#14 – Glenn August: Oak Hill Advisors, Private Credit
Apr 2, 2024
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In an engaging conversation with Glenn August, the Founder and CEO of $63B Oak Hill Advisors, he shares valuable insights from his extensive career in finance. Glenn reflects on the importance of personal values and ownership in investment, alongside his experiences transitioning from risk arbitrage to private credit. He emphasizes the value of collaboration and hiring for shared values, while discussing the evolution and significance of private credit in today’s market. His stories reveal the blend of hard work, opportunity, and strategic thinking that drives success.
Glenn August's early experiences at Morgan Stanley emphasized the vital link between understanding corporate strategies and identifying undervalued assets in investment.
Transitioning from private equity to credit management allowed the speaker to apply a disciplined risk management approach that minimizes costly mistakes.
The growth of private credit reflects changing financing landscapes post-global financial crisis, showcasing its appeal to institutional investors for robust risk-adjusted returns.
Deep dives
The Fascination with Corporate Strategy and Markets
The speaker shares his early fascination with corporate strategy and how it intersects with markets, beginning his career at Morgan Stanley in the M&A department. During his time there, he gained exposure to numerous companies, evaluating their business strategies and market valuations. This experience became instrumental in shaping his investment philosophy, emphasizing the importance of understanding corporate strategies to identify undervalued assets. The speaker reflects on how the formative experiences of his early career continue to influence his investment decisions today.
Transition to Credit Investing
The conversation highlights a critical transition in the speaker's career when he decided to pivot from private equity to managing a credit portfolio during the collapse of Drexel Burnham Lambert. This shift was characterized by applying a private equity mindset to credit investing, which focuses on buying companies rather than merely trading securities. The speaker emphasizes the importance of a disciplined approach to risk management and minimizing costly mistakes in the credit space. This foundational principle has remained a cornerstone of the firm's investment strategy and approach for decades.
Lessons from Early Experiences
Early experiences at Morgan Stanley shaped the speaker's investment principles, illustrating the importance of thorough analysis and ownership of work. He recounts a pivotal moment when he realized the need to understand every aspect of what he was presenting, leading to his ethos of taking ownership. Another story highlights the significance of focusing on client needs rather than pushing a personal agenda, reinforcing the concept of service-oriented investment management. These lessons underscore the necessity of aiming for meaningful engagement with both the investments and clients.
The Rise of Private Credit
The speaker discusses the evolution of private credit and its significant growth driven by the changing landscape of financing, particularly after the global financial crisis. He illustrates how regulation and institutional changes forced a shift from traditional bank lending to private credit markets. This trend has led to increased demand from institutional investors looking for exposure to private credit given its potential for attractive risk-adjusted returns. The discussion delves into factors like the reliability and speed of private credit as appealing aspects for both investors and borrowers, solidifying its place in the investment landscape.
Investment Philosophy and Risk Management
A core aspect of the speaker's investment philosophy is focusing on larger cap companies to mitigate risks and ensure investment quality. He emphasizes that larger firms often experience lower volatility, better margins, and reduced default rates, which are crucial for protecting investments. The speaker also details how credit selection and a disciplined approach are vital to successful investing, arguing that having a sound investment process can help navigate challenging market conditions effectively. Additionally, the long-term outlook on private credit reinforces the notion that selecting high-quality assets remains key to achieving sustainable returns.
Glenn is Founder, Senior Partner and CEO of Oak Hill Advisors, a $63B alternative investment firm. In a broad ranging conversation, Glenn talks about his formative years in the investment industry, explains how to scale an organization and shares insights about private credit.
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