Ken Kencel on the Rise of Private Capital

number of shops, including Chase and Carlisle. Really few people in the industry have seen the growth of this from a tiny, little niche form of credit to a trillion dollar plus industry that's become a key part of asset allocation and a key part of the management of foundations, endowments, other large institutional investment. So I found this conversation really to be absolutely a masterclass and totally fascinating, and I think you will as well. With no further ado, my

conversation with Ken ken Sell of Churchill Asset Management. Ken ken Sell, Welcome to Bloomberg. Thanks so much, very great to be here and love love the format. Thanks so much for coming. I've very much been looking forward to this conversation. Let's start out by digging into your career, which is really quite fascinating. You start at Drexel in the m and a group. What was that like? That had to be quite an experience. It was a fascinating

time and an incredible group of people. I will tell you that you know, in many respects, you know, you look at you look at experiences in your career and think about you know how they influence you, and think about you know, organizations, and you know the environment you want to work in. And Drexel is an incredibly exciting place to work. Young people given tremendous responsibility at frankly

a very young age in their careers. And I got the opportunity to work with some really interesting folks who continue today to be involved in private equity and private credit and see them all the time and very proud of that time. Was a great time from that era. Any particular deals or events that stand out as as highlights or really memorable, well, the deal everybody thinks about in that era and kind of the defining deal was Rjr. The Barbarians at the Barbarians at the Gate and financing.

What most people don't realize is that that deal had been hanging around as a potential transaction for a long time and a lot of firms had looked at it and had had conversations with the company, and you know, it was, you know, frankly for us, you know, younger guys, and I was, you know, I was a you know, an associate or VP. Back down, I was, you know, one of the younger folks in the crew. It was

a bit of a tar bag be back then. No ords, you know, the senior folks would go around and say, okay, we're going to do yet another analysis on our JR. I'm going to look at a buy out and look at the pricing, look at the structure. So you know, it got to the point where you know, it was exciting at first as a deal, but I would say over time we were all kind of under our desks when when the assignment partner came around looking for somebody

to work on it. So, you know, it's funny how deals turn out to be, you know, Bellweather deals and known across you know, across the didn't look but it didn't look better at the time. People were running, people were running away from working on it. So so so you end up at Chase Financial where you stand up their high yield business. Tell us a little bit about that. How did you get to Chase? Sure? And what was

it like back then? They weren't the giant player. They weren't In fact, that was pre merger with Mittmanny Hanny

and Chemical and JP Morgan and et cetera. Well, you know it was interesting, you know when you know, I think all of us were a bit surprised when Drexel left, you know, the corporate landscape and and you know, all of us were out trying to figure out, okay, well what you know, where do we go and and what was fascinating about Drexsland The kind of the diaspora, if you will, of that era was that we all basically went out looking to take that experience, you know, particularly

in a high yield and kind of buy out and financing and do it at either banks or you know, other other investment banks. So I ended up a Chase in the early nineties, and they, interestingly enough, had just formed a section twenty. They really weren't in the investment banking business, and they looked at the opportunity there and said, gee, we should really have a you know, a high yield

business and a financing business. And so Tom Lebreck and Art Ryan hired me to start their high eel business, and it was a great it was a great place to work. Unfortunately, you know, they went through a series of about, you know, a dozen mergers in the period of a probably five years. I love the joke about the person who says they they're sitting at their same desk, but like every three months they get a new set of business cards, right, and they just keep a stack

of all their old ones. First we were what was it, dime manny Hanney. There was just a run of acquisitions until the behemoth that they pretty much are the mac Daddy in the space. That's exactly right. And back then, you know, it was again it was a very interesting place to be because they had lots of capital and they had lots of clients, but historically they had not

been in that business. So we started to hio business there in the early nineties and frankly it was going quite well until you know, the first of what turned out to be many mergers. And then I left there and joined a number of my colleagues from Drexel and launched a business that, as it turns out, was pretty much a carbon copy of the business we have today. And it was a It was backed by the largest

bank in France. It was called Indo Suis Capital, and in many respects it was a lot like Drexel in the sense that super talented people, incredibly flexible, um, you know,

in terms of giving young people opportunity, et cetera. It was a relatively small group, but we became one of the most active lenders and financing sources and investors to mid size US companies and had lots of very talented folks that we worked with, so that that kind of led one thing leads to another, and that led us to led me to getting back with a lot of my old colleagues from from Drexeland, you know, built quite an interesting business there for almost ten years. So many questions,

So Indosuez Capital sounds so exotic French bank. What was their focus? Why stay investing in mid market US private private credit? Seems unusual? Right? So the first thing to think about is that when we first met with them, I'll never forget meeting with the gentleman who was heading up the bank in the United States, and they essentially

had virtually no significant business in the US. They were lending to aircraft, you know, under aircraft and had a couple other very small businesses, but they aspired to be a much larger player in the financing markets, and we brought them a plan that you know, I think was very similar to what the banks were doing at the time, which was providing financing to private equity owned companies. Huge area of growth in the economy. PE at that point

was really just developing in the middle market. You had a lot of the big buyout firms, they were doing the transactions in the eighties that the early nineties, but there, you know, the these large firms were spinning off smaller private equity firms and they were doing midsized deals and so financing and actually investing co investing in those deals. You know, it was a very interesting place to be

and it was a credibly fast growing area. In some cases, the big banks weren't quite as interested in financing those deals. So we created basically a mid market lending platform that ultimately spun out some of the most talented and capable folks you know, within the private debt world today. So lots of folks work there that now run very large alternative asset management firms and credit credit arms affirms. So

it was a very very interesting place. But we did not only did the financing for deals, we actually invested alongside those private equity firms as an equity partner. Right. So the theory was, that's great that you're providing a loan, but if you can co invest with them and get the upside of partnering with some of the most successful private equity funds in the United States, you know, a great way to enhance your returns. We call that legal

insider trading. Hey, I know this private company is about to get a giant line of credit and that's going to help them go to the next level. Let's get an equity piece. Also kind of like that, I mean, I would say that what we what we really did is focus on the private equity firms that really had a great track record. You know, we knew the principles,

we knew that they had done. You know, a good deal is acquiring you know, attractive and high performing businesses, and so you know, we we looked to finance those deals, but essentially said to those those private equity firms, look, we you know, we we think you could do a great job. We love your investment strategy, we love the industries you invest in. You know, we'd love to co invest with you, not not as a control but as

a minority investor. Right, So if they were acquiring a business, you know, we would often take an equity investment as well, and that model proved to be very very successful. Now, if you think about the time and place that we were operating, it essentially was the precursor to the current private credit world, you know, in the words, you know, really we were managed in investing um, you know, alongside you know, leading private equity funds and managing the bank's capital.

