0:02

This is Mesters in Business

0:04

with Very Results on Bloomberg

0:06

Radio. This

0:09

week on the podcast, I have

0:11

an extra special guest. His name is Mark

0:13

Jenkins. He's the head of Global Credit

0:16

at Carlisle Group, which runs

0:18

about three one billion dollars

0:21

in assets. Mark manages

0:23

about seventy three billion dollars in credit

0:25

assets. He has a

0:27

fascinating career doing

0:30

all sorts of work across the

0:32

credit universe, and there aren't very

0:35

many people as knowledgeable as he is, uh

0:38

in as many types of fixed

0:40

income and credit investing as

0:42

he is, whether it's aviation,

0:45

real estate, liquid a liquid,

0:47

private investments, um,

0:50

distressed assets, really across

0:52

the board. His focus

0:55

on alternative credit

0:58

assets is quite

1:00

comprehensive. Carlyle

1:02

is one of the fastest growing credit shops and private

1:05

equity shops out there. They're probably traded

1:07

and I just found this to be a master

1:09

class in how to put

1:12

capital at risk when you

1:14

can't get a whole lot more than one and a half

1:16

two percent and fixed income but you

1:19

don't want to see the same sort of volatility

1:21

and risk that you see in equity.

1:23

What's the sweet spot in between the two? Really

1:26

just an absolutely fascinating conversation

1:29

and I learned a lot and I think

1:31

you will also with no further ado,

1:33

my conversation with Carlisle Groups

1:36

Mark Jenkins. This

1:40

is Masters in Business with Very

1:42

Redults on Bloomberg Radio.

1:46

My extra special guest this week is

1:48

Mark Jenkins. He is the Managing

1:51

Director and Head of Global Credit

1:53

at Carlyle uh, the

1:56

private credit and investing giant with

1:58

over three billion dollars in

2:00

assets under management. As

2:02

head of the Global Credit Desk at Carlisle,

2:05

Mark overseas seventy three billion

2:07

dollars in assets under management.

2:10

Previously, he led the Canada

2:12

Pension Plan Investment Boards

2:15

Global Private Investment Group, and

2:17

prior to that, he was at Barclays, where

2:19

he was Managing director and co

2:22

head of Leverage Finance. Mark

2:24

Jenkins, Welcome to bloom

2:26

bark Berry. Thanks for having me. I appreciate

2:28

it. I'm excited about this. This is an

2:30

area that I don't think people

2:33

understand or or hear enough about. It's

2:35

usually all day long equities and I'm

2:38

I'm excited to talk a little bit about

2:40

the various types of credit you manage.

2:43

But before we do that, let's

2:45

get into your background a little bit. You attended

2:47

Queen's University in Canada,

2:50

where you earned a commerce degree. How

2:52

does that translate into an

2:54

interest in credit and investing? Yeah,

2:57

sure, Verry, I think you know, when I grew

2:59

up, I grew up in a town called Ashwood, just outside

3:01

of Toronto, and um, you know, growing

3:03

up, I didn't really have uh,

3:06

any influences that were in the business side,

3:08

and so as I was kind of progressing through

3:10

my childhood and through high school, I

3:13

sort of was very interested in commerce

3:15

and how that works. So, you know, my first job really

3:18

was working at a corner store where

3:20

I used to stack what we would affectionately

3:22

call in Canada pop bottles, but you called soda

3:24

bottles that if you're in Minnesota, you might

3:26

calm pop bottles as well. And

3:29

I used to sweep out the parking

3:31

lot as well. That was sort of my first job at thirteen,

3:33

and I was very interested in how that gentleman ran that store.

3:36

And my brother in law actually ran a small

3:38

lumber yard in town that I worked at as well, and

3:40

so I was very very interested in how

3:42

business has worked, you know, how that

3:45

operationally worked, not just the actual element

3:47

of working at them. And so I kind

3:49

of looked at people who had progressed into

3:51

business, and most of them in Canada at least had commerce

3:54

degrees. So that's how I went to Queen's Commerce.

3:56

And you come out of school, you

3:58

end up at Goldman Sachs prety early in your career,

4:01

right, Yeah, Actually it took a bit of a short stop

4:03

first. So I um, back in the

4:05

day when I was sort of again trying to explore

4:07

how to get into business, I noticed a

4:09

lot of chief financial officers

4:11

in Canada had a c p A or back

4:13

then as c A, and so I actually spent

4:16

two years at Cooper's and librand working

4:18

on my CEA. In Canada, you have to intern at

4:21

a at an accounting firm, so I worked there in corporate

4:23

audit and business investigations,

4:25

which basically back in did

4:27

a lot of the bankruptcies in real estate. So in fact,

4:30

one of my early experiences was working on the

4:32

Olympian York bankruptcy with

4:34

the Reichman brothers. So so I have to imagine

4:37

that's a useful set of skills to

4:39

have when you're trying to decide,

4:42

hey, am I going to see a return of capital

4:44

as well as return on capital? For this particular

4:46

credit. Yeah, it's it's certainly taught

4:49

me how to understand, like how you're gonna get

4:51

your capital back if you will. I think that,

4:53

you know that. I think my early formative

4:56

years in terms of business was

4:58

one of skepticism because eighty nine ninety was,

5:00

at least in Canada was going through large, you

5:03

know, recession, predominantly in real estate.

5:05

Owen Y had overextended itself building

5:08

out in Canary Wharf at the time. I recall cross

5:10

collateralization. I was kept from all the banks,

5:13

of course, which was part of what we discovered. And I

5:15

think my formative years was

5:17

started with a lot of skepticism, which probably led

5:19

me into credit as a result. So

5:21

so from Cooper's and libraries

5:24

and and accounting, how do you make

5:26

your way to fixed income and Goldman?

5:28

Yeah? Sure, well I

5:30

I realized that the accounting profession,

5:33

probably long term, wasn't going to be for me, and

5:35

most people would move on to something different. I

5:37

had some friends who worked over Golden Sacks,

5:40

which frankly I didn't know a lot about at the time. I

5:43

walked across the street in Toronto, ended up working

5:45

there and initially in um in controllers,

5:48

but eventually worked my way into

5:51

being a credit analyst there. Uh, and

5:53

you know, very shortly thereafter, I moved

5:55

down to New York and spent actually most of my

5:57

career in New York working for Goldman uh

6:00

and always on the credit side. So

6:02

Goldman and then you end up at Barclays

6:04

where you were co head of leverage

6:07

product that that sounds like that's

6:09

an aggressive portfolio, is it what

6:11

it sounds like? Yeah, I you know,

6:13

I'd spent over eleven years of Goldman.

6:15

I learned a tremendous amount of that organization

6:19

as it you know, transferred from

6:21

transformed from basically being a partnership

6:23

into a corporate uh and all the changes

6:25

that go with it. But it was an extraordinarily um

6:28

fertile time for me in terms of growth and development,

6:30

in terms of just being very entrepreneurial

6:32

and commercial. And I love that aspect of it.

6:35

But Barkley's a couple of my friends

6:37

had left Goldman to start up the leverage finance

6:40

business there, and it really for me, it was it

6:42

was an opportunity to learn how

6:44

to build a business. I was, you

6:46

know, spent all my years doing very highly

6:48

structured transactions on the credit

6:50

side, being a credit analyst, et cetera.

6:53

But really what I hadn't learned as the business side of it,

6:55

and that was a great, you know, formative

6:57

time for me, which which kind of led me into my

6:59

next move, which Canadian Pension

7:01

Plan, which just sounds very different than

7:04

prior experience. Yeah, very different,

7:06

but but similar in that

7:08

you know, um, my former boss used

7:11

to joke when you hired me that basically

7:13

I was joining a hundred billion dollar startup

7:16

because the Canada Pension Plan Investment

7:18

Board, in fact is manages

7:21

what you would think of as in the U S terms

7:23

excess contributions to social security

7:25

if there was such a thing, which there isn't, um,

7:28

but but that's effectively what

7:30

you're doing. You're managing those excess contributions

7:32

to the Canada Pension Plan. And

7:35

for me, it gave me the ability

7:37

to take all the knowledge I learned on the

7:39

credit side, the business building

7:41

opportunities, and transform that into

7:43

a private credit UM direct

7:46

private credit investment platform for c p

7:48

p I B and later you know, as

7:50

I progressed their stayed there. I guess if I

7:53

ended up running private investments which include

7:55

a private equity, infrastructure credit, energy

7:57

credit, and some other assets. But jen Away,

8:00

I'm I'm a practitioner in the credit side. So

8:02

when I was doing my research into your background,

8:05

you have family members who were investment

8:08

investors and pensioners into

8:10

the Canadian pension Plan. How did

8:12

that, police, teachers, pensioners, things

8:14

like that. Did that impact

8:17

how you thought about doing your job?

