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00:00:00:00 - 00:00:23:22

Unknown

Private credit funds are gaining traction as investors look to diversify as these volatile times continue to get us across the space. Mark Sherwood from I partner joins us now. Hey, Mark, Nice to see you there. Thanks for joining us. When we think about private credit, I mean, where where is the real appetite coming from? Yeah, we're very active all the time, Nadine.

00:00:23:22 - 00:00:47:20

Unknown

And good morning. We the non-bank lending sector in particularly that particularly for us, it's about non-bank lenders that already have proven business models. That is, they continue to grow very, very well. We're not talking here about buying our pay later, but we're really talking about groups that do extensive credit work on all their borrowers before they before they essentially lend.

00:00:48:03 - 00:01:20:12

Unknown

So that that ad space has been very active for us by last year and and the start of this year, we've kicked off with that with more deals now, really funding those those non-bank lenders that have got proven extensive strong credit processes in place. That becomes quite a good risk reward for for an investor. And so this is presuming or you know, this is sound, even if we do see further slowing in the economy, because I'm thinking about small businesses, small businesses suffering as people, you know, stop spending.

00:01:21:15 - 00:01:42:10

Unknown

Yeah, it's something we're really aware of and really spending a lot of time on, because you're exactly right. There's no doubt the the momentum has turned. It's coming through the dollar. The household sector is is already under pressure. There's this lag that's coming through in the data that we've seen in the last month or so. So so there's no doubt that that's going to put pressure on on small businesses.

00:01:43:14 - 00:02:16:04

Unknown

That said, it doesn't rule out the sector. You and I, for instance, interestingly, we're doing a funding deal for a lender to small and medium businesses right now. But there's there's deep security in the in the in the deal from our point of view, because we're taking our full security position over the actual loan book. So so even kind of if that business analyses a small to medium business wrong and has a an a raise or perhaps in a default situation, it ends up being a very, very, very small piece in an overall investment position that we've taken.

00:02:16:20 - 00:02:41:15

Unknown

Hey, Mark, is there much interest or appetite for equity right now? Private equity? Yeah, private equity is is very active. Where we're actually involved right now in a in a private equity capital raise for a for a business that's that sort of valued in in the 30 to $40 million category. So this is a business that's it's quite fascinating one.

00:02:42:03 - 00:03:09:14

Unknown

It's a business called Unyoked which is which has already proven a strong brand in Australia as well as offshore. They provide cabins on now on private land for people to do short stays in in unique kind of bush locations. So it's a really fascinating talk about the type of business, obviously a business that that grew through COVID is proving to be in demand far beyond COVID.

00:03:09:15 - 00:03:30:00

Unknown

And so it's not a not a fad by any means. It's something that's that's that's a fascinating way for people to take a break. And this is a business that's capitalising on that kind of opportunity. Got it. Now, we were just having a good conversation about fixed income with the folks at Bond Advisor in your area of the market.

00:03:30:00 - 00:04:04:21

Unknown

Is there, you know, an increasing appetite for fixed income type exposures as well? Generally fixed income for us from a public sense is kind of less exciting only because the yields are not kind of what we're trying to seek and what our investors are kind of looking for. That said, we have increased our focus a little bit on some of the the subordinated pieces, particularly where you're talking about very, very high quality lenders such as such as banks, but looking at some of their subject positions in the public space has has taken a bit of our our interest.

00:04:05:04 - 00:04:33:16

Unknown

For us, fixed income tends to be a greater risk reward generally in in in private privately offered deal societies. And that really falls back into in into product credit where we can often pick up a bit of a premium for a lower level of liquidity. So we would call that kind of an illiquidity premium where the asset that we're that we're funding is very, very strong about because the deal perhaps is not offered in the in the public market.

00:04:33:19 - 00:05:10:20

Unknown

We can pick that up at a more favourable yield and the kind of risk reward proposition becomes quite, quite strong. Okay. And so what type of I mean, this might be too general of a question, but what type of returns do you expect that investors can achieve? You know, if you want to look at as this year as a general rule, I would say in terms of the higher sort of senior positions that we're looking at, look at in terms of private debt type deals, you're talking about kind of high single digit yields for our for a senior position to a you know, to a strong balance sheet type position.

00:05:11:20 - 00:05:33:11

Unknown

Some of those deals will come with for asset backed security. So that sort of decreases the level of risk in a deal. That said, we are seeing some interesting opportunities that are going into the kind of low teens in terms of in terms of yield. So they kind of it's a, you know, an equity market type of target return for a debt position.

00:05:34:03 - 00:05:59:04

Unknown

But that debt position needs to be carefully analysed and and understood because, you know, because there is a slightly higher level of risk in the business. But we spend our time really analysing that balance sheet, analysing the, the, the opportunity that the business has and make sure it's at all times it's, it's going on a path that way, you know, that we expect it to really decrease any chances of anything going, not to our expectation.