Private Markets 360° | Episode 29: Beautifully Inefficient: Uncovering Hidden Investment Opportunities in Private Credit

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Jocelyn Lewis:

Welcome to Private Markets 360 where we delve deep into the world of private markets and bring you insights from industry leaders. Today we're excited to welcome Bed Radinsky, a partner at HighVista Strategies, a Boston based alternative investment firm with 11 billion in assets under management. With over 20 years of experience in private credit and syndicated lending, Ben has a profound understanding of the complexities in today's credit landscape. At HighVista, he oversees specialized alternative credit investments in areas that are often deemed structurally inefficient, included asset based lending, natural resources, and real estate debt. His insights into the evolving world of specialty finance and how HIVISTA uncovers opportunities in areas often overlooked offers our listeners a fresh lens on alternative credit strategies. And with that, Ben, I'd like to welcome you to Private Markets 360. Thank you for joining. And how are you today? 

 

Ben Radinsky:

I'm great. Thanks so much for having me. 

 

Jocelyn Lewis:

Absolutely. 

 

Chris Sparenberg:

Well, Ben, to kick things off, you've got 20 years of experience in private credit and alternative investments. It seems like you've been a part of every existing and emerging part of private credit. Would love to just hear you take us through your career journey and talk about how it's impacted your investment approach at HighVista. 

 

Ben Radinsky:

So my career started as many in the industry does, where I was working for a large investment bank. Over time I started to realize that one can add tremendous value in the markets that are less efficient. And what that means generally is it's looking for the pockets of the market where there are either capital deficiencies or there are material changes in capital flows. And those inefficiencies in the market can really be quite intriguing when you start to uncover them. After working at an investment bank for close to a decade, I spent the next decade trying to figure out where in private markets I felt most comfortable. And private credit was really beginning its journey. And through that process, my career has grown. Together with private credit, I've done things like specialty finance, where we provided warehouse lines of capital to specialty lenders that are non bank lenders, secondary situations, and direct lending. 

 

Ben Radinsky:

And that leads me to HighVista, where I am today, where I've been for almost five years. 

 

Jocelyn Lewis:

Well, Ben, it's clear that your career has been shaped by a deep understanding of credit and then also moving into having a deep understanding of private credit as well, and that you've really been committed to uncovering value in the less kind of obvious places. So building on that, let's shift to the current market landscape where inefficiencies often create opportunities. And with this Evolving private credit landscape, particularly beyond the traditional direct lending. How does HIVISTA strategies identify and capitalize on unique investment opportunities that others might overlook? 

 

Ben Radinsky:

What really sets us apart at HIVISTA is we're able to have a broad view of relative value across markets because we're not tied to a single asset class or a single delivery mechanism. We're one of the few institutional investors that can look across lots of different markets and we can figure out what relative value is. Take the private credit market as an example. Today that market is estimated to be 1.7 trillion. About half of that is direct lending. And if you were to think about that market specifically, there are lots of funds that have been built over the last two decades focused exclusively on direct lending. But there's also the leveraged loan market, which is about 1.4 trillion. And then there are also high yield markets, which are 1.3 trillion. 

 

Ben Radinsky:

The first thing that I would note is the rapid rise of private credit over the last two decades. But almost as important is the fact that there are three markets of roughly equivalent sizes, but that oftentimes are foreign to the investors that are playing in each. As an example, there might be a private credit fund that's focused exclusively on direct lending, but they might not know what's going on in the high yield market. And what we try to do at Hy Vista is we try separating what I would call the general market performance from what the outperformance would be. And we're always looking for those areas that are beautifully inefficient. And what we mean by beautifully inefficient is most of the time, in most places, markets are efficient. However, in a very rare percentage of the time, markets are inefficient, and then a subset of that is, is it investable? I think that the broader scope of thinking about what's happening in the marketplace, understanding relative value and having the flexibility within your mandate to be able to invest across markets really gives us an edge. But that's one dimension. 