8:19

For sure? For sure? I think that the greatest

8:22

takeaway from me, and I take that to my job

8:24

today is like, I know who you work for

8:26

and for me of a ninety one year old mother

8:28

and she would say to me every week when I

8:30

talked to her, how are we doing? Because

8:34

it's her money, right And so

8:36

my my my mother, my brothers are about

8:38

eighteen years older than me, so they take

8:40

the Canadian pension Plan right now as well and

8:43

my sister, so they're all beneficiaries

8:45

of that. And and on top of

8:47

that, my brother and my other

8:49

brother they're both were one with a teacher,

8:51

one with the policeman, so they also benefit from

8:54

the Ontario Municipal Employee retirement

8:56

Plan and Ontario teachers pension plans.

8:58

So they're all beneficiaries of

9:00

these large pension plans in Canada.

9:02

And I think what it what it really did. Has made it real,

9:05

made it real for me in terms of the money

9:07

that I was investing the sacred

9:09

trust were literally nineteen million people are

9:11

giving you money to invest on their behalf

9:14

is a sacred trust. And so I used to say to the team

9:16

at c P P I B that

9:18

that's a special place to be and

9:21

that has a higher duty of care in my mind,

9:24

because think about if you lose

9:26

twenty million dollars, that's like

9:28

the entire city of Peterborough

9:31

contributing to CPP for a

9:33

year. So that really puts things in perspective.

9:36

And and I've taken that with me now because

9:38

now I work on behalf of many beneficiaries

9:41

and fiduciaries across the globe and I

9:43

and I do still think it's a sacred trust and it's a privilege

9:46

to manage money. Huh. Quite quite fascinating.

9:48

Let's talk a little bit about credit

9:50

and fixed income side for your career.

9:53

What what led you to make that

9:55

leap from from a

9:57

credit analyst and a fixed income analy

10:00

us to actually managing

10:02

credit portfolios. Yeah,

10:04

Barry, you know, when I think about just being

10:07

in credit generally, people ask me that all the time, and I look

10:09

back and my my my not

10:12

illustrious sporting career, which was you

10:14

know, soccer hockey, and

10:16

I always played defense, so I never

10:18

really played on the offense. I was always trying to keep

10:20

the puck or the ball out of the net and helping people

10:22

do that. And I think when you you think about credit,

10:25

what you're looking to do is there's

10:27

a contract between me and you, and I give you some money,

10:29

and at the end of that term of the contract, you give me the money

10:31

back. That's that's defense I'm not looking

10:33

for. We're not looking for massive

10:36

upside that you you know, shoot

10:38

the lights out on the equity side. And so it always

10:40

seemed to be very much a comfort zone for me

10:42

that I could operate in an area where I

10:44

could understand what was going to allow me

10:46

to get my money back at the end of the day.

10:48

And all that training at Goldman had

10:50

taught me as a credit analyst,

10:53

that's what I was always thinking about, is how will

10:55

this obligore give us the money back

10:57

at the end of the day, so that you

11:00

know we're in a good position and we're minimizing

11:02

our credit risks. I think the other thing that

11:05

Goldman really taught me was how to mitigate

11:07

risk and downside and really focus

11:09

on the downside and a lot of situations.

11:12

And so coming at investing from

11:14

that perspective naturally led me to a

11:16

better credit hat than it ever did equity.

11:18

And in fact I did run equity

11:21

private equity at at c P P I

11:23

B. I think I was okay at it, but I definitely

11:25

majored in in credit. UM. So

11:27

that's the path I pursued and and it's

11:30

been it's been fruitful, and I really find it fascinating.

11:32

I know I'm a credit geek. If you will, you know, I'm

11:34

intrigued. I love the soccer hockey

11:37

metaphor. I have a friend who's fond

11:39

of saying a bad year in

11:42

fixed income is a bad afternoon and

11:44

equity and and it's really kind

11:46

of true. What's the worst year? High

11:48

quality fixed income has not not that

11:50

bad because of that return

11:53

on of capital. Yeah, And I you

11:55

know, I think for anybody who manages the portfolio

11:58

and getting back to that, you know, managing

12:00

large portfolios at a place like CPP

12:02

I B, as you recognize we're just like one

12:05

exposure in somebody's broad portfolio.

12:07

So you've got to think about what you're meant

12:09

to deliver into that portfolio,

12:12

and that is a very stable, persistent return

12:14

three cycles. And that's to me what credit

12:17

encapsulates from an investor standpoint.

12:19

So, so let's talk about some of those different

12:21

silos of capital. You have

12:24

a couple of different credit segments

12:27

liquid credit, a liquid credit,

12:30

real estate assets. Am I missing

12:32

any or no, that's it. Those covers the big

12:34

three. So break those down for us if you would.

12:36

Yeah, So what we wanted to

12:38

do and from my experience on the other

12:40

side and experience that these other organizations

12:43

was explaining credit which isn't

12:45

really a monolithic asset class like it

12:47

has a range of exposures and a range

12:50

of expected outcomes you know through

12:52

time that we really wanted to be able

12:54

to deliver two investors that

12:56

range of risk return outcomes. Right.

12:59

And so if you think about, you know, non

13:01

investment grade credit, you go from leverage

13:03

liquid loans clos which is the

13:05

liquid credit side of things, to direct

13:08

lending, to opportunistic credit, to

13:11

distress which is really private or a liquid

13:14

credit because it doesn't trade. And then there's

13:16

real asset credit, which involves assets

13:19

like real estate infrastructure

13:22

in our case, aircraft aviation

13:24

where the underlying security and cash floads

13:26

are determined on herd assets

13:29

and all of those from ourn investor's

13:31

perspective, allow you to um

13:35

put together a portfolio that is

13:37

diverse away from just single name

13:39

credit. And I think that's what people

13:41

like on the institutional side. I know that from experience,

13:44

that's what we look to do in my portfolio,

13:47

my former life, and that what people are doing today.

13:49

So that was point one. We wanted to be relevant to

13:52

our customer, if you want to call them that the investor.

13:55

Number two, we've got to be relevant

13:57

to the user capital right like

13:59

it's by having a platform

14:01

approach which really kind of covers that span,

14:03

that broad span. We can be relevant

14:06

to almost any borrower

14:08

in the world for whatever they want to do. Right

14:10

So they may have some real estate, they may have ongoing

14:13

cash flow loans, but you can put them together and you

14:15

can deliver an opportunity. Why is important

14:18

because it allows us to have

14:20

the widest funnel from an

14:22

origination standpoint that we can

14:24

and leverage that car Carlisle network

14:26

where we're operating on a global basis. So

14:29

that's that's really those three verticals

14:31

really feed into what we're trying to accomplish

14:33

from a platform perspective, So

14:35

I understand real estate obviously is gonna

14:38

be collateral in that space. When you talk about

14:40

hard assets and aviation, you're referring

14:42

to the actual aircraft. To the actual aircraft,

14:45

I mean, the actual metal in the sky only

14:47

has value to the extent you have

14:50

a contract to lease it out. So it's

14:52

not it's not just enough to have the airplanes.

14:55

What's as important is to have the relationships

14:57

with the D and ten plus airlines

15:00

that we do on a global basis in

15:02

some a D plus countries

15:05

around the world, so we have that diversity

15:07

and maintaining that long term contracts.

15:09

So through this period of time which a lot of

15:11

people would say, geez, it must have been a really tough time in

15:14

global aircraft, which it has been. You

15:16

know, we've been able to take advantage of restructuring

15:18

and turning out our long term leases,

15:20

which is good, gives us lots of optionality, but

15:23

also take in more aircraft. So we've now

15:25

actually risen from being I think it's

15:27

the fifteenth largest lesser in the world

15:29

to the sixth largest lesser in the world. As

15:31

long as we close on Manchester, which was announced

15:33

just before Christmas, So so we really

15:36

leaned into something where the metal in the

15:38

sky is relevant, but as

15:40

relevant is are the long term contracts

15:42

that you have with the with the airlines, and

15:45

so essentially you're making a bet that

15:47

we will eventually return to normal,

15:49

travel will recover and

15:51

and people will move about

15:54

the country as they were the world as they as

15:56

they were pre pandemic. Yeah,

15:58

at a macro level, at solutely, I think

16:00

that's true. I think the the other thing I would layer

16:03

into that is there has been a shift

16:05

in terms of the older aircraft that

16:07

have been retired, so that the actual

16:09

inventory has shrunk and the actual

16:12

O E M s Airbus and Boeing have

16:14

actually shrunk the number of planes a producing.

