Credit Exchange with Lisa Lee

We’re on the cusp of profound change in Europe, says Tristram Leach, co-head of European credit at Apollo Global Management, in the latest “Credit Exchange” podcast. Leach spoke with Lisa Lee, the managing editor at Creditflux, on how the degree of policy uncertainty at a global level has driven a fundamental re-evaluation of how Europe needs to conduct itself.Germany, in particular, is looking to turn on the fiscal taps, and set to spend dramatically more than it has historically on defence and infrastructure, providing an enormous fiscal boost to Europe as a whole. Only a few weeks ago, the prevailing sentiment on Europe was that it was squarely in the crosshairs of a trade war, with nothing much that could be done. Now, Europe appears to be responding to what it perceives as threats, in ways that are potentially going to change the investing landscape very dramatically, according to Leach. Those changes mean a new paradigm for Europe, and a new investing environment. The economic outlook has shifted to one of higher rates, higher inflation, and potentially higher growth.While public credit markets remain relatively tight, there is an attractive premium to be found in private credit, Leach advises. Apollo Favours private over public in both the sub-investment grade universe, and in the investment grade credit space, where investors can pick up a 150-200bp premium over their liquid counterparts.

Mark Jenkins, head of global credit at Carlyle, speaks with Creditflux's managing editor Lisa Lee in the latest edition of the Credit Exchange podcast, about the vast growth potential in asset-backed and investment-grade private credit to a roughly $23 trillion market as bank retreat from the space. IG private credit is gaining traction with institutional investors because they are able to get a premium of 100 to 150 basis points over liquid investment-grade spreads, said Jenkins. That’s a proportionally a bigger premium than that commanded by the sub-investment grade (known as direct lending) segment because IG private credit has more complexity. Besides insurance companies, which are familiar with the asset class, pensions and sovereigns are starting to look at IG private credit from a return perspective. Broadly, Jenkins sees three secular trends for past five years that’s caused an increase in private investment: the ramp up of geopolitical risk, which is causing more volatility, a massive onshoring of certain capabilities, and a re-orienting of supply chains. What’s changed is the uncertainly around tariffs and immigration but that too will change. The neutral rate will be much higher than the past fourteen years, predicts Jenkins, and there'll be more competition for capital. To invest, ask where are the points where you can create value, suggest Jenkin. There are inefficiencies in certain geographies such as corporate credit in Europe where the fragmentation and volatility has made traditional financing more difficult and thus created opportunities.

In the latest edition of Credit Exchange podcast, Mike Dennis, co-head of European credit at Ares Management, speaks with Creditflux's managing editor Lisa Lee about Ares’s record-setting private credit fundraise for direct lending and opportunities to invest in Europe. Investors are still excited about the opportunity set in Europe, evidenced by Ares’s EUR 30bn direct lending fund which attracted a historic EUR 17bn of equity commitment that far surpassed the previous record also set by Ares. Private credit gives good yield, low volatility and good quarterly distribution on a quarterly basis, said Dennis.Dennis sees the private credit market easily able to provide EUR 2bn to EUR 3bn unitranche loans in Europe, which could increase if borrower tap multi-currencies across Europe and US. In the future, these deals will get even bigger. But they will done more on an opportunistic basis when public markets are shuttered – Ares core direct lending strategy is focusing on middle-market companies where the banks are continuing to retrench and there are enough deals to be very selective.Opportunistic credit business is also an attractive space. Ares looks to provide capital to delever balance sheets or provide growth capital for deals that were inked when interest rates were zero and therefore have capital structures that may no longer make sense.

In the latest edition of Credit Exchange with Lisa Lee, Alan Schrager, senior managing partner of Oak Hill Advisors, speaks with Creditflux's managing editor Lisa Lee about the cross-currents in credit markets which is blazing hot with spreads going tighter but there’s issues of tariffs, immigration reform and defaults. Spreads have gone tighter in many markets, not only credit or private credit, while there's a number of pressures on companies, including tariffs, which Schrager suggests means it's better to invest in higher-quality investments. The spread between “great stuff, good stuff, and bad stuff and terrible stuff” is the tightest it has ever been, he noted. Of the headwinds, immigration reform will have a greater impact than trade protectionism, he predicts, since the industries that are impacted by tariffs will adjust.

On this inaugural episode of Credit Exchange, host Lisa Lee sits down with Fortress co-CEO Drew McKnight who sees the best play of 2025 in asset-based finance as banks become increasingly disintermediated. While President Donald Trump's win may loosen bank regulations, banks will still need to comply with Basel III and shore up liquidity to deal with asset-liability mismatches. Fortress is cautious about direct lending, the largest segment of private credit, but optimistic about its future given the improving M&A and LBO climate. Geopolitics remains the looming worry while the incoming Trump Administration could pressure corporate profits with tariffs and wage inflation but result in better outcomes for consumers.

Credit Exchange with Lisa Lee. Explore the latest trends in global credit markets with the biggest movers and shapers on Wall Street and the City, hosted by financial reporting veteran Lisa Lee.