In short
The evolution of private credit beyond headlines, focusing on why the “core middle market” can deliver attractive risk-adjusted returns, how market structure and relationships shape deal access, and what investors—especially wealthy investors—must understand about illiquidity and real (often delayed) credit risk.
Guest backgrounds
Ken Kencel is President and CEO of Churchill Asset Management, a major U.S. private credit manager with $66B+ of committed capital. He has a 35-year leveraged finance career, including leadership roles at Carlyle, leading leveraged finance at RBC Capital Markets, and building high-yield finance at Chase Securities.
Key claims
Middle-market inefficiency comes from less competition than large-cap private credit/syndicated loans. Churchill differentiates by being both a lender and an LP investor in private equity funds (350+ funds; 200+ advisory boards). Private credit is fundamentally illiquid (e.g., ~5% per quarter liquidity, but longer lockups should be expected). Best risk-adjusted returns come from credit quality, not maximum yield; Churchill avoids oil & gas, restaurants, and retail. Portfolio construction caps exposure at ~1% per name across ~50 senior lending vehicles.
Notable examples
Churchill reports software/AI exposure around 5% of the portfolio and minimal redemptions (private BDC ~2% last quarter). He cites COVID as a stress test where conservative lenders fared better, and explains that software-heavy, covenant-light lending drew legitimate criticism.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOUnderstanding Middle Market Inefficiencies
0:45 to 3:12
Discussion about the inefficiencies in the middle market and their implications for investors.
“I appreciate very much the opportunity to chat with you.”
The Evolution of Private Credit
3:12 to 6:28
Exploration of the history and evolution of private credit, including its shift towards individual investors.
“And so today, you know, when a private equity firm acquires a business, that plan often includes both strategic acquisitions, M &A, product extensions, geographic extension of the business.”
Key Risks for High Net Worth Investors
6:28 to 8:39
Discussion on the risks associated with investing in private credit for high net worth individuals.
“and particularly private credit in the middle market.”
The Institutional Validation of Private Credit
8:39 to 11:19
Analysis of how private credit has gained institutional validation and its implications for individual investors.
“I think it's a great investment for retirement.”
Core Beliefs in Lending and Risk
11:19 to 14:00
Ken Kencel shares his core beliefs about lending, risk management, and investment strategies in private credit.
“If you look back across your career, are there certain beliefs about lending and risk that you feel have remained remarkably constant despite all the market change around them?”
Investment Strategies in Private Credit
14:00 to 18:06
Learn about key investment strategies in private credit focusing on fundamentals and diversification.
“or more premium to the liquid credit markets.”
Understanding Risk in Credit Investments
18:06 to 21:56
Explore the importance of understanding risk-adjusted returns and managing potential downturns.
“In other words, they took more risk, they showed higher absolute returns, and some consultants actually allocated to.”
Market Insights and Lessons Learned
21:56 to 28:00
Discover insights from historical market events and their implications on investment strategies.
“We learned, for example, you hear a lot about smaller companies.”
The Evolution of Private Credit
28:00 to 29:40
Learn how private credit has transformed from a niche to a mainstream investment strategy.
“Well, private credit has grown from a niche strategy into a major pillar of institutional portfolios and now going into high net worth portfolios as well.”
Understanding Scale in Private Credit
29:40 to 32:10
Explore the significance of scale and relationships in private credit management.
“I think of private credit today in many respects is almost like a food chain that at the top, there are the largest, most institutionally validated managers that can deliver scale and have been doing it for a long time.”
Show all 24 chapters
Challenges Faced by Wealth Investors
32:10 to 33:30
Discuss the unique pressures wealth investors face in deploying capital.
“And I think it's sometimes maybe underappreciated by investors.”
Critiques of the Private Credit Industry
33:30 to 36:20
Examine the criticisms of private credit, including risks related to concentration and lending practices.
“You alluded to this earlier, but private credit has faced a wave of negative headlines recently from concerns about redemptions and liquidity to even valuation practices and potentially systemic risk.”
Investor Concerns and Redemption Risks
36:20 to 39:10
Analyze how redemption dynamics affect investor relationships and strategy.