16:16

So there is there's another technical

16:18

factor going that you're having old

16:21

aircraft retired because they're not economical

16:23

to fly, and you have the O E M

16:25

slowing down, so actually makes our midlife

16:27

aircraft much more valuable. If you're trying

16:29

to have a very economical asset

16:31

in the sky to fly from, it makes sense you can

16:33

strain supply with the same demand.

16:36

Prices are going to go up, So so let's

16:38

focus within the ill

16:41

liquid credit silo.

16:43

Tell us a little bit about private credit,

16:46

because I want to hear that phrase.

16:48

I tend to think of merchant banking and

16:51

the sort of mid level bank

16:53

services that Wall Street has

16:56

sort of grown out of and only

16:58

focuses on the largest companies.

17:00

But there is a lot of you

17:02

know, really substantial amount of UM

17:05

firms and activity in that space.

17:08

It just doesn't seem to scale to public

17:11

Wall Street activity.

17:13

Yeah, Well, a little bit of history, I guess

17:15

it is probably worthwhile. If you went back to

17:17

oh eight oh nine, which you know,

17:20

I was fortunate enough to be in the credit

17:22

markets, sent to to to work through that, which

17:24

was very, very interesting. What

17:26

you found is the banks had already started

17:28

to retrench from the lending market.

17:30

I mean that in fact, it started well before

17:33

oh eight o nine, and then late nineties more or

17:35

less uh in the institutional market,

17:37

specifically on the loan side, started to increase.

17:40

And if you went from eight

17:42

o eight oh nine to call it twenty

17:44

if you saw the amount of credit inventory

17:47

that banks were carrying to today, that's

17:49

down, you know,

17:52

And I put it in simple terms, is there

17:54

no longer um They no longer

17:56

hold inventory they're shippers at the risk

17:59

right and in that void if

18:01

you will. You had a couple of other

18:03

things happening. One, you've got a thirty

18:05

year decline in absolute interest rates, which

18:07

we've all observed. And

18:10

um, you've seen a rotation

18:13

as a result of that of these larger

18:15

institutional funds that have to make

18:17

returns that are in the

18:19

high single digits rotate into a

18:21

liquid assets. The first phase of

18:23

that that was in private equity. People

18:26

looked and said, I can pick up five

18:28

hundred extra basis points on average

18:30

if I go into private equity, plus or minus

18:32

a hundred here or there, and I don't want to be exact on

18:34

that, but just approximate, and they

18:36

made that rotation. That happened coming

18:39

out of O eight oh nine, and we've seen that progression.

18:42

The next wave is people who are in fixed income

18:44

who are picking up two three in

18:46

corporate bonds and rotating

18:49

to the extent they can allow themselves to

18:51

be more eliquid, picking up

18:53

a hundred two hundred fifty basis points by

18:55

going into privates. Now it's not obviously

18:57

without risk because you want liquidity, but I think oh eight O nine

19:00

showed us that you may be over

19:02

paying for liquidity because I lived through

19:04

that period of time and what you could sell was the best

19:06

high quality liquid names and anything

19:08

that wasn't high quality within

19:10

all that liquids. So the risk, you

19:13

know, premium you're paying for that was pretty substantial

19:15

for for liquidity. So what we what

19:18

we have today is a

19:20

private credit market that's grown from three billion,

19:23

it's over triple to one point one trillion

19:25

today. Total alternative

19:27

assets today as of the end of last

19:30

year eight point nine trillion in

19:32

a market where the combined

19:35

fixed income and equity markets

19:38

are two hundred and twenty nine trillion.

19:41

So alternatives as a whole

19:43

are pretty small in somebody's portfolio.

19:46

Private credit is it's a one

19:48

to nine ratio in terms of total alternatives

19:52

on a path where we've tripled in size,

19:54

over tripled in size since eight oh nine.

19:56

And what we see because of all those dynamics, the

19:58

banks retrenching the rotation

20:01

into alternatives is a ten to twelve

20:03

percent kagger over the next five years. So

20:06

it's there's you know, we don't hear about it because

20:09

it's relatively small, but it's

20:11

it's a part of somebody's portfolio, and it's becoming

20:13

increasingly more important. So you mentioned

20:16

the um thirty plus year

20:18

bull market and fixed income with

20:20

rates falling from

20:23

the early eighties and Paul Vulcar down

20:27

to close to zero. What was

20:29

it the bottom of the ten year about one

20:31

something one two one one. Uh.

20:34

It appears that that thirty

20:37

five year market is coming to an

20:39

end, and we're looking at a combination

20:41

of both rising inflation

20:44

and higher rates. How

20:46

what sort of challenges does that present

20:49

to you working in credit markets where

20:51

hey, maybe rates are going up, maybe inflation

20:54

is is going to impact our our

20:56

real adjusted returns. How do

20:58

you figure that into your Yeah,

21:01

well, the early early returns are

21:03

if you look at high yield, it's down four

21:07

year to date. That's relative to the SMP five,

21:09

down eight and a half percent year to date. Leverage

21:12

land exactly. Leverage loans are flat.

21:15

Now why is that? Because they're floating right zero

21:17

like zero point five duration versus a longer

21:19

duration fixed income on. So right now,

21:22

it's pretty clear that the moving interest

21:24

rates is impacting valuations, right,

21:26

it's not. There's not been a fundamental shifting

21:28

credit yet. Although default rates you'd

21:30

imply with spreads right now that default rates went from

21:33

the end of year at one point one to maybe one point

21:35

to five, still very very

21:37

low skill. So I think the early

21:39

returns are um really

21:41

indicative of interest rate moves, which,

21:43

by the way, we should have expected. I

21:45

mean, I don't know how long people thought the punch

21:48

bowl was going to stay there, but we couldn't

21:50

believe we're going to stay at that that level forever. So

21:52

none of this is unexpected. I think the shock

21:54

of the moves is always I find in the market

21:56

unexpected by people, but it should have been

21:59

expected. So as you think about investing,

22:01

if you think about it from a return

22:03

perspective, you've got that

22:06

hedge if you want to call it, against rising rates.

22:08

What we're not seeing yet, but this is

22:11

what we I think we get paid for is the

22:13

credit impact of a slowing economy

22:15

with rising rates and inflation,

22:18

and that you know, That's where I think

22:20

we moved from two thousand and twenty

22:22

one, which was I would say arguably

22:24

a macro focus trade, if you want

22:26

to call it that, even though we're long term investors, to

22:29

very much focusing on the micro, which

22:31

is security selection and portfolio construction.

22:34

Because the one thing I've learned in thirty

22:36

one years. Is the only thing that's protected

22:38

us ever coming out of like a massive disruption

22:40

in the marketplace is a high quality, diversified

22:43

portfolio. So that's how we're focused

22:45

today. Inflation isn't

22:47

is not so much where we think rates go in terms

22:49

of how I think about it, it's how does it impact

22:52

the companies that we are lending

22:54

to. So, for instance, we have a company

22:56

recently um they call

22:59

it like a staple food provider, white

23:01

label it, and the biggest cost

23:03

to them is the inputs of the food obviously

23:06

gone up dramatically. We're our

23:09

concern was was were they able to pass

23:11

that on to the distributor large

23:13

distributors you could think of of of food

23:15

in in the United States, And the answer

23:18

is they were, okay, So that's a good

23:20

thing. What we're trying to do is look

23:22

at portfolios were that ability

23:25

to pass on costs or absorb costs is

23:27

greater than things that are more sensitive to it, because

23:29

we know that's going to hurt margins and EBITA growth,

23:31

and that's that's what we're focused on right now

23:34

as we think about inflation, not so much out it in effects

23:36

interest rates. So that's interesting

23:38

you're you're using that as a single example,

23:41

because when I was learning about

23:44

what you do with Carlisle, you know,

23:46

sometimes I look at a particular manager

23:48

and they're all about the selection.