 

Ben Radinsky:

There's another dimension which is what is the delivery mechanism? So a delivery mechanism might be, is it a publicly traded security, is it a derivative, is it a fund, or is there some securitization that you can access? And so thinking about those two dimensions, the first is comparing direct lending, leverage loans and high yield loans. That's one dimension. But then the second dimension is understanding funds, securitizations, secondaries, or other derivative products where you could invest in those situations. 

 

Jocelyn Lewis:

That is certainly a lot to think about with the different dimensions across credit So I like the term that you use beautifully, inefficient. And I would love if you could share an example that illustrates how HIVISTA turns that inefficiency that you're able to find in specific areas of the market into differentiated value. 

 

Ben Radinsky:

Yeah. So the first point is, what does it mean for a market to be inefficient? Or better yet, what does it mean for a market to be efficient? And what we generally mean by that is that there are very mature capital markets with mature players that understand all of the risks and all of the required reward at a given time. As a result, you have lots of very sophisticated buyers and sellers that are undertaking price discovery at any given point. And that's what it would mean to have an efficient market. Or said differently, because you have such sophisticated parties playing the game and they're all playing by the same rules, you kind of have the best price that could possibly be achieved is the price that the market is willing to pay at that given point. And therefore there is no way to have an advantage or an edge by any single party at any given time within that market. Now, what does it mean to be inefficient? Inefficiency could come from lots of different ways. It could come because either there are not sophisticated players, it could come because the capital markets are less developed, or it could come because there's some sort of informational advantage that one party in the market has over another. 

 

Ben Radinsky:

Our general thesis is that inefficiencies are pretty rare, but where one can find them is oftentimes when there is not as much capital as you would expect chasing a particular space, or if there's a new investment idea that has now come up and therefore there's a lot of excitement about it. But there might not be the level of sophistication required to build a really deep market or the opposite. It might be a market that has been abandoned for a whole host of reasons. One really tangible example that highlights this point is in private credit. Broadly, we have been looking at situations where there is meaningful downside protection. And where does that downside protection come from? It usually comes from excellent covenants that are securing very easy to value pieces of collateral. So if you were to think about that paradigm of very simply a loan to someone who has pledged you collateral. This is one of the oldest financial instruments that exists. 

 

Ben Radinsky:

You know, it's thousands of years old, it's just a collateralized loan. But there are specific areas where we have seen a noted change simply over the last eight years. Here's one example that might resonate. Eight years ago, lending to natural resource market There was a loan done where it was a mezzanine loan to a large capital structure and the covenants were very broad. They weren't specific around the collateral because there was a senior lender in this collateral pool. The collateral in this case was a very easy to value group of producing oil wells. This is not a speculative investment. It wasn't hoping to find new oil wells. 

 

Ben Radinsky:

It was existing oil wells that are producing with a known quantity and there's a known decline curve of that quantity that's being produced now over time. You could think about what's happened in the world over the past eight years. Lots of European pension funds have been told by their constituents that they have to divest from anything relating to fossil fuels. Our position has been that doesn't really make any sense because in order to have the most efficient transition from old energy to new energy, including all the renewables, there's going to be some 25 year period where there's going to have a transition and you want the best actors that you possibly can have that are investing in fossil fuels. So here's the inefficiency that developed. You have all of these pension funds that were forced to exit the market for no reason other than esg. It's our position that's actually difficult from an ESG point of view because it won't accomplish what you want to accomplish. It won't actually allow the transition to renewable energy. 

 

Ben Radinsky:

And at the same time that means there's just less capital available for lots of good deals. So 2017, let's go back to that loan that I recognize. It was a mezzanine loan with loose covenants on existing producing oil wells. That same loan, eight years later, we were able to do a senior loan at a higher interest rate with better covenants where we had full covenants on the security. To me, that's an example of inefficiency where number one, you could identify why there are fewer participants in the market. Number two, you have an exact replica of a capital structure and a risk where over the period of eight years we were able to get better terms on senior lending with better covenants representing 0 to 60% cash flow. And as opposed to the prior loan where it was mezzanine, cash flow of 60 to 80%, worse, worse interest rate, worse terms. So to me, that is something that is inefficient. 