We actually started raising third party money back then as well. But that's really interesting. I want to circle back to something you mentioned about how that middle market forms if and let's let's put this in the frame work of the nineteen nineties. The market, the public markets were doing great. A lot of these companies were becoming very large, and I think the traditional sources of financing were chasing the big, bigger companies, and suddenly like a void developed underneath. Is

that a fair way to describe that. That's exactly right. In fact, as things subsequently played out, what you saw is that wave of bank consolidation that I referred to ultimately brought banks. I mentioned Chase for example, started with their section twenty when when we launched their high business is the investment banking affiliates. Right, so now words Chase said, wait a minute, we can be an investment bank. We're

going to form our own investment banking operation. In their case, it was called Chase Securities is now JP Morgan Securities them. But but what was happening is that wave of mergers, you know, the elimination of Glass Stiegel and the ability of banks to consolidate and form their own investment bank in their own securities businesses led banks to what effectively

was a higher margin business. Right Rather than you know, put all their capital in a single loan and hold two, three, four or five million dollars a loan, they could actually arrange to distribute the loan. And so what we saw over that period of time was that banks became much more in the moving business, if you will, as opposed to being in the storage business. Right. So you know

where did that void get filled? It got filled ultimately initially by you know, some of these more esoteric businesses like Indoso as Capital and of course ge Capital had a lending business very similar, but over time it ultimately got filled by private capital managers, direct lenders, firms that were raising institutional capital to invest in private companies. So underserved in beginning really in the nineties, but as that underserved dynamic continue to grow, and as the middle market

continue to grow. I mean, interestingly, the US middle market is the third largest economy in the world. That's an amazing stat about, right, that really is an incredible stat So you're building out a middle market private credit bank, and alone comes Carlisle and says, hey, we'd like to absorb you. Tell us a little bit about that experience.

So one stop along the way. So in subsequent to that business at endows who has I launched my own firm in two thousand and six and we and this is now further into that bank consolidation dynamic, and we raised about five hundred millions of private equity. And the thesis was, which turned out to be completely true, is that these banks were going to move away from the

business of actually lending money to mid sized companies. It was a huge and growing market, and in fact, asset managers were going to become the giants of that business, including firms like Carlisle and KKR and others, and so to the extent that we could build a best in class private credit direct lending platform, there would be buyers of that business, because again, private equity firms always build things to sell them, right, And so five years into

that growth of our business, we sold a firm to Carlisle in twenty eleven. Carlisle was in the process of going public. So if you think about it, they're bankers were saying to them, you know, you're great in private equity. You've got a big real estate platform. By the way, you're not really in this private credit business, and that's really going to be a growth area. You should have a platform there. And that's really what was the genesis for our sale to Carlisle. So let's talk a little

bit about the history of your business. You launch your own firm, and a couple of years later, along comes Carlisle and says, hey, let's talk about integrating what you do into what we do. How did that come about and what was that like during that period? Yeah, sure, Now it was interesting. Um, of course we were coming out of the GFC at that point, and you launched an O six, launched six and we sold to carl in twenty eleven. So so let's let's before we jump

to Carlisle. Then let me ask you private credit. The bank's freeze up in O eight oh nine, right, how was your business during that period? Was that a target rich environment or what was that like? So interestingly enough, somewhat different from today, right, because if you think back then, we were we were one of only a handful of private credit firms. The amount of liquidity or dry powder

in our world was much more limited. The banks were essentially out of the business, right, They weren't landing at that point. So while there was a lot of dry powder and private equity probably back then two hundred billion or so of liquidity, the private equity firms really did not have a large amount of private dat to finance their They were a handful of us, right, So you know, we saw some opportunities, but I would say that it's really only been in the last ten years where you've

seen this tremendous growth growth in private credit. So today, for example, the situation is very different. Right. Yes, there's a lot of aquidity in private equity, but there's also a lot of aquidity in private credit to be able to finance those transactions, so a very different dynamic than we saw back in two thousand and seven, two eight, two thousand and nine. That being said, we stuck tornating.

We stayed focused on high quality companies. Our track record and performance through the GFC was very very good, and so when we came out of the GFC, my private our private equity owners were starting to think, Okay, well, how do we monetize this investment we made? And fortunately for us, there were a number of large scale alternative asset managers like Carlisle that we're looking to grow in

private credit. Carlisle was in the midst of going public at that point, and I know David and Bill, the founders, for well over almost two decades, and so I approached them about the opportunity of potentially having Churchill become the private credit business within the broader Carlisle grow. So you approached them, they didn't come knocking on your door. That's very fascinating. I did approach them, and um, you know, it quickly became clear that the fit was very very good.

Um it was something that gave them a broader platform in terms of the ability to you know, to provide private credit and frankly it was an area that that all the analysts were saying was going to be an air of tremendous growth. So we did the deal in twenty eleven, and um, I kind of gave up my baby,

if you will. Um So I went from being a founder and an owner to being more of an employee and a and a member of the Carlisle um and you know, for several years, uh, you know, we operated as part of their you know, it's really their direct lending platform. Of what led to you saying it's time to spin out and be a standalone again. So a

couple of things, you know. One was I found that once you're a founder and you have a lot more control over your you know, your your culture and your people and the environment and and really the growth dynamics and your business that I missed that you know, I missed, you know to me, you know, my business and really the business you know that that I've done throughout my

career is really all about the people. You know, you see, firms, I mean, capital is a commodity, right, so at the end of the day, it's really about building, developing and growing your people. And so for me, the ability to go back and really be in control of that dynamic. Be where I was, which was a founder and an owner of my own firm, was really where my heart was. And so, you know, I went to David and Bill

in two and fourteen. We had kind of served out our three year term there and there was an opportunity to to do that, and they were incredibly gracious and allowing me to do that. And you know, for me, I also saw the business changing. And what I was seeing was that the ability to deliver large amounts of

capital to really operate like a bank. Right. You know, we saw this transition starting in late nineties and early two thousands, but at this point you were seeing large scale institutions allocate significant dollars to private credit, right, and it became a very well accepted asset class. Why because the banks had been leaving these midsized companies needed financing. And now it wasn't a matter of oh, we're going to invest ten or twenty or thirty million dollars in

a private credit deal. It was we're going to be the lead lender and a four hundred million dollars deal. And so what I felt was that there was going to be a tremendous need for significant capital, and so joining a firm that had that was really an asset owner and that could actually invest their own balance sheet alongside third party investors was going to be a key

to being able to grow the business. In the case of you know, the firm that we ultimately partnered with, Interestingly, tia had just acquired Nuvine, so they had not only did they have a balance sheet and were a significant investor in private credit. In fact, TIAA is the second largest investor in private credit in the world. So we found a good partner, but they also owned an asset management platform, so they had institutional distribution in the ability

to raise capital from third parties globally. So you know what we saw, and you know, I've formed a relationship back in twenty fourteen fifteen with jose Meniah who is now the CEO of Nuvine and actually still sits on our board today, and I could see his vision for where he wanted to grow this business and it was completely aligned with mine. And so the opportunity to launch relaunch effectively my firm with our name by the way, which is kind of nice with my partners and by

the way, all of my partners ultimately joined me. All my founding partners joined me to join as an affiliate of Nuvene and tia committed an initial amount of capital. Back then it was three hundred million dollars and don't lose it. Today we manage over twenty three billion dollars for TIAA and take very very seriously our obligation to their members. College professors, university professors, healthcare workers over five

million of them, you know, all across the US. And every time I have one of these conversations, invariably and variance probably you two. You know, Well, I've got an uncle who's a college professor or a somebody who's a teacher, and so I'm passionate about education, and so the ability to invest in behalf of you know, millions of college and university professors and teachers is something that means a lot to me. So this raises a really interesting question.