23:51

Other times and I'm gonna throw

23:54

this to you, it's more about

23:56

creating a platform that they

23:58

can um opera raid off

24:00

of, as opposed to being so focused

24:03

on the granular single

24:05

company selection. Tell us a little

24:07

bit about the platform that you helped develop

24:09

at Carlisle. Yeah, our platform

24:12

approach is really informed by

24:15

my time at c p P I B and what I

24:17

learned there, where they were agnostic

24:19

to product in silos.

24:22

They were simply seeking at the best adjusted

24:24

risk adjusted returns. And

24:27

if you looked at the old days of

24:29

oh eight oh nine, things are very

24:31

silent, high yield leverage, loans, distress

24:34

maybe special sits, but they were very specialized.

24:37

And what we learned, or I learned at

24:39

least with my team at cpp I B, is by

24:41

having a broad platform that could connect

24:43

to the information flows coming in from the public market

24:45

side, coming in from the private equity

24:48

side, you know, coming in from our infrastructure

24:50

and real estate, helped inform opportunities

24:53

and allowed us to move three cycles to

24:55

where those opportunities were. So, for example

24:58

today at Carlisle, what we were able to

25:00

do is as we were going into

25:04

we're obviously working across the platform and

25:06

direct lending an opportunitisy to credit, not

25:08

really need to stress doing really regular

25:10

way performing deals. And

25:13

when the market dislocated in April,

25:15

March and April, it felt like eight

25:17

o nine again, and we were able to go

25:19

immediately to the secondary market and deploying

25:21

the leverage loan market where things were trading

25:24

off dramatically. So Charted Communications trading

25:26

at seventy two, I didn't need to be

25:28

a genius when I looked at the market cap of

25:31

chart Communications Trading at seventy

25:33

two to recognize I'm probably gonna get my money back, right.

25:35

So if you don't have a platform that

25:37

allows you to pivot, you can't take advantage of that.

25:40

So what we've done deliberately

25:42

is have this cross platform

25:45

approach both in products set

25:47

expertise, but geographically

25:50

so that we can swing to where those opportunities

25:52

are. So, for instance, in the past

25:54

i'd say six months, we've seen a lot of opportunities

25:56

coming out of Europe because the US capital

25:58

markets tend to hear themselves a lot

26:01

quicker and stabilize quicker. Europe

26:03

because of the multiple different jurisdictions,

26:05

tends to take a little bit longer. We're

26:07

looking into Asia, we see opportunities,

26:09

they're evolving. If you don't have a broad

26:12

platform that's connected globally,

26:15

it's very hard to take advantage of those opportunities

26:17

to swing your capital to where those opportunities are

26:20

really, really quite interesting. Let's

26:22

talk a little bit about the state

26:24

of credit today. You mentioned

26:26

global credit um generally

26:29

has grown. You've grown

26:31

your platform um

26:34

to seventy three billion dollars as of the

26:36

end of one

26:39

that's about two x what it was four

26:41

years ago. Uh, and it's one of Carlisle's

26:43

fastest growing segments. Tell

26:46

us a little bit about what you're doing in

26:48

terms of fundraising and how

26:51

much of this is performance related. Well,

26:53

you can't raise What I've learned is you

26:55

can't raise money without performance. So

26:57

one figure one that gets the other. I

27:00

would say that what we're what

27:02

we're wanting to do is I think that the

27:04

thing that's really important as we've build up

27:06

the platform is a lot of people say, you

27:09

know, why do you why does scale matter? Will

27:11

scale matters because it allows you to

27:13

take advantage of the best opportunities on

27:15

a global basis. So we want to be scalable

27:18

so that we can do any transaction that we want

27:20

to do globally period and that was

27:22

the goal of getting to scale seventy

27:24

billion, eighty billion, ninety billion, like you're

27:26

in the snack bracket where you can do any transaction

27:28

you want and being very selective. What

27:31

that also leads to is that you

27:33

know, each successor fund more people want to participate.

27:36

So that is an ongoing growth trajectory

27:38

that we just deal with. If you have poor performance,

27:41

well guess what, people don't want to participate

27:43

in your funds. So far, Touch would In the six

27:45

years that I've been involved, our performance has

27:48

been I think very good. But

27:50

the most important thing, and I said this before,

27:52

is that we're there to deliver an expected

27:55

exposure into somebody's portfolio, consistent

27:57

and persistent through time, and that is

28:00

something you demonstrate over time and so far,

28:02

I think with the team that's there, which is excellent

28:04

by the way they have been delivering

28:06

those returns over the past six years, even

28:09

through the pandemic, which is really important.

28:11

I think the next twelve to twenty four months.

28:13

You know we're gonna we're gonna have some challenges.

28:15

Everybody's gonna have challenges, and but I think that

28:18

the portfolios are well positioned for that. But

28:21

what it also means is when we talk to our investors

28:23

is they need to invest

28:26

capital like that doesn't stop just because

28:28

the markets are volatile um and

28:30

people are rotating more into private credits you and

28:32

I discussed earlier, and so we're seeing

28:34

that growth. So we're trying to balance our growth

28:37

versus what the opportunity said is. And

28:40

the one thing I had learned from my prior life

28:42

is that you know there is a certain

28:45

growth trajectory that if you get beyond

28:47

that and I almost had infinite capital at my prior

28:49

job, but you don't have infinite opportunities,

28:52

and so you have to continually build the team

28:54

in the platform that allows you to scale

28:56

into the opportunity set to

28:58

be able to prosecute if you can't esecute

29:00

it, and then you may end up in a not a good place

29:02

for your investors. And so we're very thoughtful about that.

29:05

But the programs that we've built out have scaled

29:07

mostly because we've been able

29:09

to do those larger size transactions and

29:11

control them on the front end. And I

29:13

think, you know, we'll continue to to

29:15

to leverage into those programs that we're being

29:17

very successful. So you raise a really interesting

29:20

point, which is there

29:22

is only so far this can

29:24

potentially scale. You were talking

29:26

seven. I'm

29:29

assuming that this can scale

29:31

up some multiple of that. How

29:33

large can private credit grow

29:37

um even though it's such a relatively

29:39

tiny portion of overall investable

29:41

assets? Uh, where's the ceiling?

29:44

Well, I don't I don't don't know if I can predict the

29:46

ceiling, but I can tell you that our forecasts

29:50

and belief is that it's it's growing at at least

29:52

ten to twelve percent cager pery, or from a one

29:54

point one trillion dollar base today.

29:57

Right. I know it sounds ridiculous to say from that

29:59

relatively mole base of

30:01

just a trillion dollars, but in the grand scheme

30:03

and thing, But if you think it's a percent of

30:05

global asset, but if you think about it's

30:08

very small part of a global ass that you're absolutely rights.

30:10

But if you think about the participants, even

30:12

the largest participants aren't

30:14

greater than a hundred and

30:16

fifty I mean, that

30:19

sounds like a lot, I know, but in the context

30:21

of that that there's not like a clustering

30:23

at the very top yet. So I think, you know,

30:26

we're going to grow with at least the market

30:28

obviously, you know, stakeholders would

30:30

like us to grow beyond that. I think if

30:32

we do that in a very thoughtful, deliberate

30:35

way, that's fine. The other thing

30:37

we pursued, which is slightly

30:39

different than maybe some of our peers, is we

30:41

do have that three pillar approach across multiple

30:44

strategies. So any of those strategies in and

30:46

themselves can scale to

30:48

ten or twenty billion, but if you

30:50

you know, took that in totality

30:53

across the platform, that adds up to a

30:55

lot of money to manage, right, And so

30:57

what we've really purposely tried to do is say,

30:59

where are those veins that we

31:01

think will expand infrastructure, real

31:04

estate, credit, aviation, you

31:06

know, corporate credit as a whole, obviously

31:09

liquid credit. You know today if you look

31:11

at the leverage loan market, it's one point five

31:14

trillion. It was less

31:16

much less three to four times what it wasn't

31:18

two thou two thousand and nine. So

31:21

you know, we're trying to see in those large markets where there's scale

31:23

and we can scale along with it. So I'm going to circle

31:25

back to infrastructure and leverage loans. I

31:28

want to refer to something

31:30

that you guys said on your

31:32

fourth quarter conference

31:34

call, which was, as a firm,

31:37

we expect to see Global Credit

31:39

have a breakout year in um

31:43

given all the turmoil we've seen and potentially

31:46

rising rate environment in the face

31:48

of inflation. Why should we expect

31:52

to be a breakout year for Global Credit?

