Asset managers are bracing for an unprecedented period of volatility which promises to linger for some time to come. What structural advantages is IMCO leveraging to drive returns and deal flow against this backdrop? And how is it thinking about investors’ appetite for credit? We caught up with Jennifer Hartviksen, Managing Director of Global Credit, and Christian Hensley, Senior Managing Director of Equities and Credit, to find out.
How has the coronavirus pandemic impacted your view of the private and public markets? How is it shaping conversations with clients?
Jennifer: From a credit perspective, the current market volatility represents a great opportunity for capital like ours, that can take advantage of both structural complexity and illiquidity in the market. It creates the potential for us to structure some favourable deals that will look good over a five-year horizon.
It also lets us take advantage of IMCO’s “one-stop shop” approach and collaborative culture to think across asset classes. For example, one of our infrastructure colleagues recently came to us to discuss a co-investment. The transaction involved access to capital markets, which of course has been impacted by the pandemic, which in turn created a potential opportunity for us to lend money. So being part of an integrated team free of silos is a benefit in surfacing these sorts of situations.
Christian: The pandemic has brought significant disruption to the financial markets, and that volatility is driving very different outcomes for companies with different liquidity and fundamental profiles. As a potential provider of liquidity, we’re poised to capture some really interesting market opportunities. Even high-quality names have sold off significantly, which presents an opening for us.
So far, I think our clients are pleased we’re quickly adapting to market conditions, exploiting our liquidity and going after some interesting investments.
How else does IMCO differentiate itself from other asset managers? What’s unique about your offering?
Christian: We differentiate ourselves on speed, quality and cost. In terms of speed, we can help our clients get to opportunities and asset classes more quickly and cleanly than they might otherwise. When it comes to quality, we’re always going to be a friendly, constructive and strategic investor in the companies we support. We have a long-term point of view, certainty of capital, and perspective and insight. And lastly, we have a very effective cost of capital, which lets us be competitive in the markets that we’re addressing.
Our product offering is also definitely a part of our secret sauce. We have a flexible, adaptive and really compelling menu of products, which means we don’t force our clients into a “one size fits all solution.” Instead, we’re able to match almost any risk and liability profile and adjust as the client’s needs evolve.
Why is it so important to think about the long term in an environment like this one?
Jennifer: Simply put, it’s impossible to call a top or a bottom in the market. Instead, we believe it’s important to have an investment process with a long-term horizon that permits averaging into investments and being positioned to react to opportunities when the market presents them.
Being able to deliver scalable, risk-managed, long-term oriented products that can take advantage of these dislocations is a central feature of what we offer. We’ve got a really strong team focused on executing on the market insights we’ve developed, enabling us to deliver attractive exposures our clients might not be able to access themselves.
What segments of the credit universe are attractive at present?
Jennifer: We see both immediate public market dislocation opportunities and longer-term private market situations. We have the opportunity to capture an illiquidity and complexity premium in private credit, and there are also private deals that don’t come to the public market for a variety of reasons like size or flexibility of borrower requirements.
Christian: I would add that we’ve also been cautious for some time of cyclical and commodity-driven parts of the market. We generally prefer to find a great business and a great management team to invest in over a number of cycles, and to patiently build value over time by supplying them with capital. It just fits much better with our culture and our long-term horizon.