When you began this industry really didn't exist. Credit was you know, a twinkle in a few people's eyes. And now we've watched it grow and become institutionalized, and you go from Carlisle to Nouvene and TIA, what does the state of private credit look like today and how different is it from what we saw in the two thousands and nineties, even the early days in the eighties. Well, the first answer is it's very different in a number of ways, but I think fundamentally better. And let me

explain what I mean by that. So, if you went back to you know, kind of the bank era, right when banks were doing these mid market loans, what you'd see is that whether it's Chase Manhattan or Chemical Bank or JP Morgan or whoever, what you would see is these banks would make a loan and they would hold virtually all that loan on their bank sheet. So you would see pretty high concentrations of you know, one hundred, two hundred million, three hundred million, all essentially sitting on

a single balance sheet of the bank. So obviously risk managers, you know and you know and CROs we're very focused on how do we manage that risk and diversify that that credit risk that they were taking on in mid

market companies. What's fascinating about the model today and really coming out of the GFC is if you look at the best private credit managers today, the first thing you see is that we compete for capital based on performance, right, So we attract investors based on delivering solid risk adjusted returns as opposed to banks that are basically looking to make loans to drive short term earnings. So I would say that the transition away from banks has helped diversify

the investments in private credits. What do we mean by that? If you look at our funds today, we manage about forty six billion capital at Churchill today and we'll talk about the acquisition that Navine did of Arkmont in a few minutes. But at Churchill Historical Business we manage that capital on behalf of over fifteen hundred investors globally. So when you think about the individual exposure to a specific name in our funds, it represents less than one half

of one percent of the portfolio. So those investors are getting an incredibly diversified and I would argue lower risk profile than if, for example, one bank makes a four hundred million dollars loan and holds the whole thing on their balance sheet. So in that sense, it's very performance driven. It's meaning the best managers attract capital, which was not

the case in the banking world. Two, the investments are held over a broad range of institutional investors and highly diversified because of the nature of how we fund our loans. They're not held by one fund in our case, they're held by separately manage accounts, coming funds, publicly registered vehicles, etc. So healthier in the sense that the risk is more diversified.

And then thirdly, I would say, in the case of of of of our business, we have a number of real advantages over you know, over our competitors and over banks that give us, I think, a better and ability to deliver better outcomes for our investors, including the fact that TIAA as our largest investor, invest directly alongside every investor in our you know, in our in our in

our firm. And I want to put a little meat on the bones when you were talking about the growth of the space private debt AUM has grown to one point three trillion dollars. That's a five x increase since the financial crisis, and a doubling since twenty fifteen. So this is not like a little niche anymore. This is

a trillion dollars space. Absolutely, And you know it's funny when I you know, when I was on the road in the early days, you know, talk about you know, even even post GFC, you'd meet with large scale institutions and you'd talk about senior secured loans, private lending covenants, reasonable leverage, etc. Etc. And they would look at you and say, well, that's all fantastic and sounds really interesting, and the risk adjusted returns look really good, but we

don't really know where to put it right. In words, it's not private equity, and it's not traditional fixed income, you know, like investment grade fixed income, and so it's sat in this kind of middle ground, and you know, it took a while before larger institutions really accepted that this could be a very attractive place to earn very

good risk adjusted returns. And early days it was you know, probably ten percent, maybe maybe twenty percent of investors that we would meet with that would really be allocating to private credit. Today, ninety percent of the investors we meet with have not only allocated to private credit, but there they have a plan to increase their allocation to private credit.

So what what I've been able to, you know, have a kind of a front row seat too during my career was this tremendous transition from the mid market lending business being really a bank led business, and then kind of had an interim stop at ge Capital where it was more of a kind of a finance company, if you will, and then really accelerating over the last you know, fifteen twenty years of being really an asset management business

in some respects no different than private equity right. In fact, some private equity firms have private credit arms that managed credit as well as equity. And you mentioned the acquisition of Archman Asset Management by Nouvene. Tell us about the thinking behind that. Does that get integrated to Churchhill or is that a co investor? How does that work out? Sure? So, you know, we you know, over the course of our time as part of Nivene, it's been a fantastic partnership.

We've had great support from first Roger Ferguson, the former CEO, and now to sound Brown Duckett whose current CEO of TIAA and the CIO CEO and then also the CIO as well. But what we saw was that we were really not truly a global private credit manager. We were one hundred percent focused on managing investments in the US.

About three or four years into our business, we TI TIA actually moved all of the management of their private equity fund commitments, all of the management of their private equity co investments, and so we went from being just a private debt investor to being a private capital investor. And so that was a big event for us because all of those private equity relationships as a limited partner are fantastic drivers of knowledge and relationships and deal flow

to finance those deals with those private equity firms. So today we manage over two hundred and seventy private equity fund commitments and co invest alongside those investors. Interestingly enough, that business, our business today is virtually identical to the business, but much bigger than the business we had at Indo Suez over twenty years ago. Meaning you're doing lending, you're co investing in the equity. But what we didn't have when we really stepped back and looked at it, we

didn't have Europe right. We didn't have an ability to do what we do in the context of a European market that was in many respects developing very rapidly and probably five years behind the US. Does ARC mount solve that problem for you? They do, And in fact, when we started looking at potential partners, and I mean partners in a very real sense. We looked at pretty much all the direct lenders in Europe and what we saw in arc Mount was in many respects the car and

copy of US in the United States. Entrepreneurial had been part of a big firm at one point, had spun out from that firm. We're very much focused on high quality, conservative credits, you know, primarily private equity financed and owned businesses. So you know, a mirror image of many respects of what we were doing in the US mental market they were doing in the mid and upper mental market in Europe.

And because Europe has been roughly five to ten years behind the US in terms of that bank transition that I described, it was an ability to participate in essentially the same transition that's been going on the consolidation. Of course, we just saw another consolidation with credit squeeze into ubs, so Europe going through a very similar bank you know, retrenchment as it relates to direct lending. Arcmont one of

the early adopters in Europe. They actually launched their firm back in two ten, two eleven, so we wanted we saw an opportunity to really partner with a leader in the same business as US. And so what we did really is take Churchill, which today is a top three lender in the US middle market. We do over eleven billion dollars of investment per year and over almost four

hundred companies. And we saw with arcmon and ability to essentially take that model and partner with it a very same market leading business in Europe, and we formed a holding company called Nuvene Private Capital that basically is a sixty seven billion dollar parent company that myself and the CEO of Arcmond Co. Had And so we've taken a market leading business in the US, a market leading business in Europe, and now collectively we now have a global

private credit manager that can provide financing to cross border transactions, can deliver a global solution to our investors. Right if we have an investor that says, you know, I like Europe, I like the US, can you give me a US European global private capital solution? And obviously now we can do that. Let's talk a little bit about twenty twenty two, which for a lot of people in the capital markets was a difficult and not exactly pleasant year. You guys

had a huge year. You invested eleven billion dollars. That's a record three hundred and seventy five transactions. You raised another eleven billion dollars in capital regard despite the economic environment. Tell us a little bit about what made everything click in twenty twenty two. Yeah, well, I think that you know, twenty twenty two in many respects, and I would say COVID in general, certainly the last three years of COVID