31:54

Well, twofold one is I think you

31:57

know that operating platform I talked about is in

31:59

place, and so once you you put

32:01

the operating structure in place, from an

32:03

an investment in origination perspective,

32:06

I mean, it really does allow you to scale

32:08

and be much more efficient. So that's that's point

32:11

one. We have multiple avenues when we

32:13

raise capital. We've got c Tech,

32:15

which is a which is a retail

32:17

product that goes cuts across our entire platform,

32:20

and that is very attractive

32:22

for investors where they're getting, you know,

32:24

a very current cash dividend

32:27

and a high single digits and

32:29

that feeds into our business. But then

32:32

you've got these new verticals that you and I've talked about

32:34

on the real asset side, which are growing

32:37

probably faster than I would have thought because people

32:39

are find that extremely interesting from

32:41

a portfolio construction perspective.

32:44

But then lastly, on the opportunity

32:46

side, the volatility is

32:48

a good thing for us because, as you and I talked

32:50

about earlier, our ability to swing across the

32:52

platform and take advantage of opportunities. Volatility

32:55

is actually UM creates vast

32:58

opportunity that was difficult I would say

33:00

pre pandemic, and pre pandemic we were

33:03

in a you know, pretty well priced

33:05

market. We thought UM where

33:07

it was it was tough, tough sledding

33:09

for opportunities and very competitive. And

33:12

now UM companies that

33:14

would typically have access to the

33:16

capital markets who may have more complicated story

33:19

you get one speed bump in the market and

33:21

some negative sentiment. There's still good companies

33:23

in the long term. We're allowed, you

33:25

know, we were allowed to kind of go in and do the work

33:28

on a more complex situation and

33:30

do that work that the capital markets won't

33:32

do because they don't have access that information.

33:34

And it creates opportunity for us. And and so we're

33:37

always say excited, but we've been looking

33:39

for some volatility in the marketplace

33:42

UM for quite some time, and we're starting to see it.

33:45

So I was kind of impressed

33:47

with how selective you are in terms

33:49

of originations, really

33:51

close on relatively

33:53

few, something like five percent of

33:56

the companies you put through their paces. Tell

33:58

us a little bit about that process, and is

34:01

it just a target rich environment and

34:03

you're taking the cream off the top

34:05

or why so few UM

34:08

actual closes

34:10

given given you know, how

34:12

many opportunities you see worldwide. Well,

34:15

it's it's like anything right you

34:17

want to have from the top

34:19

level. The platform

34:21

just really opens up a very broad

34:24

funnel for opportunities. And

34:26

and as a result of that, when you're in

34:29

the market, you're scaled, you're known in the

34:31

market, you get a lot of opportunities

34:33

and they're coming in. You know, I say, left, right, and center,

34:35

but it feels like that. Sometimes what

34:37

we're looking to do is to

34:40

pull together the most high

34:43

quality, diverse portfolios that we

34:45

can that we believe will weather

34:47

through you know, three cycles. And

34:49

so as a result of that, you know, we

34:51

do have to be very selective as to what we're

34:53

gonna put in there, and we also have to be thoughtful

34:56

about the exposures right when you think about portfolio

34:58

construction, there's kind of three things, right their

35:00

security selection, you know you're picking

35:03

that asset you're gonna put in there. That's

35:05

the micro. There's portfolio construction, making

35:07

sure you have a well balanced portfolio that's

35:10

not highly correlated because that's not

35:12

the exposure our investors are looking for. And

35:14

then you you tilt those exposures

35:16

depending on some conviction you may have. I

35:19

think in this environment, the first two are really

35:21

the most important. Tilts can can wipe out

35:23

the first two very easily. So we tend not to

35:26

have tilts. We tend to have well balanced portfolios

35:28

that we believe the weather through um

35:30

volatility in the market, which we think we're going to see

35:32

more of in the next twelve to twenty four months, really

35:35

really really interesting. So so

35:37

let's talk about Carlisle. UM

35:40

in general, you guys have been on a

35:42

torrid asset raising

35:44

pace. You've been breaking categories,

35:47

as has private credit also, so

35:49

you're in the right place at the right time. Um,

35:52

why is this so hot right now? Is it just

35:55

as simple as there is

35:57

no alternative? Yields are so low on the fixed

35:59

income so I it and you guys can

36:01

deliver consistent returns

36:04

without a whole lot of risk and volatility.

36:08

Aka, you step back and think about it

36:10

from the average institutional investor

36:12

and what they're trying to achieve, and

36:15

you know it'll it'll vary, but let's use this

36:17

as a starting point. Let's let's assume that

36:19

on average, most institutional investor

36:21

over the long terms trying to achieve seven percent for

36:23

the beneficiaries in a call

36:26

it, you know, a negative real rate environment

36:29

with you know, equity returns have been

36:31

I think fifteen percent over the since

36:33

O nine roughly.

36:35

If you get thirteen plus last year plus

36:38

something like that, Well,

36:41

where where is your long term forecast for equity?

36:43

I mean a lot of people would probably tell you

36:45

public equity long term forecast is probably

36:47

in the six to seven percent range, maybe

36:49

lower, I don't know. You do the math

36:51

on that over a ten year horizon, it's

36:54

very hard to get seven percent. So you take

36:57

six percent, five percent from

36:59

public equity, and you add in two

37:01

percent from fixed income, and you blended itself.

37:03

And you've blended. That's the secret. You can't average

37:05

and you got it. Got to add them and that's how

37:07

you get to see that they didn't teach that math in Canada.

37:10

Maybe that's maybe how our education system was

37:12

different. That that's

37:14

the that's the problem with expected returns

37:16

is we've been hearing forecasted

37:19

lower expecteds. Hey, markets are high,

37:21

valuations are high. We've had to we

37:24

long term returns or eight percent. We've been

37:26

thirteen. That was before last year's nearly pent

37:29

on the equity side. So you should ratch

37:31

it down your expectations after

37:34

you hear that, so long, people sort

37:36

of stop paying attention to it. This

37:39

is probably the year where they should be

37:41

paying attention. And I and I think here's

37:43

here's a good thing I think about the institutional

37:45

investor at large is that they

37:48

generally are pretty thoughtful and

37:50

long term thinkers. I mean, I think that you

37:52

know, sometimes us on the manager side think

37:54

we have all the answers. But I would say

37:56

they're pretty smart people that are managing

37:59

broad, diversified port folios. And I and

38:01

I believe what they recognize

38:03

is as a producier. You can't you

38:06

hope isn't a strategy. You know, I hope I keep

38:08

getting the same returns in public equities. That's

38:10

a great that's a great thought. But I don't

38:12

know if that delivers. And so what people

38:14

have been doing is there is a trend,

38:17

demonstrable trend of putting some

38:19

of your cash if you can be liquid,

38:21

into alternatives, private equity,

38:24

real estate, credit, infrastructure,

38:26

and that trend is just going to continue as we

38:29

continue to be in this lower rate environment. I know

38:31

rates are going up, but like historically, they're still very

38:33

low, and I could they could go up, you

38:35

know, four or five increases and you're

38:37

still historically low. Yes, I mean,

38:39

do you remember when library was like six percent?

38:42

Yeah? I do. I remember when my parents

38:44

had a mortgage that was eighteen percent. So I

38:46

remember when my father in law's

38:49

New York City General obligation bonds

38:52

from the seventies that we're yielding eight came

38:56

up and he said, what can you get me? Like,

38:58

I could get you six percent in you and four

39:00

percent in unis or six percent you

39:02

know, longer term bonds. He's like six percent?

39:05

Who the hell wants six percent? And that

39:07

was I don't know, twenty years ago. So and

39:09

you would you'd kill for that right now? Six

39:12

percent? Oh my goodness, how do I get six percent?

39:14

Yeah? I remember, as off topic,

39:16

but I remember I was I was talking to a

39:18

guy who asked me, said, you know, I'm looking at these Ontario

39:21

zero coupons at like, what

39:23

do you think I said, Oh, I think they're going to go higher. I would

39:26

buy them. He

39:29

didn't work out. Well, he didn't buy him, and he's mad at me to this

39:31

day. So anyway, but but you know,

39:33

you go back to this and you and you say

39:35

to yourself, why

39:38

is it these really smart institutional investors?