 

Ben Radinsky:

But even better than that, it's beautifully inefficient because you have all of these things that line up that show you why the market has priced things in the way they have and you're able to actually invest them it. 

 

Jocelyn Lewis:

And if you could just keep replicating those same types of loans, it would just be a well oiled machine, pun intended. 

 

Ben Radinsky:

That would be terrific. I would love it if we can do that. 

 

Jocelyn Lewis:

But that really is interesting and makes a lot of sense that you're able eight years later. And was there any change in the fundamentals, so to speak, or really more so the market opportunity was what presented itself for you then to be able to go in and get the better structure. Pricing in terms. 

 

Ben Radinsky:

Actually in this case the pricing, the pricing in terms were better, but the fundamentals were also better. And that's what's really interesting about this case. Meaning this is really a case where you could track the capital outflows as being what changed in the market. The fundamentals of the company, the fundamentals of, of the general commodity market have all improved. And one of the ways you can see that is, well, how much collateral actually exists, what is the performance of the collateral relative to where you underwrote that collateral and generally how is the company performing from a cash flow point of view and an overall leverage point. 

 

Chris Sparenberg:

Of view that's so interesting. Another part of the market that I think defines this concept of beautiful inefficiency really well and also one that from time to time gets some attention from the broader market is litigation finance. It's often seen as complex, it's misunderstood. Could you take us through your definition of litigation finance and why that's become an attractive space for alternative investors? 

 

Ben Radinsky:

So litigation finance has really developed also over the last 20 years and it's really been side by side how private debt has developed, but it's much smaller. If you were to look at total industry size of litigation finance in terms of devoted assets under management, today, it's probably in the neighborhood of 16 to 17 billion actually. Interestingly, new commitments to deals have probably declined. So from 2022 it probably was close to three and a half billion. And in 2024 it's probably down to two billion. But the reason why litigation finance is so interesting is first it is totally non correlated to the market. What funders are hoping to do is they're trying to find really interesting cases that have been hard to finance over time. And they've been financed generally either by the litigants themselves or by the attorneys. 

 

Ben Radinsky:

And so within litigation finance, here are the different structures that have happened in the past. It would be, well, I have a large Mass torts case. So take any of the large cases over the last decade. Let's use one of the most notable examples of the BP oil spill. The BP oil spill was one of these cases where it was pretty clear there was liability, but there was a tremendous amount of work that had to get done by each individual party in order to prove that they actually had damages because of this spill. And so what would happen would be these law firms would go out and try finding these litigants. And over time, it would be very costly for both the litigant and the law firm to prosecute the case. Because even though you knew ultimately there was liability, and even though you ultimately knew what the size of the overall trust was that was there to pay out each of these individual litigants, it just took time. 

 

Ben Radinsky:

And this is where litigation finance comes in. Because what a funder could do is a funder can actually find really interesting cases like the one I just described, where there's not much dispute over liability, but there is this procedural process that can take months, if not several years. You then have this very high cost that has to be borne. And so what you can do is you could say, okay, I will fund. We'll take on that risk from a pure financial point of view for a specific type of return. Now, that's the original form of litigation finance. And there have been some large funds that have been raised around this. But over time, what's happened is there are lots of other expansion areas of litigation finance. 

 

Ben Radinsky:

One example would be, let's say you have a law firm that has a portfolio of these cases. So could you lend to the law firm and that is secured by these different cases? Or another example would be, let's say you are only looking at cases that have already been adjudicated, but they're on appeal. That appeals process could take months or years. So, so again, very high degree of certainty of your success, but it's simply a time value of money, and that's a perfect time for a litigation funder to come in. Now, the last example that has really gained popularity is in certain IP disputes, where you have companies that have either patents or other types of intellectual property, and they have these very complex cases, cases, some of them could range in the costs of tens of millions of dollars against large corporate entities, primarily tech companies, but not exclusively so. And that also is a great opportunity because there you could have this hybrid structure where it's not just the litigation finance, but it also may be debt against an existing company that has a portfolio of patents not just the patent that's being litigated. And, and they may actually have recurring revenue or other types of financial assets that would be traditional collateral in some sort of lending deal. To summarize, litigation finance has moved from what I would call funding mass torts case to now having really sophisticated loan structures to either law firms or companies. 

