Driving Opportunities Through Bespoke Capital Solutions

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Michael Searles, Head of North America, Capital Solutions

In this Q&A, Michael Searles explains why capital solutions strategies continue to gain attention despite the current uncertain backdrop and looming maturity wall.

Can you start by defining capital solutions, and how the opportunity set differs from distressed debt?

We think of capital solutions as flexible, often credit-focused strategies that offer investors access to unique dealflow and give sponsors and borrowers access to customised or bespoke financing solutions. These strategies typically target a return profile between traditional, sponsor-backed direct lending and private equity. However, the way managers target that return profile can vary significantly.

While some capital solutions strategies focus primarily on junior capital investments, we tend not to venture into that risk spectrum. Rather, we focus on driving returns through investments in senior secured debt, which makes up roughly three-quarters of our portfolio. In our view, this not only positions us to potentially achieve the attractive returns characteristic of this asset class, but also provides investors with greater downside protection and resilience through economic cycles.

One of the ways that today’s capital solutions strategies differ from traditional distressed strategies is that the primary focus is not on rescuing companies after they’ve got into trouble. Much more often, these are investments made into companies that are growing and going through some type of transition where traditional capital raising channels may not be the best fit. These tend to be more advantageous situations for investors from the start.

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