“I also think, you know, the deployment pressure that was felt in that retail space, you know, also resulted in terms getting more aggressive.”
Long-Term Risks in Private Credit
39:10 to 42:00
Learn about the long-term fundamental risks in private credit that investors should consider.
“Again, back to the partnership I alluded to making us much less effective if we don't have that kind of dry powder and that capability to finance them.”
Importance of Experienced Managers in Private Credit
42:00 to 45:30
Learn why selecting experienced managers is crucial for investment success.
“And that's why I think it's very important when you're looking to select a manager that you're working with or allocating to a manager that has been doing this a long time.”
The Role of Relationships in Private Credit
45:30 to 48:50
Discover how relationships and trust influence private credit decisions.
“You've talked about private credit being fundamentally relationship-driven.”
Navigating Challenges in Private Equity and Credit
48:50 to 55:40
Understand the collaborative approach to overcoming financial challenges.
“And I think you hit on the key differentiating element of doing dozens of transactions with the same firms over decades.”
The Unique Landscape of Private Credit Firms
55:40 to 56:00
Explore the uniqueness and longevity of certain private credit firms.
“And, you know, look through COVID, you know, it was pretty draconian.”
Navigating Unusual Economic Periods
56:00 to 57:20
Explore how private equity firms adapt during challenging financial times.
“Question now is, how do we get through this very unusual period?”
Critical Questions for Credit Managers
57:20 to 1:02:20
Learn about the essential questions investors should ask private credit managers.
“And so we are, you know, a co-lender with other lenders and deals.”
The Importance of Covenants and Equity
1:02:20 to 1:06:00
Understand why covenants and equity are vital in private credit investments.
“So, so for us, you know, that that's a big part of our story is when you get into the discussion about workout.”
Balancing Conviction and Humility in Investing
1:06:00 to 1:10:01
Discuss the balance of conviction and humility when facing market fluctuations.
“The problem for us is when you go larger and larger at some level, you hit the broadly syndicated loan market and the standard in that market is covenant-like.”
Navigating Market Challenges Post-COVID
1:10:01 to 1:12:02
Learn about the impact of COVID on markets and the need for humility in investing.
“we think recessions can go down a certain amount and recover at some point.”
Gratitude and Reflections on the Podcast
1:12:05 to 1:12:27
Hear Ken reflect on his experiences and express gratitude for the discussion.
“I appreciate you sharing all your experiences and all your insights with me and our audience.”
Transcript
Automatic transcript. May contain errors.0:00Welcome to the Insightful Investor podcast, a weekly series that seeks to share industry, investment, and market insights. Learn more about our show at insightfulinvestor.org. Today's guest is Ken Kencel. Ken is president and CEO of Churchill Asset Management, one of the largest private credit managers in the U.S. with more than$66 billion of committed capital. Over a 35-year career, he has helped shape modern leveraged finance, including leadership roles at Carlyle, leading leveraged finance at RBC Capital Markets, and helping build the high-yield finance business at Chase Securities. Today, we're going to discuss the evolution of private credit, market structure, risk, relationships, and what ultimately drives long-term success in investing.
0:50Welcome, Ken. Thanks for joining us.
0:52Ken Kencel:Great to join you, Alex. I appreciate very much the opportunity to chat with you. And that sounds like a long agenda, so we've got a lot to talk about. Well, let's get started. Some say the middle market is still inefficient and overlooked. What does that inefficiency look like in practice and why do you feel it's good news for allocators? You know, it's interesting. You know, a lot has played out, as you know, over the last six months, regarding private credit and we've gotten a lot of tension. We used to be the quietest part of the alternative investment world, suddenly become the focal point of a lot of discussion.
1:32Ken Kencel:But I think in the middle market, there are a number of things that make it quite unique, and I would argue drive what are very attractive risk-adjusted returns. And I would say the fact that the middle market and certainly the core middle market where we operate is still very much driven by relationships. The fact that we've worked on dozens and dozens of transactions with the private equity world that we focus on and the partnership and the relationships that we've built over decades are quite unique. And when you combine that, in our case, with the kind of scale we've built in our ability to provide a full level of financing solutions, not just senior lending, but in our case, we also manage a significant amount of commitments, level of commitments, to private equity funds themselves.