 

Ben Radinsky:

And it's moving upstream and it is especially complicated. And this goes to the type of mandate that you have. If you are a traditional private credit lender, you don't have the flexibility to say, okay, I'm going to enter into a litigation finance deal. Because oftentimes these litigation finance deals don't look exactly like credit instruments, meaning even though they have a lot of the same features of a credit instrument, namely a stated principal amount or a return that you're expecting over time, it's oftentimes hard to put a maturity date because you don't know how long the litigation will last. So a maturity date might not be a point in time, but it might be related to how the adjudication of the case has progressed. So that's one complexity. Another complexity is how do you actually get the legal security, the perfected security interest in the type of case that you're trying to, that you're trying to finance. For all of those reasons it requires a specialist, it requires someone that has a little bit a different risk tolerance and it requires really sophisticated detailed know how of how these cases work and what the timelines are. 

 

Ben Radinsky:

Now from our point of view, we've actually stayed away from most of litigation finance because it's just to us, it's not something that fits into a, a multi asset private credit portfolio. However, we have played it very specifically in situations where there is again that beautiful inefficiency, where there's a known catalyst, where there's additional collateral, where there's a very specific reason why the loan is needed and it will generate very specific cash flows. So to us we find the overall space interesting, probably inefficient, but then there's this subspace that we find beautifully inefficient, which allows us to actually take advantage and invest in that area. 

 

Jocelyn Lewis:

Well, thank you for walking through and explaining all the different types, or a few of the different types anyways of litigation finance. I do remember back to the BP oil spill and the frenzy that created around claims and just the different perspectives on timing of payouts and who wanted to step into which level of risk and have the time to wait out some of those claims. But I think it's really Interesting that you've found a way to really hone in a particular niche area and capitalize on that. So thank you for walking through that. And I also liked how we really talk about where complexity can also create opportunity. And so shifting gears, I want to talk a little bit about how Vista sources these types of opportunities. So, Ben, can you talk a little bit about your approach to managing deal flow and how your network plays a role in uncovering and executing on unique investments? 

 

Ben Radinsky:

So, finding these areas is hard. And the reason why it's hard is because if a market is inefficient, it means that it's not as well known, and it means that there aren't the typical players that you would expect in a very sophisticated, deep capital market. So, as an example, if you were investing in, let's say, traditional syndicated loans, so that would be. There would be an investment banker involved, there would likely be an auction. It would actually be quite, quite easy to access that deal flow. Even in traditional private credit, as private credit has evolved, you have these large capital structures that are put together, maybe sometimes by a private equity firm or maybe there's an intermediary that's working on a club, but they're pretty well known. And I would call that beta, right? That is the market. So it's kind of good that market exists because it anchors what your expectations are in terms of pricing, in terms of what deals should look like structurally and what covenants should be expected. 

 

Ben Radinsky:

So I think that's incredibly important to anchor yourself and understand where the market is. But once you veer from that and you're looking at inefficient markets, sourcing becomes almost the most important part of the entire process. It might rival underwriting. Maybe it's even more important than underwriting because there's probably a strong correlation between how the deal was sourced and the quality of that deal. For HighVista, we have the advantage of 20 years of history where we have been investing in alternatives and developed a very robust network where we call upon folks in lots of different spaces, especially when there are interesting transactions. So, more specifically, what does that look like? How does that really play into our strengths? So I think that it's important to take a step back and again, think about what HighVista is good at. What HighVista is good at is understanding relative value across markets, understanding the markets themselves, understanding what areas we deem to be inefficient and that comply with our institutional requirements for reporting and for legal sophistication and for counterparty risk, and making sure that Custody of assets is maintained and that there is continuity should there be an event of default and how that would play out and in terms of all of the various complexities that you could have with creditor committees. So that's where HighVista's expertise lies. 

