What Questions Should Allocators Ask When Evaluating Direct Lending Managers?
From 2010 through 2024, conditions were extraordinarily favorable for private credit funds. As a result, most managers delivered strong returns.
While it is extremely difficult to predict when the credit cycle will change, cycles will inevitably happen, and today’s credit market faces a range of risks:
What Can a Credit Analyst Learn from the Rise and Fall of First Brands?
As I wrote in my book, The Credit Investor’s Handbook (Wiley Publishing, 2024), the role of a credit analyst is to assess risk and determine whether the expected return on a debt instrument sufficiently compensates the investor for the risks identified. Throughout the book, I focus on identifying red flags—warning signs indicating that a company might be riskier than it initially appears. I emphasize that a red flag doesn’t automatically mean the debt is a poor investment, but rather that an astute and sophisticated analyst may conduct deeper due diligence and ask additional questions to assess the situation thoroughly. Sometimes, further analysis lends confidence in the investment. However, if the due diligence raises concerns or the company fails to provide sufficient information for risk evaluation, the opportunity is likely not worth pursuing.