2:36Ken Kencel:So our business is a bit unique in that we're both a lender, but also an investor as an LP. And those private equity firms were a co-investor with those firms in transactions. We sit on the advisory board of today of over 200 US middle market private equity funds. So the relationships are very broad and very deep and in some cases go back decades. And so in the core middle market where we operate, the level of partnership is very important because if you think about how the markets evolved, when a private equity firm acquires a business, unlike 20 or 30 years ago, where they were trying to put the most leverage on a company, you know, and basically drive returns by utilizing leverage that, you know, everything has changed dramatically.
3:26Ken Kencel:And so today, you know, when a private equity firm acquires a business, that plan often includes both strategic acquisitions, M &A, product extensions, geographic extension of the business. So it truly is an investment partnership with your lender. And I think that makes our investment profile quite unique. And I think it's resulted in firms that have built those relationships and have built a long-term track record and have scaled their platform so they can deliver a full range of solutions are quite unique. And I think it differentiates the core middle market from, let's say, the large cap private credit market, where you're essentially competing with the syndicated loan market.
4:19Ken Kencel:right so in the large cap world it's much more transactional and and in many respects it's driven that way because the banks are there right the goldmans the morgan stanleys are making um you know you're often competing with them when you're proposing a private financing whereas in middle market there is no competition from the syndicated loan market and there's also less competition because if you can't deliver the full range or the full financing solution, $300 million,$500 million,$800 million, you're likely not going to be the lender of choice. So I think it's unique in the relationships and I think unique in the scale that our firm and others have built over the years.
5:04And supposedly that's where the inefficiency lies with effectively less competition. Is that accurate?
5:11Ken Kencel:I think that's right. I think less competition because you have less lenders that can write a check for$509,$709. So scale matters a lot. And a history and the relationships that we've built and those relationships underscored with LP investments, advisory board seats, and a long-term partnership approach have made our business quite unique. and have obviously driven a tremendous amount of success in our platform. You've also expanded beyond institutional capital to serve wealthy investors. What's driving this shift and how our investor needs different? Well, you talk about the history of private credit.
5:55Ken Kencel:And certainly when private credit began moving away from the banks, with a shortstop in finance company world, the GE Capitals of the world, post -GFC, it very much moved to an institutionally driven business. And so we, like many of our competitors and firms that were building businesses, built the business based on an institutional foundation and institutional relationships. What has happened over the last five to 10 years is that that institutional interest in our asset class has continued, but alongside it have been individual investors, whether those are private clients, private banks, RAAs, high net worth investors, multifamily offices, have all recognized the benefits and the attractiveness of private credit.
6:58Ken Kencel:and particularly private credit in the middle market. And so there's an interest in allocating to that. But I think alongside that comes a requirement that you invest in education and recognize that the individual investors are somewhat different in terms of how you service them, how you support them, and ultimately how you interact with them on an ongoing basis. And are there any key risks high net worth investors should understand when entering private credit? I think that what the last several months of press and redemptions and all the dynamics around private credit really highlight is that individual investors should understand that private credit is fundamentally an illiquid asset class.
7:56Ken Kencel:I think that that lesson has been brought home by all the dynamics we've seen play out from a redemption standpoint, right? Investors are realizing that while there is some liquidity built into these structures, you know, and typically 5 % per quarter, what investors are getting really is access to a very attractive asset class, but at the same time, an asset class that is fundamentally illiquid. And so I think investors need to understand that if they're going to invest in private credit, they should expect to be investing for a more extended period of time. It's simply not an area where you would come in, invest for three months, and then ask for your money back and go somewhere else.
8:40Ken Kencel:I think it's a great investment for retirement. It's a great investment for long-term capital appreciation, provides great risk-adjusted returns, certainly if you're investing with a high-quality manager. But I also think that it's not an asset class that can be can be looked upon in the same way as, you know, a high yield mutual fund or a leveraged loan fund or even an equity mutual fund. You know, it's it's an asset class that does have inherent illiquidity. And I think investors need to appreciate that if they're going to make an investment and they should go into it with a time arousing that's reflective of that.