 

Ben Radinsky:

But where it doesn't lie is when we pick a specific area. So far we've spoken about two areas, natural resource lending and litigation finance. So what generally will happen is we think about those and we come at it from a top down approach where we say, okay, it's very interesting. Natural resources is interesting for the reasons that I mentioned. There's been a flight of capital because of some pension funds that have exited the space. That means there's quite a bit of opportunity because there's not the robust and deep funding you would expect. So let's start poking around in figuring out where those opportunities lie. And this really gets to the heart of what we do at hivista because we don't actually have a vested interest in the delivery mechanism. 

 

Ben Radinsky:

So we can speak to funds because we have the ability to invest in primary funds. We, we can speak to the secondary market. So we could understand what's going on in the secondary market. We can actually look at specific deals and clubs that are being put together and we could speak to other limited partners, endowment funds, pension funds, as to their best practices and what they're doing in this space. And very quickly what you'll see is you'll get a very clear sense of the market, who the participants are, where the opportunities lie, and do those opportunities actually meet the bar for our investing. And it's that hybrid approach where HighVista's expertise is in understanding relative value. And then we could partner with specialists in a specific space that actually find the deals that can package them, but then could take our advice every as to what best practices are, what we're willing to give on and what we're unwilling to give on, and most importantly, how things price. You put that all together and it's a pretty, pretty powerful, it's a pretty powerful combination. 

 

Ben Radinsky:

So now to answer your question specifically, how does HIVISTA source? The answer is, well, we have a network that's been developed over 20 years, that's 1, 2. We have proprietary joint ventures with what I would call fundless sponsors. These are folks in the private equity world. There's, it's a pretty robust market where you have very sophisticated operators that are able to put together deals. In the private credit world, it doesn't really work that way. It's usually folks that have Deep teams, deep expertise. But they don't raise funds exclusively. Instead they have a joint venture with someone like us where we'll give them a balance sheet and that level of sophistication and they'll go out and they'll find the deals and they'll understand how to structure them. 

 

Ben Radinsky:

And should there be a workout, they'll understand how to foreclose and what the details are. But we could guide them along the way. And then we also have a number of folks that we've invested with over time, we both as limited partners, but also as general partners, where we can actually put together some very interesting club deals in the lower middle market. And I think that's also the key where it's finding the inefficiencies in lower middle markets so that the deals are large enough that they could accommodate all of the institutional requirements of reporting and, and of legal and of everything that you possibly would need in terms of trustees and organizational sophistication. At the same time, it's not super competitive because you don't have the large private credit funds chasing these transactions because they're not $100 million or more. 

 

Jocelyn Lewis:

They're not. But would they also have similar structures with the joint ventures like you mentioned, so that they would have teams that then would make it more competitive in some of these inefficient areas that you are also looking at? 

 

Ben Radinsky:

So I think that some of the large private credit funds for sure have invested in some of the spaces that we are investing in. Take specialty finance as an example, where I think there has been quite a bit of M&A activity where you have of the larger firms that have gone out to purchase some of these devoted firms. You know, Atalaya has been recently purchased and Victory park has been recently purchased and Bastion has been recently purchased. And the reason why all of these firms are being purchased is because it gives a great sourcing platform to those large asset management firms. But the difference lies in the types of transactions that they're doing. Because of the size of those funds, you are forced to look at transaction sizes greater than $100 million. And because you're in that market and things start getting very competitive, it's actually counterintuitive. It's the larger deals with some of the larger institutions have covenants that are generally less constricting, or shall I say they are more borrower friendly and less lender friendly as opposed to the lower middle market where there's less capital. 

 

Ben Radinsky:

But if you have the institutional capabilities in that lower market, you actually can get Better terms, better collateral, better rates. So it's having your cake and eating it too. The problem, if I could say it that way, is it's harder to invest. So if you're an enormous pension fund that's looking to invest $250 million a clip, it's going to be very hard for you to access some of these more niche areas of private credit. And that's also where HIVISTA really shines. We have the sophistication to match some of those really large investors with some of these more niche opportunities. Because what we do is we take these niche opportunities and we package it all together in a single vehicle so that you as a large LP can access lots of different niche opportunities in one slug. Which may be harder if you have, you know, a fund that's exclusively focusing on one area of the market. 

