Director, Principal Alternative Credit
Director, KKR Credit
Principal, junior capital and private equity solutions, Churchill Asset Management
Vice-president, Atalaya Capital Management
What do you know now about private debt that you wish you knew when you started out in the industry?
Laura Keffer: That you don’t have to be just one thing! I like being an underwriter. I like being a relationship manager. I love being a mom! I’m grateful that Principal finds novel ways to lean into my strengths that both benefit the team and challenge and excite me, while also giving me flexibility and support as a working mother of three.
Daniele Candela: Private debt is an eclectic industry, which encompasses a number of different strategies – the market is constantly evolving and so firms can’t operate in silos or with a singular focus. This creates a dynamic environment where creative and solutions-oriented individuals can continuously be challenged – and thrive.
Dodson Worthington: Challenging the status quo is critical. Oftentimes, industry participants have a herd mentality and are nervous to go against the grain. Throughout the course of my career, some of our best outcomes have resulted from taking a stand when no one else would. Honest feedback and innovative thinking also builds tremendous trust and goodwill with clients.
Meagan Haugh: It is important to be proactive and take ownership of your career path. Raising your hand is a better way to make progress than waiting for the next deal or task to come to you. While it might not feel natural or easy at first, it will pay dividends in the future.
What tips would you give to more junior colleagues?
LK: First, invest in relationships – find people who can teach and advocate for you, and then you should do the same for others. Second, identify your natural talents and find ways to leverage your strengths in novel ways for the organisation. Third, keep an open mind on every deal to find the right balance between risk and reward.
DC: Keep focusing on developing fundamental skills to become great investors but don’t forget the importance of relationship building along the way – a strong network always pays in the long run.
DW: Always transact with the long-term partnership in mind, as private equity clients are often repeat customers. When closing a transaction, impress them with a flawless execution. When a deal is a ‘pass’ for the platform, be timely, constructive, and respectful with your feedback.
MH: Having a genuine curiosity in the work you are doing is imperative; you should aim to find a role that excites you. I enjoy being at a firm that is always exploring new ways to innovate and make forward progress because I learn something new in my job every day.
What skills are necessary to succeed?
LK: Strong financial/technical skills are very important, but also the ability to take a step back from the numbers and apply real world experiences and observations to identify the strengths and risks associated with each opportunity. There are so many different players in dealmaking, so strong interpersonal and communication skills are important as well.
DC: Beyond the basic skills of a good investor, being diligent, persistent and above all flexible enough to look at each situation with the aim of finding a workable solution which satisfies all stakeholders around the table.
DW: It’s important to quickly understand business models and industry sector dynamics, but it’s also important to persevere. Success is often a result of persistence, frequent communication, and trust – not just terms.
MH: Interacting with people is a crucial skill. The industry is relationship oriented; you often work with the same partners over and over. I am lucky to have mentors who impressed upon me the importance of building and maintaining these relationships with integrity, because as a lender, relationships are often most important during a difficult conversation.
In what ways is the profession changing?
LK: The volume, complexity and variety of data available to private debt underwriters has been a game changer in recent years. In an increasingly competitive market, underwriting professionals have learned to leverage technology and data to make more informed, measured and expeditious investment decisions. Principal uses a combination of data from comparable debt transactions, an internal database of industry-specific metrics and publicly available/third-party data to augment traditional underwriting methods. In some ways, data and technology have made the job more efficient; in other ways, it adds a layer of complexity that lenders will need to embrace to be successful.
DC: The private debt landscape is ever evolving in response to broader macro forces with traditional players, like banks, continuing to retrench more and more, as well as new products (eg, hybrid strategies) emerging to suit the needs of companies and their stakeholders – all of which help create an exciting opportunity set for private debt investors.
DW: New products and solutions continue to develop and emerge, such as structured capital, which often disrupts conventional credit structures. Today, private equity firms and borrowers want to consider a comprehensive menu of financing options for their transactions, which has led to more customisation and innovation in the industry. This trend will continue and will favour managers who have scale and a broad range of capabilities across the balance sheet.
MH: As the industry is maturing, private credit managers are continually finding new ways to innovate. At Atalaya and in the industry more broadly, I have watched certain niche categories of private credit grow into full-fledged asset classes as outcomes are proven out and institutional investors provide support.
There has been a growing focus on diversity and inclusion in private debt; how do you expect the industry’s approach to this to evolve over the next decade?
LK: I expect diversity and inclusion to continue to become a fixture in our industry and I am very excited about that. Principal has had a longstanding focus on diversity and inclusion, and it is a core tenant of our direct lending team as we look to scale, because diversity of thought, experience and background helps us to mitigate bias and make more informed credit decisions.
DC: Bolstering diversity and inclusion is of paramount importance for private debt – and asset management more broadly. It is proven that diverse teams perform better in multiple contexts and we all have to strive to improve diversity across genders, races, backgrounds and experiences.
DW: We are very focused on DE&I at Churchill – both in building our own best-in-class team and with respect to our credit underwriting. As an ESG leader, Churchill has rolled out a systemised approach to tracking DE&I metrics on a regular basis for each of our investments. I presume this will become standard practice with even more managers over the next decade.
MH: I think the industry is starting to appreciate the value that diverse perspectives bring to the investment process. Having different voices in the room helps move away from group think, and since these diverse perspectives yield better results, allocators and investors will continue to focus on DE&I.