9:19That makes sense. And given the shift towards more private credit than what we used to have in the past in terms of borrowers, it makes sense that it should be considered as part of our well-diversified balanced portfolio. And you can think of it as you had public equity, public fixed, and then private equity became popular and it seems natural that private credit will follow.
9:41Ken Kencel:Well, I think that having proven itself, private credit having proven itself as an asset class institutionally, essentially, you know, the first 10 years posted GFC was really, were really about the institutional validation of private credit. consultants came in, they kicked the tires, they evaluated managers, they looked for managers that had a long history of generating attractive risk-adjusted returns. And I think once the asset class became more validated institutionally, wealth became more and more comfortable that it made sense to allocate not just to public equities or fixed income, that all turn is more broadly in private credit in particular, had a place in a diversified portfolio.
10:33Ken Kencel:I think we've entered an era now where private credit is not only accepted and appreciated institutionally now as a great returning asset class, but individual investors want access. But they want access to institutional quality managers. And I think that's what's changing and that's what's playing out real time as we see this whole redemption cycle and some of those dynamics playing out. The focus on portfolio quality, the focus on software and AI risk in the portfolio. I think what it all speaks to is individual investors really want the same quality and the same performance from their managers as their institutional brethren.
11:18Ken Kencel:And so we certainly feel, Churchill, with our investor base being 96 % institutional, that we're extremely well positioned to capitalize on that opportunity. If you look back across your career, are there certain beliefs about lending and risk that you feel have remained remarkably constant despite all the market change around them? for sure you know i i think that in credit you know i think that that we you know certainly those of us who've been doing it as long as i have look back and i think you need to keep in the forefront that um the best thing that can happen in a loan is you get your money back right and so i think it's a very very different mindset than private equity or or you know other higher risk higher return asset class.
12:10Ken Kencel:So in private credit, we've always focused on two very critical fundamentals. One, obviously, credit quality and fundamentals. I say this to our investors and more broadly, I say this to our people. Our goal is not to drive the highest yield. It's to drive the best risk-adjusted returns, right? So staying highly selective, staying focused on your mandate, on your market, sticking to your knitting, being very selective from a credit quality standpoint is fundamental to what we do. It was fundamental to what we did when I founded the firm 20 years ago. It's certainly fundamental to what we do today.
12:56Ken Kencel:And that's important, right? Because even in the early days, Alex, of institutional adoption, there were consultants who would say, well, Ken, your portfolio is fantastic. Your credit quality is really good. All good from a credit perspective. But occasionally what we'd hear is, well, but these other guys over here, they have a higher yield. And that higher yield came with more volatility. It often came with a lot less visibility regarding ultimate returns, ultimate realizations. But on the surface, it looked like they were generating higher returns, but they were taking on a lot more risk. So I like to think that we stay focused and true to our core fundamentals from a credit perspective.
13:44Ken Kencel:So we, for example, we do not invest in oil and gas. We don't invest in restaurants. runs. We don't invest in retail. So what we're looking for are market leading, high quality, middle market businesses with attractive spreads, typically anywhere from 150 to 200 basis points or more premium to the liquid credit markets. We're looking for traditional financial covenants, so structural protections. And we're looking at financing businesses that are backed by leading private equity firms that are typically contributing 60 % or more equity in those deals. So focus on the fundamentals, focus on high quality market leading businesses backed by top tier private equity funds who are writing a significant check, if you will, or investing heavily below us in the capital structure.
14:40Ken Kencel:And that's number one. It will always be the most important criteria and we've stuck to our knitting now for 20 years. I invested over$100 billion in middle market lending, middle market companies in the U.S., nearly a thousand businesses. But the second thing I would say involves portfolio construction. And so when you look at how we invest, even though we've developed a significant amount of scale in our business today, When you look at our portfolio construction at the fund level, Alex, we typically don't like to see more than 1 % of an individual name within a vehicle. So, for example, in our senior lending business, we manage today nearly 50 separate vehicles.