39:40

Right? They're not? You know, they are

39:42

smart people who are are investing money

39:44

on behalf of a lot of people rotating

39:47

into alternatives. And and the singular

39:49

reason is is because they're looking for a pickup

39:52

in a liquidity that they're getting from being in that

39:54

asset class. And my prior

39:56

employers, C P, P, I B they recognize

39:58

because of the long live

40:00

of the asset base for them, which is they looked

40:02

seventy five years forward. You could be

40:05

a hundred percent equities if you wanted to be. Now,

40:07

the volatility of that I don't think stakeholders

40:10

could handle, but today they're there.

40:13

Allocation is equities. So

40:16

if you can layer on top of that, alternatives would

40:18

give you a premium and you can

40:21

bear the whether the volatility, then

40:23

actually you're probably gonna return more

40:25

for your beneficiaries than if you just

40:27

stayed in public assets. But I think a

40:30

lot of investors forget the

40:32

illiquidity premium

40:34

is there for a reason, and if you don't

40:36

have a need for that liquidity,

40:39

you're effectively getting a discount

40:41

in public fixed income markets.

40:44

So if you don't need that liquidly, why not take

40:46

the additional hundreds of two hundred

40:48

bases points and returns correct. And I

40:50

think that that's that is what you're seeing, and that's what you're

40:53

driving it right now. I mean, the conversations

40:56

we have with institutional investors with consultants

40:58

today is very much

41:01

in that vein, which is, you can afford

41:03

to have this much of alloquidity

41:05

in your portfolio, you should tuck that

41:07

away, and you should pick up that illiquidity premium.

41:09

And and there's other you know, all the academic studies

41:12

say there's illiquidity, there's complexity, and there's a lot

41:14

of other things in there. But you know, when you

41:16

can pick up a hundred to five

41:18

basis points, which is kind of the range, that's

41:21

pretty attractive, especially relative

41:23

to under two points

41:26

on on a tenure. So So

41:28

back to the question on scale,

41:30

where does this top top out? Are

41:33

we still very early days in the growth

41:35

of all these different types of

41:37

private credit transactions. The

41:39

way I maybe think about it in terms of growth is

41:42

there's there's over one point three trillion of

41:44

dry powder and private equity today, and it's

41:46

probably much higher than that, and there's a lot of people out

41:48

there raising money. If you think about

41:50

how much financing that will drive,

41:53

that drives at least another multiple

41:55

of it, right two to three times. You

41:57

know, two point six billion trillion

42:00

plus of just financing there alone.

42:02

And that's just in the biout market. That doesn't

42:04

include any corporate activity.

42:07

That doesn't include um,

42:09

you know, other special situations that

42:12

you know, we just don't even account for in that number. So

42:14

I think the growth is really driven by

42:16

the fact that the third thing that

42:18

we didn't talk about is the number of public companies

42:22

today is about half of what it was

42:24

over ten years ago. There's more companies stay in private

42:26

for longer. I don't know if the whole spack

42:28

thing is going to change that a bit, although the run

42:31

on that's not been great, but I would say

42:33

people are staying in private for longer and

42:35

as a result of that, the need for our capital is greater

42:37

than it probably was ten or fifteen years ago. So I

42:39

I think the tail winds are there for you

42:42

know, the next five plus years for sure. So

42:44

so let's drill down to different types

42:46

of of UM credit. Uh.

42:48

And you mentioned infrastructure investments

42:50

as a sizeable piece of the portfolio. Uh,

42:53

let's talk a little bit about infrastructure. What areas

42:55

are you investing in? Walk us through the

42:58

typical credit investment in

43:00

in infratray. Yeah. Well, infrastructure

43:02

as a as a strategy kind

43:04

of came to me really from my

43:06

experience at c P P I B where when I

43:08

was running the infrastructure equity business, I

43:11

looked at where the credit

43:13

financing was coming from, even though we're putting equity

43:15

in and a lot of the deals where we would put

43:18

twenty to equity

43:20

and required massive amounts

43:22

of credit. Now banks generally

43:25

would provide a lot of that. US

43:27

banks don't provide anything to infrastructure,

43:30

very little. They it's just not something because of the long

43:32

term nature of it. Canadian banks to a decent

43:34

amount, but guess what, there's not that many Canadian

43:36

banks, and then the Europeans. But

43:38

then with some of the financial regulations

43:41

that limited how long that duration could

43:43

be. So my thought was always going to be that the

43:45

capital markets would become a more relevant

43:47

part of infrastructure finance,

43:49

and that was kind of the thesis. So when

43:51

I came to Carlisle, what I started

43:53

with on day one is I want to find a team

43:56

that could help build out that business. And

43:58

we found a very very experienced individual

44:01

and who had worked at a number of places

44:03

on the infrastructure side, most recently

44:05

black Rock and UM

44:07

He had been very successful and built up a very very

44:10

large portfolio. So we

44:12

hired him and we've

44:14

been building out this business and I can see this

44:16

being a very substantial part of

44:19

our overall portfolio going forward,

44:21

tent of our overall portfolio,

44:23

and there's such a great need for it. So when you

44:25

think about what does that mean specifically,

44:28

I mean they're really I would say,

44:30

assets that have an underlying rate

44:33

or regulatory charge that

44:35

allows you to have more confidence

44:37

in the stability of the return on that asset

44:40

than you would in a normal corporate asset.

44:42

And as a result of that, they can also

44:44

be longer duration, and a

44:47

lot of insurance companies, for instance, who are trying to

44:49

match duration. Look at these assets and see them

44:51

as being very valuable and a diversify in

44:53

your overall corporate portfolio. And when we

44:55

talk about infrastructure assets, so we're talked

44:57

me about ports and rails

44:59

and partways or rails,

45:01

um, transit energy, transportation,

45:04

pipelines, pipelines. Yeah,

45:07

um, it could be transmission lines,

45:09

it could be toll roads. I mean it has various

45:12

natures. But anything where there is an

45:14

overriding charge to use that asset

45:17

that is disassociated

45:19

with the price or volume that's going through,

45:21

it makes sense. We talked

45:24

about aviation as a hard asset,

45:26

but we really didn't get into real assets.

45:28

Let's let's talk a little bit about real estate and

45:30

what you're seeing in that space. Yeah,

45:32

I think in real estate right now, what is

45:35

really really interesting to us is

45:37

uh and it was you know, as a result

45:39

of some of the dislocation we're seeing is

45:42

really in the opportunistic real estate space.

45:44

So we're we're providing you

45:46

know, mezzanine and sort

45:49

of um completion capital

45:51

if you will. You know, the banks are very efficient

45:53

further up the capital stack and

45:55

can provide that, but it's really that completion capital

45:58

and we're seeing that in very unique

46:00

and interesting assets. I think the

46:02

ice Star asset that we just announced

46:05

several weeks ago is interesting

46:07

to us because of the triple net least component

46:09

really is underlying credit and it's a very

46:11

diversified portfolio between commercial,

46:14

office and entertainment. And I read

46:16

those about three billion dollars three billion,

46:18

and it's it's a business we want to grow. So there's

46:20

a team there that's well known to us, an

46:23

asset base that's well known to us. UM.

46:25

Roger Cozy, who we hired, actually

46:28

used to work at I Star and helped develop

46:30

that original portfolio. So we're we're quite

46:32

excited about that in our ability to grow that over

46:34

time. Uh. And as as as as

46:37

everything we try to grow into, we wanted to be a

46:39

ten billion dollar plus type business

46:42

because that gives us a scale advantage. Huh.

46:44

And we haven't really talked about distressed assets,

46:47

which I would imagine, having worked your way

46:49

through on O eight oh nine must

46:52

have been a another

46:54

target rich in environment. Yeah.

46:57

I think the stress has has gone through

46:59

an evolution. UM. I believe

47:02

if you think about distress twenty

47:04

years ago, UM, there's fewer people doing

47:06

it. I think that the

47:09

the efficiency was it was

47:11

a less efficient market. Fewer participants

47:13

made it less efficient. So there are you know, bigger

47:15

outsized excess returns to make. I think

47:18

today, given there's a larger number

47:20

of participants with a lot of cash, it makes it less

47:22

efficient. Uh, and it makes it less

47:24

scalable quite frankly, Um,

47:26

there's a lot of crowding around the larger opportunities,

47:30

so and everybody piles into them.