have really been a watershed for our firm. And I think a lot of it has to do with investors recognizing that how we invest and the advantages we have in the ability to deliver attractive risk adjusted returns because of our scale, our differentiated private equity relationships, and the fact that we've been doing this a long time really all came together in COVID. So it's not just twenty twenty two. I would say it's rasically been through the

past three years. And what and what it's set the stage for was investors really looking carefully at private credit managers and saying, gee, you know, there's been this rush to private credit. We need to really look deeper at performance and track record. It's all well and good when everything's going up, then the market environment, it's good and

you know, credits flowing. But when things get more difficult, and certainly they did for everyone during COVID, how do they manage to grow the business and how is their portfolio performing in a in a you know, in a essentially you know, an economy that was basically frozen. And I think that what our investors saw is that Number one, our portfolio held up incredibly well. We actually did not have a full scale default during cod which is pretty interesting,

right when you think about, now, why is that? Well, we financed high quality businesses. We don't invest in oil and gas and restaurants in retail and more volatile businesses. We stay away from all that, right, So we focus on quality, We focus on market leaders. We partner with private equity firms that themselves have a great track record that focus on the kind of industries where we do invest, which is technology and healthcare and business services and market

leaders in those areas, distribution logistics. So we go through COVID, we perform extremely well. The portfolio does well, and investors take note of that, and TIA takes note of that as our largest investor, and so their allocations and investors interest in US as a private credit manager grow exponentially, and so you see our capital raising. You mentioned eleven billion dollar last year. It was about twelve billion dollars a year before that, and a significant number prior to that.

So during COVID we have raised well over thirty billion dollars from TIA and other investors. And so performance, which is kind of what I said earlier about you know, performance attracts capital, right, So the lesser performers I think struggled during COVID, and I'd say twenty twenty two is the culmination of that, because not only did you have COVID, but now you've got rising interest rates, and so if you're financing marginal businesses, suddenly the cost of their loan.

The good news is our interest rate goes up. With rising all of our loans are floating rate was gonna no no good news for us. So let me jump in and ask this. So prior to twenty twenty two, we're effectively at zero, that's right, So how does the my loans We're yielding six to seven percent, and then what happens when rates go up to four? Loans today

are yielding eleven to twelve percent. So the very same loan that we did a year ago at six to seven percent is now yielding for our investors eleven to twelve percent. So is it libor plus whatever the substitute. That's exactly right, that's right, sofur right. So what we saw was that not only did online base rates go up about four hundred and fifty basis points maybe more today, right, spreads widened and so that very same loan, a six to seven percent loan today is yielding in our portfolio.

Reflects that our yield now is you know, eleven percent plus, So better returns for our investors. Now. Conversely, you've got to look at the companies and say, can they handle you know, eleven percent interest? Right? Well, because we were a very conservative lender, and because we were going into

transactions with very reasonable leverage. In fact, our average equity and our transactions has been running about fifty five sixty percent equity, right, so well capitalized, conservatives, structures, covenants, and so the rise in rates has been beneficial to our investors, but it is not caused broad based issues in our portfolio.

So we're sitting in a great place track record performance, portfolio doing well, lots of liquidity, we continue to raise capital, and investors institutions see that and as a result, gravitate toward the better quality manager. So today, our yields on our funds are, you know, at the highest levels they've ever been in our history. Our portfolio remains in very

solid shape. We have a very very small number of names even in our kind of watchless category, and we're seeing interestingly enough, and this is I think a bit of a surprise. The more challenged businesses are actually not

coming to market today. Right. If you've got a company and they're struggling under their interest burden, or they're struggling as a result of inability to pass on price increases or problems with dealing with the rise and rates or the consumer, they're probably not going to be businesses that

are being sold today. So the businesses that we are seeing in our coming to market are higher quality, you know, and so overall, you know, I would argue that the current environment for us is really a golden age for our ability to lend to quality businesses. By the way, with lower leverage, right, because you can't lever it, you can't lend it six times leverage today when rates are

eleven percent versus six. Right, So now leverage is lower, covenants are more in favor of lenders like ourselves, and I think, frankly, what we're seeing play out today in the banking industry will only enhance that dynamic. Right, So let's talk a little bit about the types of businesses you're lending to. You said no restaurants, no retail, no

oil and gas. So anything that's either very volatile or very specific like a good restaurant is a great business, but as an industry, it's a razor thin margin, difficult business with high turnover. What sort of businesses do you like? Where do you follow? Sure? So we like market leading businesses. So we like businesses that are in their niche a you know, one or two player in terms of their business. We like businesses that are really what I would call

traditional side middle market companies. So what does that really mean? You know, we don't like the micro companies, right, companies with you know, three four million dollars a year in cash flow. Frankly, we saw in the GFC those businesses were much more heavily impacted, right, So we want businesses that are typically you know, fifty million to one hundred million in cash flow maybe as small as twenty five million, but but significant companies, market leaders in industries and with

demonstrated track records of strong historical growth. So what do we mean by that? So software is a service business, right, So, for example, a business that providesides software to banks or to manufacturing companies where the software is actually embedded in the business, right, highly unlikely to switch providers. Subscription subscription model correct, by the way, not revenue based cash flow base. No words, We're not lending to kind of pine this guy,

venture capital businesses. We're financing real companies that are the lifeblood of the US economy. Healthcare. We're major financing provider to healthcare businesses. Right. We financed, as an example, m orthopedic practice build up, a large scale practice that is providing healthcare services to you know, individuals and is a leading practice in the in the New York area. We financed that business. We financed us. You mentioned software um

a firm called Diligent. We have been a financing partner of them for years. So you know, they're used to keep information secure for boards and endowments and other public and private investment boards. Optical scanning secure information ability to update in a regular basis. You have a board meeting, you want to update the materials. Five minutes before the meeting. You downloaded that into their site, and so they are

the leader in that space. So market leaders recurring revenue, recurring cash flow, information services, software, healthcare, distribution, logistics, business services. But away from businesses that are very volatile, right, because volatility brings all sorts of challenges, liquidity issues, issues with respect to wiping out underlying equity value, or businesses that, frankly, we could be completely right on the credit but wrong on the commodity. Right. Oil goes up, going gas businesses

do well, it goes down. It takes everybody down, right, So we like businesses where we can do our homework. We can finance strong management teams backed by leading private equity firms, and that's where we've been for our history. So let's talk about those management teams. Once you make either a credit or an equity or both investment into a company, how closely do you stay involved with the management team once the deal? You know, once the ink has dried, do you stay involved or is it arms

length of them? Very very involved, And I think that's that is in many respects and buy product of the private equity business today, which has changed dramatically. So you know, when you think about very you know, twenty twenty five years ago, you know, private equity firms were buying businesses, putting up ten percent equity, you know, buying companies for you know, six seven, eight times cash flow and really looking at cut costs and and and um and flip

those businesses a few years later. That's not the business today. What we see in private equity today is really private investment firms buying and growing businesses, creating value through growth through acquiring smaller players. I look at a company like Diligent. When we first financed that business, it was doing twenty million a year in cash flow. It's doing you know, two hundred plus million cash today. So the model today is a growth model, and with that growth comes a

much closer relationship with the lender. So in most of our deals today, the private equity firm that's buying the business is already talking to us about the next acquisition, the next opportunity, the next geographic expansion. So what they're bringing to the table really is equity and looking for us to be a full scale partner. Of theirs providing that financing. And so the model, if you will, isn't just oh, we lend money these guys when we walk

away and we hope they don't breach a covenant. The model today is no, no, no no, no, we're buying off on the strategy of growth. How can we be a you know, an important and very strategic partner of that private investment for as they grow the business. And I'll give an example. At the time of our financing, our average company is about forty to fifty million cash flow.