15:33Ken Kencel:So we diversify the risk across multiple vehicles so that no one fund, no one SMA, no one registered vehicle or even CLO is holding more than 1 % per name. So when there is an issue, you're getting a much more diversified approach to portfolio management. So I would say it's two things. One is focus on the fundamentals, focus on attractive risk-adjusted returns, be very selective about the companies you invest in. It's all about quality. And then secondly, taking that as a given, it's then about making sure that as you build your portfolio, you're doing it in a way that's highly diversified. so that no one deal, no one loan, no one borrower is going to cause a fundamental issue in our portfolio.
16:23And you said something earlier that I think is critical that I want to dig into a little bit more because I feel like it's often overlooked by investors. And that is you have to look at risk adjusted returns. And the challenge there is risk is not like returns. Returns you see every day, risk you only see every once in a while. And sometimes when you go an extended period before it rears its ugly head, you feel like it's not there. But so as an investor, you have to be very mindful of what is the risk that's being taken, even though it may not show up in the data, there is a risk there. So I think that is a really important point, especially for a credit investor where there's asymmetry, right?
17:01There's limited upside and a lot of downside.
17:04Ken Kencel:That's exactly right. And if you look at how you mitigate that risk or how you address that risk, You know, I think, I think, you know, that really points to building a culture organizationally, your investment team, your investment approach, the metrics that you use to measure that investment. when you look at leverage points, covenant structures, attachment points, equity, industry diversification, looking at all those metrics, both at the individual company level and at the portfolio level to stick to your core philosophies and your core approach. And I would argue that as much or more so than almost any investor in our world, you know we're we've you know i think we've done very well by that you know we've we've we've had um tremendous consistency in our investment team we've had tremendous consistency with respect to how we approach investing i mentioned certain industries that we don't invest in right you could get a higher return by doing retail you can get a higher return by doing restaurants you know that there there's no question that if you wanted to drive a higher absolute yield you could do that And I would say early on, Alex, in our business, certainly the early days, I'm going to say post-GFC, there were lenders that did that.
18:34Ken Kencel:In other words, they took more risk, they showed higher absolute returns, and some consultants actually allocated to. like, well, well, you know, and I heard this early days, I would say, well, look, we're not focused on driving the highest returns. And they'd say, well, we met with so-and-so over here and they're making senior loans at 13 % yields. And we would say, well, that's great. Let's see what their portfolio looks like two or three or four years from now. So it gets to your point, which is, you know, you can show high returns, but you don't necessarily show the risk you're taking until you've been tested in an economic downturn, right?
19:10Ken Kencel:So whether it's a recession, whether it's a more volatile period in the markets, whether it's even structural dynamics like the liquidity, which is forcing lenders to either sell assets or artificially create liquidity in their portfolios, it all comes back to those disruptive events show you actually how much risk you've been taking, right? And certainly we saw that in COVID. You know, in lenders that were fundamentally more conservative, you know, went through COVID in a much better place than maybe others. And I think there's a certain extent you're seeing a little bit of that today with the AI risk and software.
19:56Ken Kencel:You know, for example, our software as a percentage of our portfolio is only about 5%. We never bought into this rush to software deals. And we always looked at many of those transactions and said, look, if a company can't meet its interest expense today and you're underwriting it to meet its interest expense two or three years from now, that's probably not a good place to be if that business experiences any hiccups along the way, and some did and some have, and maybe a fair amount will. And so, you know, we find ourselves in a position where we've had very minimal exposure to software and AI, very modest.
20:41Ken Kencel:We've experienced very limited redemptions in our publicly registered funds, our BDCs. Our private BDC last quarter had a redemption rate of only about 2%. So, you know, much lower than some of the noise you're hearing in the market and some of the things that have gone on with our peers. But I think it comes from a fundamental recognition that, you know, you need to be well prepared for a rainy day. And you can go along in a, you know, in a benign environment and look pretty good. But we've never bought off on that. We've always tried to manage ourselves for that rainy day, if you will. It's interesting, Ken.
21:23And I hear this more from more experienced investors who have lived through stormy weather and less from multiple times and less from those who have maybe just lived through an environment that's been favorable for an extended period. It seems like the ones who have lived through the major storms are more mindful of them, which obviously makes sense. Yeah.