47:32

And then if you look at um, the smaller

47:34

opportunities are just really hard. I

47:37

liken it to uh private

47:39

equity light. I mean, really, if you do true

47:41

distress for control or you're gonna take over

47:43

a company, you really have to have a

47:45

post acquisition value creation

47:48

plan, which is really private equity. You've got

47:50

to you know, run the board, you've gotta you

47:52

know, oversee the management team,

47:55

and you've got a great value. Uh. And that look,

47:58

I think our private equity guys do that really really well.

48:00

I think credit people are okay

48:02

at it um, but I think we're

48:05

probably more interested in what

48:07

we've been doing lately, which I would call structured

48:09

equity minority equity opportunities,

48:12

which give you kind of that higher return something

48:14

that I wouldn't call opportunistic where we're in that

48:17

mid mid team type range, but higher

48:19

higher return perhaps with some you

48:21

know, higher risk of course, but

48:23

where we're working with really good companies and really good

48:26

management teams, where we have really good governance

48:28

structures, but we don't have control. So

48:30

so what does structured equity actually mean.

48:33

Is this a sort of hybrid of equity

48:35

And it could be a minority interest

48:38

position. We've got one where we have

48:40

a we have a minority interest position where

48:42

we have some downside protection in terms of

48:44

excess collateral and the shares. So that

48:46

to me is, you know, we've limited a bit of our

48:48

upside, but we've also taken a big cushion on the

48:50

downside. It could be prefect equity

48:53

that's deeper into the capital structure than we normally

48:55

would do um because of

48:57

some views that we have on the company. When you say

49:00

deeper, you mean lower in who

49:03

gets paid in banquet? Correct? Correct? You know,

49:05

like through through the capital structure, where

49:07

we've created at a much lower area

49:10

in the capital structure. The other thing I would

49:12

I would say, what makes us gives us

49:14

an advantage there to a great

49:16

degree is being integrated with Carlisle

49:18

as a global platform, and I think that's the

49:21

one thing that really turns

49:23

the wheel for our platform today

49:25

is that connectivity with Carlisle,

49:28

who has been in business for over thirty years,

49:31

owning companies, realizing

49:33

on them on a global basis, boots on the

49:35

ground not only in the US, Europe, but Asia

49:38

in particular, which is a great growth area

49:40

I think for us UH and having

49:42

that experience and experience

49:44

with management teams, countries and companies,

49:48

you know, it's it's unbelievable how much

49:50

origination it helps us with. But also

49:52

when we're making an investment, the

49:55

different points of intersection that we can get from

49:57

our colleagues in the private equity side, it's kenn

50:00

and put a price on that. The the complementary

50:03

nature of marrying global credit

50:05

to private equity seems to be, Hey,

50:08

how come we didn't do this before? It really

50:10

seems to have worked out nicely for you

50:12

guys. Yeah. There, we're like, think of us as solution

50:14

providers, right, Like I mean, if you're

50:16

a management team, you're and you're looking

50:18

to expand, you either sell

50:21

control equity or

50:23

you look for some sort of structured solution.

50:25

You come to Carlisle. You can go to our biogroup

50:28

it does control equity, or you can come to

50:30

our group and we will do some sort of

50:32

structured solution that will help you achieve

50:34

your growth objectives. As

50:36

a combination. That's a powerful outcome

50:38

because you get all the benefits of both

50:41

those groups in one package to help those teams

50:43

grow. Right. Really, if no matter

50:45

what your needs are, and I don't want to sound

50:47

like I'm doing a commercial for you, you you know, not at all, but

50:49

but you can. But it seems like

50:52

there it's kind of amazing

50:54

to think back ten twenty

50:57

years ago when in a lot of private

50:59

equity shops nobody was thinking

51:01

in terms of credit. And really it makes

51:03

in hindsight, it makes perfect sense

51:05

to marry you know, It's like marrying

51:08

a fixed income and equity together.

51:10

It makes a lot of sense. Yeah, And I think look culturally

51:13

as an organization. I mean, we didn't talk

51:15

about this, but culture matters a lot.

51:18

And culture matters a lot to me. I mean, I left a

51:20

great organization with a great culture and

51:22

I'm not you know, I'm not at the beginning of my career.

51:25

So I need to go to a place where I thought the

51:27

culture is gonna fit for me, and Carlisle

51:29

is a very collaborative, very supportive environment.

51:32

Is known as a good partner in the

51:34

marketplace, and that's that's worth a lot.

51:36

So when you're talking to a management team, you bring

51:39

that with you and they know

51:41

if they're dealing with Carlisle Global Credit

51:43

or Carlisle Private Equity, they're getting that same

51:46

partnership approach, and that's extremely

51:48

valuable, especially when you're in competition

51:50

for assets. So so let's

51:52

talk a little bit about that for a second. And

51:55

I'm not asking the name names, but who

51:58

are your your clients? What sort of

52:00

entities are Carlyle's clients?

52:03

Who who do we think of? Um?

52:05

Are they? Are they pension

52:08

funds? Are they? Yeah? I

52:10

mean at amends?

52:12

What what sorts? What sort of entities

52:14

are carlisles Claus Sure I would say

52:17

that, Um, you know, we have all the

52:19

traditional institutional investors in anybody

52:21

else is going to have. You're gonna have your traditional state

52:23

pension plans. You're gonna have your

52:26

you know, non Canadian or sorry,

52:28

non US pension plans, whether that

52:31

be in Canada or Europe or Australia.

52:33

You're gonna have sovereign wealth funds, which

52:35

are a big component of that. And you're gonna

52:37

have insurance companies. I mean, those would be the major institutional

52:40

side. Then we've got high net worth. Really

52:42

yeah. High net worth is for us in credit

52:45

in particular, that's a growing How do you

52:47

define high net worth because every entity has

52:49

a different line fift yeah,

52:53

I mean I don't so much define it

52:55

as to how much they have, but as how big

52:57

of a ticket. And for for now we

52:59

go all the way down to where I think we

53:01

can take tickets in that are as low as ten thousand

53:04

dollars really yeah, yeah, uh

53:06

so, I know I only have you for a

53:09

limited amount of time. Let's

53:11

jump to our favorite questions. Ask

53:13

all of our guests all starting

53:15

with let's talk about what what you were doing to keep

53:18

yourself entertained during lockdown?

53:20

What were you watching? Streaming, listening,

53:22

streaming? Okay, well, the two

53:24

things that I one i've finished and one I'm

53:26

still watching. One is called it's called

53:29

the Bureau or the Bureau, which

53:31

is it's subtitles, but it's French

53:34

and it's really about the French intelligence

53:36

agency and their operations

53:40

in the Middle East and um

53:42

Northern Africa, and it's fascinating

53:44

because of you know, really, what you do is you have these

53:47

relatively normal people leading these

53:49

clandestine lives to affect

53:51

change and all the complications

53:54

that go with it, and it's you know, it's complicated,

53:56

but it's subtle. It's it's really worth

53:58

watching. It's probably the best thing I have watched

54:01

in a long time. Really, these

54:04

five seasons fantastic, the

54:06

one, the other and the other one. And listen.

54:08

I'm even though I'm Canadian and I did take French

54:10

for twelve years, I'm really not proficient

54:13

at it. So I do read. I

54:15

watch these with subtitles Call my Agent

54:18

fantastic hilarious. So

54:20

so every time I discussed

54:22

call my Agent with friends,

54:25

I always have to tell them in France

54:27

it's called ten, not called

54:29

called my Agent. And all of the

54:31

actors playing actors are actually

54:34

the very famous French actors

54:37

that if you're an American you may or may not

54:39

recognize them. Um, but that was

54:42

such a great show. I really enjoyed.

54:44

I've not done it yet, but I quite

54:46

enjoy It's my fun place to go. So so I'm gonna

54:48

check out the bureau and you're already onto

54:51

ont call my agent. UM, let's

54:53

talk about mentors who helped to shape

54:55

your career. Yeah, I I would call them

54:58

mentor facilitators if you which

55:00

were people who not so much

55:02

mentored me, but but put pushed me in

55:04

certain directions. And I'd say the one

55:08

there's probably three of them, and the one who initially

55:10

think of as a guy, Tim Hodson and

55:13

him and I worked at Tim and I worked at Golden Sacks.