Yet our portfolio today, you know, obviously several years on from when we finance the original deal, our portfolio today is approaching seventy million in average cash flow of a business. So signific growth in the underlying portfolio companies, because those private equity firms see their role is really driving that growth in Our role obviously is to be a good partner for them. So on the one end of the spectrum, a bank makes a loan and they hope it dozens

of faults. On the other end of the spectrum, private equity companies accumulate a portfolio of separate companies that they're running. They have thousands of employees, you seem to straddle the two of them. You have a foot in each camp. You're making loans, you're providing equity investments, but you're not accumulating folio companies the way pe farms. Well interestingly, so here's the angle and the difference between us and virtually

any of our peers. If you look at most of our peers in private credit, certainly the large ones, they all have their own dedicated private equity arms. Right. So if you look at the publicly traded asset managers, they have private credit, but then they also have a control private equity arm that actually does deals. Right. So in some respects you could argue competing against themselves a little bit, right.

I mean they're buying companies, but then they're financing in large private equity firms that are competing to buy those very same companies, right, Not always, but occasionally. In our case, we don't have a control private equity business, right. Our private equity business is partner oriented, and it starts with the fact that we have investments in over two hundred and seventy mid market private equity funds, Right, So what

does that do for us? It gives us tremendou insight into their performance, right, and so we do all that research. We understand their focus. We obviously see what industries they invest in, understand we see their rrs, their returns they generate. We invest with the best, and then we look to do other things with them. Right. So we're a limited partner. We may co invest in the equity and some of those deals, but equally as important, we now understand the firm.

We have an ongoing relationship. We sit on the advisory board today of two hundred US private equity firms, so on their advisory board. Let's drill into that a little bit. When you say you're a limited partner, I think of LPs as Oh, here's a Carlisle fun twenty seven, Right, I give you X dollars. I'm an LP. That what you're describing sounds like a much tighter relationship where you're co investing in a specific project. That's right, not just

handing off dollars to a fund. That's exactly right. We have a separate team that does that, right. So they are managing our investments in private equity firms and co investing in those deals, and part of their goal is to assist the lending side and understanding who's doing it the best, what industries are they doing it, and ultimately making sure that we're connected on the lending side with how we can finance their deals. I was about to say that sounds like it's really good for deal flow.

It's really good for deal flow. And in fact, what we're seeing in the current environment is that those two hundred and seventy private equity funds where we're a limited partner and sit on their advisory boards, are increasingly consolidating their lending relationships, right because they're saying, you know what, we want to go to partners that when we bring a deal to them, we know they're going to be there, right, And if you've financed twenty thirty forty fifty deals with

that firm over the past twenty years. As we have, we've become in many respects, the go to partner of many many of these private equity firms now. And it's a huge advantage, right because if you think about it, if you're a private equity fund and you're try to buy a transaction, you're competing to buy a business, right

and you need financing, you need committed financing. Are you going to go to a firm that has done thirty deals with you over the last twenty years, and you know is going to be there or are you going to try a new guy? Right, You're gonna go where you've got a relationship and you've got a history. So let's talk about that. Because I have a limited amount of experience with a couple of different firms doing the

sort of stuff. And one of the things I found fascinated and I won't mention any names, but every household names that everybody knows, and one of the deals that we did, I just came away thinking every interaction with these people has been fantastic. Everybody at everyone, every level is a rock star. Hey, we're looking for a buyer, we're looking for seller. Everybody comes together with the same objective in mind and it happens, and I'm like, wow,

that was really a delight to deal with. I have to think when you have these long term relationships, it's personal. There's a ton of trust. It's not every step along the way. All right, let's bring on the team of lawyers to fight over commas. It's right, we know who you are, you know who we are. Let's make this happen. Well, if you think about it, if we've financed thirty deals, as we have with many leading private equity firms, we

start out on the five yard line, right. Words, we've done thirty documents with them, right, I mean, we don't need to recreate the docs. Right. So we've got personal chemistry and history, We've got a course of dealing where we both know kind of we start with okay, we just did your last deal. Let's let's start with that document, right. So all of a sudden, we're at the ninety five yard line, right, So, so a lot ability to move

much more quickly. Third, there's a level of trust. So when we say that that private investment firm, we're good. You know, we're issuing a commitment letter. We're good. They know we're good, right, They know that after twenty years of working with us, we're going to be there for them. And oh, by the way, just one other element, we're a limited partner in your fund, and our private equity team sits on your advisory board. And oh, by the way, we've got a long term connection with you guys. We're

you know, we're here for the longest. It seems very comfortable for everybody involved. It is, and you know what, that doesn't mean that we don't negotiate over terms and we have to and they do too, But at the end of the day, there's a level of respect and trust that we're going to get there. We like the business, it makes sense, and it's been a huge driver for

growth in our business. You know, I would venture to say that there have been very few direct lending firms like ourselves then in a relatively short period of time. If you think about it's been seven years that we've been part of TIAA, it'll be it'll be eight years. Actually, are of an anniversaries coming up here. If you think about how, you know, how we have grown this business. You know, last year we were the second most active

direct lender in the United States. That's a relatively short time When you look at every you know, look at the firms that are around us, many of the have been around for you know, as many as fifteen or even twenty years. So in that sense, we've grown the business quite significantly. And I'd be remissive I didn't. I just got asked this question last week, so I think this is important. So I was actually on speaking at a conference to Greenwich Economic Forum last week, we are

your folks interviewed me. Actually so, I had a very nice conversation, but I was asked the question, how does that happen? How do you go from three hundred million dollars from TIAA that they were only investor. We had one investor eight years ago. We have nearly two thousand investors today, including many many of the largest US pension funds and sovereign wealth funds and internationally investors. And I

said three things. I said, Number one, it's all about your people, and it's particularly all about the first ten to twenty people you hire. If they are the right people, and obviously technical capability, but also just culturally other right people, they multiply like crazy, right, those are the people are going to be running hiring, and they're going to be hiring people. So next thing you go, you know, you go from ten to fifteen twenty people. Suddenly we've got

fifty people. We were at fifty professionals when we went into COVID. We're one hundred and fifty today. We were managing six billion dollars when we hit COVID. We're managing forty six billion dollars today. People, so Number one, It's all about the people, and I'm so proud of the team and the culture we've built. I mean, we literally just had our offsite two weeks ago and you know, I was practically crying. I couldn't believe what a great

team we've put together. Secondly, the partners you have. You know, if you look at TIAA and Nuvene, they've been unbelievable partners. Nuvine's raising money for us ta's investing their own capital and obviously their their members capital. They've been incredible, unwavering supporters. As I've mentioned, we managed twenty three billion dollars today for tia and their participants, but also Nuvene has helped

raise capital and we wouldn't be here without them. And then Jose obviously as the CEO, has really been an incredible supporter. And then I would say it's at the end of the day, it's also about recognizing that this is never easy. I mean, you know this very right. It looks so easy now, right, I tell other people's stories, you know, like, oh, it looks so easy. Tom, it was inevitable. I mean Tom Brady was drafting the fifth round, and you know he was sitting on the bench in

