What, if any, are the positives that you see emerging from the pandemic?
Kirsten Glaser: Pent-up demand will create an upturn in investment volumes. Investors will look to new business opportunities, whether it be new asset classes or new markets. For me that will create an opportunity to advise on re-entry into the market, portfolio optimisation and capital/liquidity management.
Marcin Leja: Well, grey hair. A few months ago, I heard from one of the LPs that he would only consider managers with a decent amount of grey hair. I have it now… On a serious note we can see increasing deployment opportunities in our markets. The banks have cut down on lending. The state support comes mostly in the form of loans that will need to be repaid soon. Capital markets are rather shut down. And the corporate funding needs just got bigger. I am pretty sure that I am facing the most intense period in my career.
Elizabeth Di Cioccio: When all of us were forced to work remotely, there was an inevitable blurring between work and home. I think that this dynamic prompted companies to pay more attention to employees’ personal circumstances and potential challenges than ever before. I have been truly impressed by the effort and thoughtfulness that KKR has shown during this time, where potential challenges to work-life balance, wellness and mental health have been proactively addressed. Although we will all be back in offices soon enough, I think the considerations around work-life balance and wellness will be here to stay.
James Del Gaudio: In terms of family, this has definitely taught me that we were overbooked with activities, and the silver lining of all of this was that we got to spend a lot more quality time together without all the rushing around.
The same is true for PSERS in that everyone has been more available without all of the business travel. Although I do expect travel to resume at some point, I think this pandemic has taught us what is really possible in terms of virtual meetings. Unfortunately, I’m not sure anyone will ever shake hands again, so I’m not sure what that means for the ‘handshake’ agreement!
How has you work life changed during the coronavirus?
EDC: Saying goodbye to old colleagues at Mercury Capitol Advisors and meeting new ones virtually was certainly different from the transition I imagined. My new colleagues at KKR have made a big effort to make me feel welcome and assist me with getting up the learning curve that is associated with any new job. Ironically, given that nearly no one is travelling at the moment, it’s been somewhat easier to virtually connect with colleagues all around the globe than it might otherwise have been. So, there’s a silver-lining, despite the challenging circumstances.
JDG: Friday 13 March (perhaps a bit ominous) was the last day in the office and I have been working from home ever since. That said, we have managed to be very productive working from home and our team is probably communicating better than ever. The one negative is that we don’t have nearly as much informal interaction with other teams outside of our asset class, which I do miss.
KG: The biggest change is that I actually took new employment moving from CR Capital Advisory, which I launched, to become senior director, head of debt advisory with Mount Street. It was a very strange time navigating the process 100 percent remotely, but it has been really refreshing and exciting to join a company that values flexibility so much and sees great opportunity to further assist its clients in these challenging times by adding a new strategic hire to its debt advisory business.
ML: It’s definitely moved more into online. Video conferences seem to work perfectly well and they save so much time. Also usage of e-signatures, the virtual flow of documents, etc. All in all, it was a leapfrogging for the adoption of new technologies in our daily operations. On the other hand, it also means more work at home, blurring lines between work and family time, which is not always a good thing.
What are the most rewarding and challenging aspects of your role?
EDC: I’ve always enjoyed my role in the Middle East, as I am able to regularly interact with so many thought leaders in the investment community. It’s a huge privilege to sit at the nexus of this exchange of ideas between sovereign wealth funds, family offices and other sophisticated investors.
During the covid-19 lockdown, I think that communication remained high and everyone was able to successfully carry on with investment activity by embracing technology. However, I think that the conversations were a bit more ‘transactional’ in nature, and I miss the less formal engagement with the investment community that comes hand in hand with being able to meet investors in person.
JDG: First and foremost, it is extremely rewarding to know that your hard work is helping to secure the retirements of hundreds of thousands of members/retirees of PSERS. With regard to my specific role – and perhaps many institutional allocator roles – the unique access to some of the brightest minds in finance never gets old. I always feel like I am one or two phone calls away from leading insight on any topic of interest.