21:47Ken Kencel:No, it's some. Well, we've had a few, right? I mean, since we founded Churchill in 2006, we had obviously only a couple of years in from our founding, we were in the midst of the GFC. And so we learned a lot from the GFC. We learned, for example, you hear a lot about smaller companies. We hear strategies of lower middle market. And what does that mean? I'm not a big fan. And part of the reason why I'm not a big fan is that we lived through the GFC and what we saw was that those smaller businesses, often backed by less experienced private equity firms, often financing companies that have limited operating depth, maybe even more limited management teams, certainly more limited market position, were disproportionately impacted in the GFC.
22:44Ken Kencel:So when you look, for example, at our focus, we want to finance businesses that are market leading that are in what we call the core middle market. Typically, that's businesses with at least 20 million or so, ideally, of cash flow, 15 to 20 million at the low end. And then at the large end, it's really a function of, you know, large as we can finance them in terms of scale, but not so large as to have graduated into the syndicated loan market. Because once you graduate into that market, Alex, what you see is you're now competing in a bid-ask liquid loan market dominated by the banks that is really an auction, right?
23:31Ken Kencel:The lowest price wins. The highest leverage wins. No covenants, covenant light, great, you win, right? Or maybe lose. But what it transitions into is an environment that is far less investor friendly. So it's not surprising that spreads in the liquid market are 300, 325, right? You're putting a deal out to auction among hundreds of investors who are potentially participating. So you're looking at lower pricing. You're often looking at the highest achievable leverage. And you're often looking at Covenant Light from a structural perspective. So we like larger businesses as much as any lender, but not so large as to become active participants or borrowers in the syndicated market.
24:29Ken Kencel:So our upper end, if you will, tends to move around a bit depending on the level of disruption in the liquid markets. When the liquid markets are more disrupted, you know, we see larger companies. So in an environment like today, where a number of those large cap private credit managers have pulled back a bit because of the redemption pressure, today we're actually seeing somewhat larger companies come to lenders like us that have the scale and the relationships and the ability to move quickly as a private credit manager. and so we're seeing larger deals right now that are coming our way. So our average EBITDA historically has been around 50 to 75 million.
25:17Ken Kencel:I would say today that number is probably closer to 75 to 100 million. Pricing is, I would say, a little bit better today than it was six months ago or even 12 months ago and structural dynamics remain quite good. But we were in the first quarter of 2026, we were at least according to PitchBook, we were the most active direct lender in the US. So, you know, we are we're very busy today. Our loan lending activity is up pretty significantly. And I think that that is a direct result of our relationships in the scale that I alluded to earlier. It seems like that sweet spot that you described, you know, big enough to survive the trough, not so big where there's heavy competition fits within your risk-adjusted framework where you get good returns for the risk you're taking.
26:09Ken Kencel:That's exactly right. So we don't want to finance very, very small businesses that tend to get hurt more dramatically. And we learned that lesson in the GSC. And then if we didn't learn it, we learned it again in COVID. Just in case you forgot, right? Yeah, just in case we forgot, we learned it again. But I think it was obviously very different conditions, but I'd say a very similar lesson, which is the best risk-adjusted returns, in our view, are in what we call the core middle market, which is, again, not too small and as large as it can be without entering the syndicated loan mark, right? where it becomes much more commodity-like.
26:59Ken Kencel:And frankly, I would argue the differentiation is much less pronounced, right? If investors can buy the loan in the syndicated loan market or buy the company as a borrower in the syndicated loan market, that's not really delivering differentiated sourcing. So, you know, I think from our perspective, you know, relationships and differentiated sourcing because of those relationships, because, as I mentioned earlier, You know, we're an LP in 350 US private equity funds today. I think that's real value. I think that's generating the kind of attractive risk-adjusted returns in the core middle market that make us unique and I think has helped us build a very strong institutional follow-up.
27:44Ken Kencel:Today, we have over 5 ,000 investors globally, and there's no question in my mind that they want us focused on this core middle market niche that we have stayed in for our entire history. Well, private credit has grown from a niche strategy into a major pillar of institutional portfolios and now going into high net worth portfolios as well. What do people underestimate about the cultural changes required when an industry like this scales that quickly? The good news is, or I think maybe what is maybe less appreciated, is that if you were to go back five, six, seven years ago in our work, no one lender, Alex, could hold more than, let's say,$100 million in a deal.