New England and how does this happen? You know? And I tell my kids this all the time. You have to be willing to pay the price in tenacity and a willingness to just keep you know, if I told you how many times, not just me but all of us who are really leaders in this space get got turned down raising money, I mean, no, thank you very much, come back later, no, thank you very much. Interesting, come

see us a year from now. So it's a willingness to be incredibly tenacious and really not give up, you know. And you know, I know that sounds kind of cliche like, but it's cliche for a reason, but it's you know what, it's really the truth. And you know, on the people front, we've been very focused on really building a diversified, diversity, diverse workforce. So today you know, nearly half our people

are women or ethnic minorities. Because it's good business. You want diversity of a thought, you want diversity of backgrounds, you want diversity of ideas. Right. I need somebody around

to tell me when I'm being a knucklehead. Right, And sometimes you know, you can make wrong decisions, but it's a lot, it's a lot harder to make a bad decision, and there's a lot more of a defense mechanism if you surround yourself with people who have diverse ideas and diversity of thought and can say to you, you know what, I've actually been in that situation, this is probably not

the right right decision. So listening, building in a very diverse team, listening to them, and and and ultimately being willing to change your mind when sometimes you don't have all the answers and you need to, you know, you need to rely on folks that you know can really bring value. So I'm very humbled by that. And it's

been a great run. So let's talk about the experience you've had in the industry, working with lots and lots of different companies, some not so successful, some incredibly successful. When you look at the landscape out there, what's the difference between the rockstar firms that are killing it and the also runs who just seem to be bogged down in bureaucracy and can't get out of their own way. Yeah, now,

and I think it's a it's a great question. And and you know, obviously I've had a front row seat to lots of different institutions and certainly my own as well. And I think in the final analysis that you know, I mentioned people, but it's even even more than that, in a very important way. It's ultimately about leadership. Right if if the leadership of an organization empowers their people, puts their people in a position to succeed, and understands that at the end of the day, you know, their

job is not to micro manage people. Their job is to set their people free and make sure that they're you know, in a word, kind of bulldozing all the barriers away. Right, that that's my job at the end of the day, and you approach it with a sense

of humility and certainly a lot of passion. But at the end of the day, as I mentioned earlier, having hired what I view are the best team in the industry, you now have to empower the best team in the industry, and you have to mentor the best team in the industry. And I look across the organization, it's all about, at the end of the day, providing that leadership in support and so the best organizations and I certainly try to do my best to to to emulate this are really

all about leadership. That is, in many respects, a servant leader. That's what I believe, leader, servant leader. I believe my job is to serve my people and to make sure that they are able to do their absolute best at their job, not to create bearers or not to micro manage them, but to empower them and to knock those barriers down and to put them in a position where they can be successful. You are not the first CEO

who has said that to me. I've heard similar things from other folks, and these are all very successful companies. So I assume there's something to that. Well, you know it. In many respects, it gets it gets back to you know, my background, which is quite unique, and I think, um, so let's talk about that. What makes your background so unique? Well, it's probably the most unique background of of any anyone you've you've interviewed in a while. Um, there's one other

Okrison who has a similar background. But tell us so. I was born in Buffalo, New York. I was left for ultimately for adoption when when I was born, But I was basically left at the hospital. I was, by the way, unclear whether I was actually gonna make it, so I was put on I was put in a life support and an incubator and lots of other stuff. Anyway, long story short, I did obviously I'm here, um, but I was adopted by a couple that you know, luck would have it. Both my father and mother died when

I was quite young. And so I my mother, my mother's brother, or my my uncle raised his hand and said, you know I can do this. You know I'll step in for my sister because as he's an only child. And you know, um, I grew up in a pretty ramshackle part of Buffalo called Woodlawn, Um, and Um, Ultimately my uncle became my guardian. It took him well over a year. He never graduated from high school. He worked in the steel plant. We actually lived across the street

from the Bethlehem Steel where he worked. But he changed everything in my life. And what he changed is he had a tremendous amount of humility. And you know, always taught me growing up that you know, it's not about you, it's about how you can influence and change other people's lives. And so I've always had that focus. And so he sent me to an all boys Jesuit high school called Canisius. The Jesuits kind of got behind the program and sent

me to a Jesuit high school Georgetown University. And in my career, I've always tried to dedicate myself to making everyone around me better. So let's let's focus on that. Because you said something earlier that I let slip by, but I want to address, especially given the growth the pharmacy and over the past couple of years, you mentioned the first ten or twenty HighRes you make are the most important HighRes. Tell us why what happens to those first twenty people as a firm grows to one hundred,

one hundred and fifty employees. It's very interesting, you know. And I interviewed all of them, every single one of them. One of them is here in the studio with us today and Jessica tan Obama, who heads up our marketing area in Communications, and at the end of the day, you see something and you know it when you see

it's it's a level of passion and enthusiasm. Obviously, all of the boxes are checked right, experience, background, knowledge, understanding of the job, etc. But there's something else, And I would say that something else is in an outward facing dynamic where they are clearly incredibly passionate about what they do, but also that enthusiasm and passion isn't infectious, and and they recruit people just like them, and suddenly you know, you instead of you know, you have a core group

that maybe ten, fifteen, twenty people you know. And I'm sure this is probably similar with other firms like this. I mean, if you look at you know, Bloomberg, I'm sure it was you know, Mike and three guys in a conference room when they got started, right, but it was the right three or the right ten, right. And you look at you know, you look at firms you know in the asset management industry, and the similar the

stories in many respects very similar. So you know, you want you want individuals that are UM outwardly focused, focusing on building a team of incredibly talented people and understand that it's really important to act as a mentor and a coach and ultimately a cheerleader and a provider of UM, you know, opportunity to really grow in their career and

their UM in their in their jobs. And what's fascinating about us is we've had virtually no turnover over the last several years, all through COVID, and I think that you know, that's a mark of an organization that has tremendous stability. And you know, I walk around all the time and I'm talking to everyone, you know, literally. I think my people get sick of me walking around because

I'm literally walking around. But I think it's really important to let them know you care and that you know they feel that, and then they thrive on that passion. So I've I've had a number of CEOs I've either have them tell me this on the show or I've read it elsewhere that I've all said, hiring is not only the most important part of our job, it's the single most difficult thing we do. Do you agree with that? What makes it so challenging? And how can we do

it well or better? I think that, first of all, it is absolutely the most it's the most important part of your job, but it's also the hardest, right because you have a half an hour or forty five minutes and you're trying to assess whether this person is really going to fit well in the organization. Sometimes they self select out by the way right, you know, or as they in the process it becomes clear it's not a

good fit. But those are the easies are the easy ones, Okay, the harder ones are where you know, look people gear up for an interview. You see one side of a person during an interview, and sometimes that's not the side you get, and so it's important in a couple ways. One, we typically have an individual that we hire interviewed by at least a dozen people, sometimes more, because we want, you know, we want to get a look at them in all different facets, in all different environments. Are you

quantifying them? Is there a checklist or is it very subjective and I think this person is a good fit or not. I you know, in many respects, I wouldn't call it subjective, but I would say, you know, we have folks that do lots of interviews, and I would say there are certain people in our organization to do more than others because they're really good at it, and