Bandwidth is always a challenge, but I think many public pensions have learned to do more with less and I do feel lucky that I was able to have an investment professional join me late last year to assist on all things private credit-related.
KG: I value building relationships with clients and watching their commercial real estate projects and portfolios grow throughout their life cycle. The challenges come from the nature of the market: it’s very competitive and I am always hustling. It is vital to always know which investors and lenders are active at any one time. It is challenging but I thoroughly enjoy it.
ML: I guess the most challenging part is to find and allocate time for everything that you need to do. Being accessible to your colleagues, managing your own transactions and credits, taking care about the development of CVI, fundraising, workouts and a lot of other things that all require your attention. And then you would like to be at least a decent parent and husband. Generally, I feel that, with time, the amount of issues at hand keeps on rising. Of course, one can see the effects and this is really encouraging. For instance, if you look at the fantastic growth of CVI in the past seven years – from three to almost 30 people on board – it feels great to be a part of it.
What is the most valuable career lesson you have learned?
KG: My mentor instilled in me the importance of relationships. Not in the traditional relationships or contacts you need to get ahead in life, but in the importance of building true, deep friendships with others in the industry. Being kind and honest will build trust and friendships, and when there are tough times, you turn to your friends.
JDG: Be humble, gracious and don’t be afraid to speak the truth.
ML: That it is all about people. You can solve each and every problem with good people around. And vice versa – even potentially easy cases may end badly if you deal with the wrong people.
How would you like to see private debt evolve over the next 10 years?
EDC: Over the past 10 years, we witnessed the rise and institutionalisation of private debt as an asset class, and I think this will continue to be a mainstay in investors’ portfolios. What will change is the landscape of managers active in this space. In the aftermath of the pandemic, we should witness a bifurcation in performance between the stronger managers and the managers who adopted less bespoke approaches. Most managers performed well in the benign environment of recent years, which made manager selection incredibly difficult.
JDG: It is really amazing how far private credit has come over the past 10 years and I would expect it to continue to become a strategic component of many investor portfolios in the future. Although it is great to see the asset class become accepted more broadly, we do need to be mindful that more widespread acceptance will lead to fewer inefficiencies. That said, the investment opportunity set for private credit is vast and spans many collateral types – not just corporate direct lending or distressed debt.
ML: I would like to see the asset class keep growing in various geographies. My personal goal is to introduce Central and Eastern European private debt to global investors and definitely I will keep pursuing it. I want the investors to evaluate CEE on an equal footing to the western part of the continent when considering opportunities in Europe. This will not be easy. Covid-19 has added more uncertainty and it has already harmed the CEE case. We can see it in our fundraising. People tend to seek well-known opportunities as they perceive them to be less risky, even if it is just not the case. But I am still optimistic about reaching my goal.
What would you like those outside the industry to know, or better understand, about private debt?
KG: As I’m involved specifically in commercial real estate debt, I’d like to direct this question to young women. Commercial real estate is dominated by males and there is a misconception that it involves physical labour and construction, which tends to deter women. There are so many different career paths one can take and the CRE landscape is always changing, which makes for exciting careers in real estate, including debt.
JDG: That we are committed to this asset class as a long-term investor and that we will continue to push our managers to be good corporate citizens.
ML: That for many investors it offers a very attractive and more acceptable risk/return profile compared with private equity or other asset classes, not to mention higher liquidity. In general, this explains the rising popularity of the asset class. It is not an accident that large PE houses have also started credit operations. This asset class is here to stay and gain more and more popularity. From the client side, the entrepreneurs should learn that in many cases they do not need to give up corporate control to PE to finance growth. Private debt with its flexibility and creative structures may be a more suited and, in the end, less costly solution. I always repeat to the companies I negotiate with that there is nothing more expensive than equity.