 

Chris Sparenberg:

Sure, that platform capability is a real difference maker for certain investors when you're out in the market. We've touched on so many angles within private credit, but I want to go back for a moment to direct lending and this view that you express that direct lending is largely beta. Can you unpack that for us? Can you take us through how you're defining beta indirect lending and then how specialized credit strategies deliver true alpha instead? Your perspective. 

 

Ben Radinsky:

So private credit has really grown over time and really grown since the global financial crisis of 2008. That's really, if you were to look at an inflection point that is really what, what set private credit on this 17 year, 18 year journey where it's just become an enormous asset class. And I think that there are a number of really important insights that I think that are important to highlight as it relates to today's private credit. I think that there are two truths that can coexist. Private credit has delivered superior risk adjusted returns and financing certainty relative to where high yield was and relative to where the leveraged loan market was. However, that does not alter the fact that recoveries, the collateral base, the covenants, the interest coverage ratios, all of those have come down over time because of how large the space has grown. So effectively what's happened is a lot of the money that had been either in the public markets in the form of high yield markets, or on bank balance sheets or in the syndicated load markets that has moved over to funds. Now, on balance, that's a good thing. 

 

Ben Radinsky:

Why is it a good thing? Because the most, the most important mismatch that that existed was if you had this liquidity mismatch where you had these loans that were five to seven year loans. And they were being financed either in the, in the case of banks by deposits or by inefficient equity of those banks, or in the case of high yield by investors. That would mandate liquidity. And they would have, because they would have liquidity, there would be excess volatility. So the private debt market over time has been a really important and positive development for financing of companies. However, again, that is a double edged sword because as it's grown, what's happened is those interest coverage ratios have come down, the covenants have come down and rates are thinner, even though there's still a healthy spread. So overall, I think that my simplest argument would be if you look at the overall market, private credit today is close to $1.7 trillion. It's hard to see how that's not beta, meaning that literally, definitionally is the market, the market is the private credit market. 

 

Ben Radinsky:

And so I think that from our point of view, we have observed a number of things over time. The first is that there has been a very significant rising tide. And that has been able to really help situations that otherwise may have come up short. And I think that this is the famous Warren Buffett phrase, a rising tide floats all boats and then a tide that's going out, you start to see which boats have rust in their hulls. And I think that phrase really says a lot about the historical market over the last 20 years, meaning we have been in such a rising tide that refinancings have been available even for situations that may not have otherwise been easily refinanced. So that's the first point. The second point is that if you were to look at how companies perform, so generally when private credit is issued, a company will have an estimate for future cash flow, for the next year's cash flow, and maybe for the next five years cash flow. And oftentimes people adjust those cash flows for things that they think are one time events. 

 

Ben Radinsky:

Last year we had some sort of weather event, or maybe there was an acquisition and we have some cost savings. Whatever it may be, there are all these adjustments. If you look at cash flows over time and if you look at how the predictions of those cash flows have performed relative to the actual cash flows, there's a 30% delta, meaning the actual cash flows underperform expected cash flows by about 30%. So if you were to think about how private credit is priced, private credit almost always is some multiple of cash flow. So if you have a company that has 500 million of cash flow, so it wouldn't be surprising for that company to be purchased at eight times, right? So eight times 500 million is 4 billion. And it would be reasonable to have debt of five times. So there would be two and a half billion of debt versus eight billion dollars of total value. Now, the problem is, let's say the cash flow is not that 500 million that you expected. 

 

Ben Radinsky:

Let's say that cash flow is 30% less than the 500 million. So that would be 350 million of cash flow. So again, using the same exact multiple of eight times. So now the company is only worth $2.8 billion. And the debt that you put on it was $2.5 billion. So the loan to value is much higher than what you thought it was at the outset. So it's close to 90% as opposed to something like 60%. Now, you put these two ideas together. 