so we keep going back to them. But I would say that at the end of the day, it's very important not only to get a broad based consensus around a person, but also to do the background checks. It's mind blowing to me how many firms hire and in some cases very senior people and just think, well, this person is well known we're going to hire them, and if they had made one or two phone calls, they would find out pretty quickly that actually that individual is

a bit of a disaster in their prior job. So not only do we make this effort with relatively junior people, but if we ever do we do sometimes hire more senior. We actually redouble the effort when we're talking about a senior person because one of the things you learn, having been doing this for twenty five plus years is you can't hide from your reputation you are. You know, once you've been doing this that long, you know people know

who you are and what you're about. And so we want to make sure that we understand that when we make a hire at a senior level, but absolutely about the people. Absolutely important to vet them. Incredibly hard to do, and by having lots of folks involved in the process, particularly ones that are good at it, and spending a lot of time doing follow up in background checks, you get a pretty good picture of that person, and those are the people we want really really interesting stuff. Let

let me throw you a curveball question. Okay, you play guitar in a band called Suburban Chaos. Come on, First of all, what sort of music do you play and how often do you guys gig? You yeah, we gig a lot. Well, first of all, we just say this, I've been playing guitar since I was six years old, seven years old, and you know, all of us, you know, have you've been playing guitar that long? All of us guitar players harbor the dream of being a rock star,

a rhythm guitar player, and a singer. Okay, my band, which I've had now for about ten years, and it actually came about interestingly enough because um full credit to my wife, she actually happens to be a competitive ballroom dancer. So my wife would go off to competitions and you could see the passion she had for really, you know, be being a great dancer. And she's been a dancer

for as long as I've been a guitar player. So I watched her, you know, starting to really get into this ballroom dance thing, and I realized, I'm gonna get with my game here, I I you know, so I need to have something to do too while my wife is traveling all over these dance competitions. So and by the way, she was US ballroom dance Champion for many

years as well, so she's really good at that. So anyway, so I figured, okay, I've gotta I gotta have my gig, right, So we formed a band about ten years ago, and I like to say that, you know, our repertoire is, let's say, vintage. Well you know, listen, we're not that far apart on edge. Yeah, so I assume it's vintage. But the question is is it Credence and John Fogerty, is it Allman Brothers? What sort of stuff do you play? Right? So I would characterize our music style as yacht rock

meets seventies disco that's eclectic or so. Yeah, when I think yacht rock, I think as much as I love Steely Dan, Yeah, which are really both, you know, spectacular well written music and especially with Steely Dan, not easy to play or at least not easy to play well, yes, depending on the song and on the disco side, dance music. So Michael Jackson, Patti LaBelle, So you could be any bar mitzvah bands in the Northeast exactly and show up

and get everybody before the Viennese table. Everybody gets up and can move. Well, Look, it's all about entertaining people. It's all about playing music that uplifts them. It's all about playing music they want to dance too. And you know what, you know, you may have seen the same thing. I've certainly seen it. Our vintage music has had a bit of a resurgence, right. I mean, you know, I hear songs that I listened to when I was a kid, and I'm like, wait a second, that song is forty

years old. And there's to satellite music. You go to XM and a lot of stations that aren't like a decade station, right, but like the blend that's where coming from. That's exactly right blend. So and then the other thing is when you look at the streaming services, new acts aren't breaking into streaming. It's all older stuff that has already has an established So. So, last band question, Just give me your three favorite cover songs you play and

that'll allow me to know exactly who you are. Yeah, okay, Well it'll show you a cross section of Okay, we do, so, I would say, um, we do. Uh, we do a lot of you know, as you say, seventies rocks. So, but we also do you know, you know chade. So, for example, we play smooth Operator. So we play Smooth Operator, which is great. Uh, we we do. Um, you're not doing the vocals to Smooth Operator, I assume. Oh no,

we have a we have a female at who is fantastic. Uh. You know, we do more of a rock song called all right Now by Free of course. That was Paul Rodgers. Paul Roger. That was a giant song. And we do a song that is a little bit less known by a guy named Paul Carrick when he was with a band called Ace, called so long excuse me, how long? How long has this been going on? Yeah? That was a Spencer's Gift soundtrack type of thing. Exactly back exactly so sore. I think we're almost the same exactly. Yeah,

so age at least musically. Yeah. So we play. You know, we play all over New York, in Connecticut, and we've played as far as Newport, Rhode Island in New Jersey. But you know, one thing about a band that's very interesting, Barry, is that, unlike a company like ours, where there is clear you know, you're the boss or she's the boss or whoever, it's a different dynamic. Oh, it's a democracy. And by the way, you know, I have to put all of my CEO you know, tendencies, you know it,

you know, leave them at the door. Right, So suddenly, you know, our band is named Suburban Chaos, and in many respects it can be chaos. Right. Everybody wants to play their own songs. Everybody wants to do this, and this is first et cetera. And you really have to be much more of a you know, it's a democratic process, let's put it that way, as opposed to a you know, as opposed to a to a company. But it's a

lot of fun. And you know, we play, you know, we probably you know during COVID, we you know when obviously all that music was was turned off, but we had something like forty or fifty gigs you know, teed up when we you know when we uh, when we went out for COVID. So we play. A lot of people were doing remote zoom gigs during during the lockdown.

Absolutely and and uh but you know, I think you have to have a passion, you know, and I think in my case, you know, music is my happy place, and you know, everybody needs to have a place they can go, and you know, my my happy places, you know, Michael Jackson or whoever, you know, I totally get it. So so I only have you for a few more minutes. Let me jump to my speed round my favorite questions, starting with what has been keeping you entertained? What are you?

What are you watching? Um on Netflix or Amazon Prime? So I watched a movie that really, you know, given I you know, I've spoken about my background and more recently, actually found my birth family. Oh really, you know, kind of interesting. And turns out that I grew up thinking I was an only child, and it turns out I have nine siblings. Get out nine siblings. And by the way, they've been fantastic and incredibly excited and supportive, and most of them are still back in Buffalo, New York. How

did you find them? Because I've heard from people who do twenty three and me, all of a sudden, these local relatives pop up that they had no idea about ancestry. So I found I found my family and ancestry. And and I was watching a movie called Three Identical Stranger. Sure, and obviously a lot of those dynamics you know, really hit home to me, you know, as I watched three brothers who've been separated at birth. You know, I have you know, I have three brothers as well, and you know,

it was very interesting to see. And of course the big question in that movie is is it nature or is it nurture? And the conclusion initially they all thought that it was nature, as you recall, oh, well he does the same thing. Actually, then you find out that it really was nurture, and it really was how you were raised, not you know, you were born. You your three brothers, and you do everything the same together and

you're identical. Remember early on in that movie, they were all talking about, oh, this person does this, and we all do the same thing, and always there's no doubt they are all these crazy parallels. And then when you start to take peel off, that first layers all about it's all about how you were raised, and it's all about you know, were you raised in an ronment of love and happiness and positivity and you can do this,

or were you raised in a very tough environment. And so, you know, that movie was incredibly moving to me because you know, I watched the thesis unfold and so that's an example, you know, of of of one of the things that I watched. So let's talk about mentors. You've had a really fascinating career, working with a lot of really interesting people who helped shape your career. So I met David Rubinstein very very early on, actually even before my Drexful days. I was a lawyer for for a

few years, and David was as well. I actually met him when he was a lawyer and I was a loyalty as well. It was kind of a funny story. I was a new associated a law firm and I was directed to report to him, and as it turns out, he really didn't need anyone to help him, so I never really got a chance to work for him, but

