understood yet interesting asset class for investors. Until then, cheers and keep your guard up. Thanks everyone. - Thanks, Rob, thanks, Daisy. - Thanks, everybody. - Thanks, everybody. - Thanks, everybody. - Thanks, everybody.