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Outshine your competition through specialisation in the private debt market

There has been a pronounced rush into private credit from institutional investors, which has driven a lot of sponsors to raise private credit funds in recent years. Where is private credit heading, and how do you beat the competition? We hear from Sasha Jensen, CEO at Jensen Partners, about her thoughts on the latest and future trends.

From a recruiting perspective, how are sponsors looking to staff these new teams and what are some of the qualities that stand out, particularly for brands that might be new to the private debt market?

The private debt market is incredibly competitive right now, so firms that are looking to raise their first funds need an institutional-quality marketing team. From a recruiting perspective, this means marketers that have prior experience raising assets for private debt funds. Since this is still a fairly new market, we're seeing a lot of marketers try to make the transition from hedge funds or private equity into private debt. But I think to succeed in the private debt space, you need a marketing team that really understands the industry.

Can you explain some of the nuance that perhaps some candidates coming from either hedge funds or PE may not understand in making the transition to private debt?

I think the most important for marketers to remember is that private debt is a relatively new asset class. Hedge funds and private equity firms have been around for a while, and most investors generally understand what they’re getting themselves into in those two industries. But private debt is a different animal because it can behave like an equity investment, a fixed income investment or even an alternative investment, depending on which sector of the market you are focused on. This makes benchmarking tricky and could lead to a lot of unhappy investors if expectations aren’t appropriately managed.

In your research from last year, there was an observed jump in the pace of fundraising and distribution personnel who were moving as well. Did you get the sense that this was in part related to the popularity of private debt?

Yes, this is a hot industry right now. We're seeing record hiring numbers in private debt, which makes sense when you look at the number of new funds and the total assets. There's also a sense that we're still in the early stages for this industry. The U.S. and the UK are the dominant players in private debt, but there's a lot of room for growth in other parts of Europe, Canada and even Asia-Pacific. Our forecast shows the hiring trend continuing in 2018 and beyond as private debt firms ramp up their marketing teams.

It’s interesting, because amid all of this, there also seems to be a bubbling up of activity in the distressed arena, as lenders and investors launch new offerings focused on special situations and distressed debt. Is this something you’re seeing in your searches and how would you characterize the activity?

Distressed debt has always been one of the most popular strategies within private debt. Of course, you have to remember that we're 10+ years into a bull market so distressed opportunities are going to be limited. We're seeing a lot of interest in distressed strategies but we get the sense it's more about accumulating capital than deploying capital right now. Institutional investors want to be ready for when the market turns, so they're having those conversations with private debt managers now.

Given the cycle, how do those who specialise in the distressed space and special situations spend their time during these extended runs? Does the field get smaller or do people build out other capabilities?

The approach is largely the same regardless of the market conditions. Even if it may not seem like there are that many distressed opportunities, finding the right ones can take a long time. There’s nothing wrong with staying in cash and focusing on building the pipeline to find the right deal. Anyways, investors wouldn’t want a private credit manager chasing opportunities that aren’t there.

It’s been said that people moves can often serve as a leading indicator regarding the credit cycle. For instance, ahead of the global financial crisis, there seemed to be quite a bit of movement among people in the distressed arena. Is this something that you’re seeing now and are there any specific industry trends that relate to the activity? (i.e. is it new groups being launched? existing firms bolstering their capabilities or launching new lines, etc.)?

I think tracking people's moves, and specifically marketer moves, is just as valuable an indicator of what's happening as assets raised and funds launched. It's a way to peer into the future, since many of these moves are a signal of what a firm is trying to do rather than what it is already doing.

To that point, we are seeing a lot of private debt firms bring in marketers who specialise in the Asian market. The Asia-Pacific region is largely untapped from both a fundraising and investing perspective, and getting into that market really requires a local touch. So anyone with experience raising assets from Asian investors is in really high demand right now.

Finally, how have the skill sets evolved in terms what’s expected from top candidates? Alluding to your earlier answer, is specialisation important? Are there certain capabilities that are being valued today?

Specialisation is key. The private debt industry, and the larger alternative investment industry, is so bifurcated that no two strategies are the same. It’s very difficult to be an expert in more than a few types of strategies. That’s why I always encourage marketers to approach fundraising by wearing whatever hat fits best. If they have a strong track record in raising assets for direct lending strategies, then focus on that. Investors can see right through a generalist that doesn’t really understand the subject matter.

Under the spotlight: Sasha Jensen

Sasha_Jensen_speaker_superreturn_us_westSasha Jensen leads a team of recruitment specialists dedicated exclusively to capital raising executive search. Prior to founding Jensen Partners, Sasha Jensen was the Director of Alternative Asset Management Recruiting for The Gerson Group in New York and London, where she specialized in placing marketing teams for hedge funds and investment banking platforms. Before joining Gerson, Sasha was Global Head of Fund Distribution for Kinsey Allen International, after being a senior asset raising recruiter for Rice and Dore. Ms. Jensen was previously an investigative journalist on Fleet Street, and worked as Head of Investigations on the Saturday Star and Sunday Independent in Johannesburg, South Africa. 

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