In lending, defense wins. Asset management is the difference maker.
In healthy markets, returns across private credit managers tend to look similar. The differentiation shows up in a down cycle, when defaults rise.
Equity investing is a game of offense. Lending is a game of defense: preventing losses is what separates one manager from another. Asset management is a lender's first line of defense.
Aaron Blanchette, Global Co-Head of Corporate Credit at Fortress, explains that the role of asset management goes beyond working out troubled credits. Strong credit managers turn portfolio data into intelligence that shapes where to invest, how to price risk, and which covenants to require.
Watch to learn why asset management infrastructure deserves a closer look.
Aaron Blanchette:
During healthy markets, it can be harder to differentiate one private credit manager from the next. The returns are going to look very similar. The differentiation becomes evident when you've gone through a down cycle or a macro change leads to an increase in default rates.
So how do you actually evaluate who will thrive when the economy hits a speed bump? One key answer is asset management infrastructure. But here's what most people don't understand about asset management: it's not just about fixing problems after they happen.
That's particularly true in credit investing. In equity investing, whether private equity or public equity, it's a game of offense. Your winners make up the difference between your performance and somebody else's. In lending it's a game of defense, and preventing losses is the difference maker between one manager and another.
Asset management is the best defensive team that any lender has: it's the first line of protecting against losses. But the best asset management teams do much more than just work out troubled credits. They collect information on the performance of companies, consolidate that data, and convert it into meaningful information to be used to inform new investment decisions. For example, if our borrowers report inflation issues in a particular sector or industry, that intelligence can help us modify where we make new investments, how we price them, and what covenants to put in place.