I met him. Then we ended up at the business that I mentioned, Indos, who as we ended up being one of their law are just limited partners and financed many money deals for not just David, but Glenn Yungcan who was an associate back then and being clear in others. And so I've known David for you know, over twenty

five years. Obviously we sold our firm to Carlisle, and I would say, of all the folks that I know in our business, really truly just an incredible, you know, incredible person and frankly brilliant in terms of how he built Carlisle into a global private equity firm, and of course, as you know, being here at Bloomberg, you know how he has transitioned incredibly to be one of the most interesting media personalities and interviewers. And you know, we need

to get him on your show. I mean, he's well. I think we were scheduled when his first book came out, and then the pandemic lockdown happened, I got postponed. What I find fascinating about him is the more people are running around with their hair on fire, the more he is just calm and the voice of reason. I love that sort of contrarianism that you know, you you really when you could see clearly when chaos erupts. That's a really valuable skill and he seems to have have that

in spades. He really is full up with that. He is and and you know, I've gotten obviously to you know, continue to know him well. And I will say that, you know, you know, the other thing that I would I would say about about his time is if you look at his leadership of Carlisle and really building that firm, and you look across the folks that are both there now and are alumni, you can see what I refer

to in terms of the people. I mean, if you look at the first twenty or so folks that that were at Carlisle, you know, many of them were still there at the firm, you know, you know, fifteen twenty years later, And I think that speaks to that same dynamic I referred to, you know, building a real culture.

And you know, that's something I admire tremendously and I certainly feel that, you know, he's a good example of someone who's done that and trans Asians so you know, seamlessly into being an author, an author and an investor and ultimately a media personality. So he's somebody admired very much. So so let's talk about some books. What are your favorites? What are you reading right now? So I listen to books.

You know, I'm kind of, you know, I'm kind of the point now where a little bit lazy, but you know, you just you know, you go on, you go on audible, and you know, you just you know, just stop and then you keep going. So I'm listening to a book right now that I think is absolutely fascinating. I would certainly recommend it. It's called The Splendid in the Vial Uh Eric Eric Larson, and it's all about England in Churchill in advance of World War Two and really leading

up through World War Two. And what's fascinating about it is, I guess, you know, maybe never and I never really fully realized how totally unprepared England was for World War Two, let alone the United States, and how vulnerable they were, you know, in those early days, and how easy it would have been for you know, Germany, which had basically conquered the entire continent. I'm at the point now where you know, they've they've they've you know, they've conquered France.

I won't spoil the ending for you, but it's fantastic and it's a great book. Everything he's ever written is deep, fascinating, deeply researched. He's a fabulous writer, he is. And it's it's a super colorful book because it really you really feel like you're in the shoes of Churchill as he's kind of navigating what is a you know, you know, potentially could have been the end of the free world or know it right. So it's a great read. I won't spoil the you know, the the dynamics of it,

but it's it's terrific. Let's get to our last two questions, starting with what sort of advice would you give to a recent college grad interested in a career in private credit, private equity finance in general? Yeah, so you know, I think you know, in this age of instant success, if you will, people become media personalities overnight. They become TikTok you know, stars, and you know and and and in

a week. Um, I would say the advice I would give to young people is that, UM, make sure that you understand going in that you know, it's all about the people you work with, the people you learn from. Surround yourself. And then this is both personal and professional. Surround yourself with people that love you, people that want

you to be successful. If you surround yourself with people that have negativity and negative thoughts, you'll have negative thoughts, right, But if you surround yourself with people that you admire and respect and truly want you to be successful and that you can learn from and grow from, that's an incredibly important dynamic. And the other thing I would say, which is I think you know and by the way,

those friendships and relationships last a lifetime. I've got folks that I was in the bullpen with at Drexel back in you know, back in the mid eighties that I'm still great friends with and still learn from and talk to all the time. So you know, surrounding yourself with those people creates lifelong relationships and often coming very handy in the business worlds I'm sure you've seen in your career. The other thing I would say is I would remind them something that I think is a little bit hard.

I think for a young person understand thinking, oh my gosh, you know I went from my first interview and I got rejected. You will be rejected, You will fail. The mark of the most successful people I know. And this includes athletes like Tom Brady, who, by the way, you know, was drafted in the fifth round and thought of his career I'm sure thought of his career was you know, m quasi over at that point, sitting on the bench

in New England. But what you realize is it's all about having the tenacity and the willingness to pay the price to be really good at what you do. So you will fail. Do not let failure stop you in any way, shape or form. Recognize you learn from failure, and it's the failures that ultimately inspire the successes. When I think about my career, it was absolutely the times when it didn't work out for whatever reason that you know, you analyze, you determine, Okay, what was it that made

it not work out? And how do I fix that? And I think in many respects, where we are today as a firm is a great example of that because we tacked several times along the way with our firm and now we're in a phenomenal position with great partners and great people. So learning from and not letting failure deter you is really important. And our final question, what do you know about the world of private credit and investing today? You wish you knew forty years or so

ago when you were first getting started. You know, I think that you know when I was, you know, like all of us, when you're young in the business, you know, you're convinced that it's all about showing everyone how smart you are and running the fastest models. I can remember the days at Direct, so we were all in the bullpen.

They used to call it the model room, and everybody would go in there, and you know, everybody would you know, we would all compete for who had the most, you know, the technologically advanced financial models, and it was all about the numbers. And I think that, you know, there's certain an element of our business that is, you know, is

about the numbers. But you know, thirty years ago, you know, I was a young kid thinking, Okay, well, you know, it's all about the numbers, and whoever's the fastest model or wins, whoever's got the most, you know, whoever's the smartest wins. But what becomes very clear is it's all about the people, not the numbers, and it's all about building relationships and working with people that ultimately make you better.

And I think if you know, you know, I certainly know that today, and I certainly figure that out along the way, but I think understanding that, yes, the technical side of the business is important, but it's really ultimately the people side, the relationship side, that the ability to surround yourself and to motivate and mentor the best people that create the best organizations. I mean, look at this organization here. I mean, you know, it's all about that.

And I think that you know, that's something I've learned along the way, and I wish i'd known that a lot earlier. Thanks Ken for being so generous with your time. We have been speaking with Ken ken Sell, Founder, president and CEO of Churchill Asset Management. If you enjoy this conversation, well check out any of the previous four hundred and ninety two we've done over the past nine years. You can find those at iTunes, Spotify, YouTube, wherever you find

your favorite podcasts. Sign up from my daily reading list at Ritholtz dot com. Follow me on Twitter at Rivolts, Follow all of the Bloomberg podcasts on Twitter at podcast I would be remiss if I did not thank the crack team that helps put these conversations together each week. Justin Milner is my audio engineer. Fatigua Valbron is my project manager. Sean Russo is my researcher. Paris Wald is my producer. I'm Barry Ritolts. You've been listening to Masters in Business on Bloomberg Radio.