 

Ben Radinsky:

You had this historical run of private credit that has done so well because of all of the new capital flooding into the space and the ease of refinance. And you have these leverage numbers where people thought the leverage was relatively low, but it turns out the leverage is relatively high. It will be very interesting to see how that plays out over the next 10 years where you have a mature market, so you're not going to be helped by refinancing anymore. And you actually have more leverage than you expect. So if you ever have a macro event, that macro event could materially impact what your ultimate recoveries are and how you do. You also have a case of the secondary markets. And the secondary markets are really fascinating examples of situations where you have a limited partner that has to leave a position for something having nothing to do with the underlying market conditions. Then you have a general partner that will only allow certain parties to participate. 

 

Ben Radinsky:

And so that again, is example of a beautifully inefficient market where if you could understand the underlying assets, solve a problem for another limited partner and participate in a secondary, that's a way that you could really create value for your investors. 

 

Jocelyn Lewis:

Yes, secondary market. And private credit is going to continue to get more and more interesting, I think, because we're seeing more volume pick up, I think more than we've ever seen before. And it'll just be interesting to see as more deals get done too, and as funds, you know, balance for liquidity, change direction of how they want to invest, new entrants come in. People either go one direction or another with regard to where they want to deploy capital. I think that'll just open up some more opportunities. And Ben, looking ahead, what trends or shifts do you foresee in the credit market that could impact Hy Vista's investment strategy and how do you plan to adapt to capitalize on these emerging opportunities? 

 

Ben Radinsky:

So when it comes to outlook, I think that, you know, very wise people said that predicting is hard, especially the future. So it's always difficult to figure out where things are going. But I think that, you know, from our point of view, we try to stick to some very basic principles. The first is we try not to take a position on interest rates. And so even if interest rates were to come down a bit, I think that we have in our documents pretty healthy requirements for a floor and for a spread. And because of that, that gives us some comfort that both on an absolute basis and on a relative basis, we'll continue to perform even in the credits that are, that are, are issued today. And even if the interest rate environment changes over time, I think, you know, the harder things to predict are as the environment becomes more competitive and as you start to have some sort of degradation of credit, what ends up happening with creditor on creditor violence. And to us, that's something that we're watching very closely. 

 

Ben Radinsky:

There have been some notable cases over the last year where capital structures have been tested and there have been situations where assets that various creditors thought that they had secured in fact were not secured and they were stripped away from companies. And so for us, we have a very significant focus on, on continuing to make sure that we're senior secured, making sure that we have perfected security interests, making sure that we understand exactly what the risks are to our collateral should there be an event of default. So I think that at the macro level, we continue to believe that the markets will evolve. And through that evolution, there's no doubt that private credit will continue to mature and become an asset class that rivals basically any other. But I think that during the, during this continued growth phase, it is incredibly important to keep your eye on the prize and what that prize is, making sure that because you have a bilaterally negotiated agreement, because you have the power to actually negotiate the framework and the structure, you can fully capitalize on the inefficiencies in the market through creative structuring and through secure documents. So our outlook overall is quite positive. And then specifically, we have a number of areas where we have focused our attention. Specialty finance is one. 

 

Ben Radinsky:

Another area that we're very excited about is GP Finance. It's been very hard for private funds to raise money and because of that there is an opportunity to help younger funds build their products over, over time and that is an untapped area. Historically it's been traditional nav loans, but I think that GP finance could be something that becomes really exciting over the next few years. 

 

Jocelyn Lewis:

Well, perhaps over the next few years we will bring you back on to see what the GP finance market is like at that point in time. 

 

Ben Radinsky:

Yeah, that would be great and I really appreciate the time today. 

 

Jocelyn Lewis:

Well, thank you so much, Ben. This has been really interesting to get your views and again, I love how you phrase the beautiful inefficiency of the market because it does really present some very interesting opportunities. So thank you again. 

 

Ben Radinsky:

Have a great day. 

 

Jocelyn Lewis:

You as well.