55:15

He was the CEO of Golden Sacks Canada

55:17

for a while. He's he's now the

55:19

chair of Ontario Hydro

55:23

one I believe called the utility up

55:25

in Canada. Now. He's also on the board

55:27

of PSP, which is the

55:29

UM the sister pension plan to

55:31

c p P I B. So he you know, he's

55:33

a great guy and he really um

55:36

pushed me to do different things. He

55:38

actually is the person who encouraged me to go to c PP

55:40

I B. But I think the biggest thing he did

55:42

for me is give me perspective. And I think

55:44

that's especially when you're younger. I think you need

55:46

that in perspective and some empathy.

55:49

I put yourself in somebody else's shoes and

55:51

replay back what you said to that person or

55:54

how you act in that situation, and that

55:56

that had profound impact on how I operate

55:58

today. And and I give him a lot

56:00

of credit for things that I've been able to do in my

56:02

career. The other one, the other two people

56:04

are really UM David Dennis and who's a former

56:06

CEO c p P I B, and Mark Wiseman,

56:09

who who became the the

56:11

CEO c p P I B. And they they

56:13

stood behind me at a time when I started a private

56:15

credit business during the financial crisis

56:18

of oh eight oh nine. They bought into

56:20

that long term strategy that I had UM

56:22

not dissimilar to the platform approach we have here

56:24

today at Carlisle and UH at

56:26

a time where we're going through the deepest,

56:28

what we thought was the deepest, darkest crisis we've ever seen.

56:31

UH, they got behind me and and rallied

56:33

board support to get that program going and

56:37

really gave me the lane way to do what

56:39

was what turned out to be a very successful

56:41

program for c p P I B. And then

56:43

finally I would say, UM,

56:45

you know my current boss, Quson

56:48

Lee. UH, he kind of found

56:50

me at a time where I was really considering

56:52

UM starting my own fund and

56:55

uh and somehow found me just before

56:58

I had left to start my own fund and convinced me

57:00

to come to Carlisle, uh and really

57:02

gave me again the lane way,

57:04

the opportunity to build

57:07

what we've done so far, and we've got a lot more to do. But

57:09

I but I I you know, I think they're facilitators

57:11

in many respects. They've they've listened

57:13

to what I've had to say and given me some guidance,

57:16

but but more or less have cleared the lanes

57:18

to to allow me to do what I think is

57:20

the right thing to get to business going really really

57:23

quite interesting. Let's talk about books.

57:25

What are some of your favorites? What are you

57:27

what are you reading? Right? You know what books

57:29

are like music? To me? I listened everything right,

57:31

So I listened to rap, I

57:33

listened to nineties rock, I listened

57:35

to pop, I listened to jazz, I listened to classical

57:38

and country, and like, you can't really pin me down. And

57:40

books are kind of the same. I go through periods where

57:42

I want to understand something, so

57:45

um, some of the greats I was just thinking about it

57:47

before I came in here were you know,

57:49

as we moved to the U S. I didn't do a lot of

57:51

US history, so I read a lot about

57:53

you know, U S history. So some of the ones that stand out, Team

57:56

of Rivals, doors, good and fantastic.

57:59

Um ron Cher now has got

58:01

some great books. I read Alexander Hamilton's

58:03

before it became like a play,

58:06

and I thought, how do you make a play out of that? But like, fantastic

58:08

book on somebody who was

58:10

so prolific in a very short period of time

58:12

and had such a large, profound impact

58:15

on America. I think that's fascinating.

58:17

Grant. I mean, you know chur Now

58:19

another one there where you know there's

58:21

a flawed man who who had his moment

58:23

in history. Uh, you know, fantastic.

58:26

And then you know, just recently I read, uh,

58:28

Ladies and gentlemen, the Bronx is Burning,

58:31

which is uh, you know, politics,

58:33

sports and sort of merging New York

58:35

in nineteen seventy seven, where you had the Yankees,

58:38

Reggie Jackson, you had the mayor

58:41

race, and you had you know, the

58:43

Blackouts of nineteen seventy seven,

58:45

a cross all five boroughs. I mean, it's fascinating,

58:47

So I really I really enjoy those things.

58:50

And then I love reading about people

58:52

who who are flawed but have achieved,

58:54

you know, in history great things. So Churchill, for

58:56

instance, Um, you know, I read

58:58

the Robert Carol book recently, The Power

59:00

Broker, which is like massive

59:03

but like you know, power crops, absolute,

59:05

power crops, absolutely, And

59:07

and now I'm I'm in the process of reading

59:09

Partying the Waters, which is at Taylor Branch

59:12

book on on Martin Luther

59:14

King sort of in the early civil rights movement. So

59:16

I like a lot of different things. Which

59:18

Churchill book will you? I think the best

59:21

ones if you want to read, if you just say I want to read

59:23

one, the definitive ones are by Roy Jenkins,

59:25

no relation to me. And then Andrew

59:28

Roberts wrote one recently, and I think that one's

59:30

a pretty good one. It has some new material and

59:32

really shows a flawed individual for sure,

59:35

as we all are, not

59:37

all of us accomplished. What what folks

59:40

like Churchill did? Um, let's talk about

59:42

advice. What would you tell a recent college

59:44

grad who was interested in

59:46

a career in either credit

59:49

or investment management? Yeah,

59:51

I you know, I get this question a lot

59:53

from junior people. They asked, what what should I

59:55

do? And I think it applies to a lot of things,

59:58

not just investment management. I think the biggest thing you can

1:00:00

do is is to be obsessively

1:00:02

curious, because if you're impassionate,

1:00:04

if you're not curious about things like I

1:00:06

don't know how you'll learn frankly, and

1:00:09

so be early on. You have

1:00:11

the ability to be curious in

1:00:13

an uninhibited way because nobody

1:00:16

expects you to know anything. I mean, you might be

1:00:18

brilliant, you might have come out of great school,

1:00:20

but nobody really expects you to know much.

1:00:23

And so that's a great time to be

1:00:25

curious about what you're interested in. Right. So,

1:00:27

if it's finance, be curious about that. If it's

1:00:29

investing, be curious about that and ask

1:00:31

a lot of questions because that

1:00:34

ultimately is what's going to drive you through. And

1:00:36

a final question, what do you know about

1:00:38

the world of credit and investing

1:00:40

uh today that you wish you knew years

1:00:43

ago or so when you were first starting out?

1:00:46

Yeah, you know, I'd say the

1:00:48

biggest thing that I've

1:00:51

I've come to realize is that

1:00:53

um change is constant. Change

1:00:55

is constant, and I think in investing

1:00:58

we sometimes fall back on

1:01:00

history, we fall back on what we know,

1:01:03

but change is constant. Some people

1:01:05

say it's circular, but I think it's it evolves

1:01:07

as opposed to circular. And

1:01:10

I think that change has increased dramatically

1:01:13

in the thirty years that I've been involved in

1:01:15

finance and investing, and if

1:01:17

I had a thought about that, I

1:01:19

think from an investing standpoint, it which

1:01:22

some In some ways, it's influenced how I think about

1:01:24

investing today compared to thirty

1:01:26

years ago. For sure quite fascinating.

1:01:29

Thanks Mark for being so generous with your time.

1:01:31

We have been speaking with Mark Jenkins,

1:01:33

managing director and head of

1:01:35

Global Credit at Carlisle Group.

1:01:38

If you enjoy this conversation, well

1:01:40

be sure and check out any of the previous

1:01:43

I don't know three nine we've had

1:01:45

over the past eight years. You can

1:01:47

find those at iTunes, Spotify,

1:01:50

wherever you purchase your favorite

1:01:52

podcasts. We love your comments,

1:01:54

feedback and suggestions right to us

1:01:56

at m IB podcast at Bloomberg

1:01:59

dot net. Sign up from my

1:02:01

daily reads at Richaltz dot com.

1:02:03

Follow me on Twitter at ritalts. I

1:02:05

would be remiss if I did not thank the

1:02:07

crack staff that helps put these conversations

1:02:09

together each week. Sean Russo

1:02:12

is my researcher. Paris Wald is

1:02:14

my producer. Attika val Bronn

1:02:17

is our project manager. Mark

1:02:19

Siniscalci is my audio

1:02:21

engineer. I'm Barry Ritalts.

1:02:24

You've been listening to Masters in Business

1:02:27

on Bloomberg Radio.