28:39Ken Kencel:So if a company or a private equity firm that owned the company came to us as a lender and said, we need$500 million, by definition, we were all clubbing it up. And that clubbing happened right away because they knew and we knew that we couldn't do the whole deal. They were not interested in a syndication. They were interested in a committed financing. So we would get a call. Our peers at Firm X or Y or Z would get that call. And we would be clubbed together right up front. What I think has changed and what maybe investors, you know, some investors may not fully appreciate is that today, the largest players in private credit, and there's certainly, you know, maybe a dozen firms that I would say fit this dynamic, can deliver the full solution right up front.
29:31Ken Kencel:So in some respects, we don't need each other anymore. We're competing and we don't often get put together, at least not up front. And so having scale in the ability to deliver whatever is needed, whether it's a$200 million credit facility, a$500 million facility, and to be able to do that every day, every week on a regular basis, not just on a one-off basis, distinguishes the, I would say the most active managers from and the firms that that I would argue sit at the top of the food chain, if you will. I think of private credit today in many respects is almost like a food chain that at the top, there are the largest, most institutionally validated managers that can deliver scale and have been doing it for a long time.
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30:19Ken Kencel:And as the call and those firms get the first quack or the first look typically at those higher quality opportunities. And then as the as that short list of firms decides or doesn't decide to participate, that deal may fall down the food chain. And I think investors may not fully appreciate the value of that differentiated sourcing and the position that the largest, most scaled managers sit in terms of getting access to the highest quality deals, the quality transactions. You know, in many respects, the largest private credit managers kind of look like the banks did 20 years ago. There's, you know, there's five or 10 of us that dominate the market in the core middle market because of the scale we have and because of the relationships we have.
31:13Ken Kencel:And so, I mean, I think that is sometimes underestimated or investors may not fully appreciate that. Capital is a commodity. and so relationships matter a lot and the ability to deliver capital and scale matters a lot and so a new manager i often get this question well gee they're all see there are all these new entrants in private credit well guess what if you raised a billion dollar fund or 500 million dollar fund you can't put the whole fund in one deal right you're not going to put 500 million dollars in a single deal. So in order to really be in a position where you're scaled and diversified, there are only a handful of firms that are managing 25, 30, 40, 50 billion in their middle market direct lending strategy that can say that or can deliver that.
32:08Ken Kencel:So I think the importance of scale and the ability to deliver that scale is quite significant. And I think it's sometimes maybe underappreciated by investors. On the other side of the equation, I would characterize it as more positive. On the other side of the equation is, I'm not sure that investors, they may not, certainly wealth investors may not fully appreciate that if you are managing vehicles that have to immediately deploy capital, the pressure to deploy capital, the pressure to get invested. And I think that's a negative of the wealth space. When you raise capital in a wealth fund, all the money goes in right away.
32:56Ken Kencel:And so there's tremendous pressure to deploy. Institutionally, it's typically a drawdown structure. So we're drawing down capital when we see good investments. On the wealth side today, many of the fund structures are such that an investor might put in$500 ,000,$200 ,000,$100 ,000, and that capital has to get deployed right away. So the pressure that capital raising creates on the wealth side is quite a bit more significant than on the institutional side. You alluded to this earlier, but private credit has faced a wave of negative headlines recently from concerns about redemptions and liquidity to even valuation practices and potentially systemic risk.
33:43But which criticisms do you think are fair and which do you feel stem from misunderstandings of how the industry actually works?
33:50Ken Kencel:I mean, just to step back and to kind of give you a framework for why I think certain criticisms are legitimate and I think how they developed. So if you look at where a number of what I would call the large cap private credit managers gravitated, because they were raising so much capital in the private wealth channels, and because they were under significant pressure to deploy, And because software and the financings in the software space represented the better part of 40 or 50 % of the New Deal M &A market, that's where those firms deploy. Because they had to deploy, and software was a big part of the marketplace.
34:44Ken Kencel:What you saw is that certain firms that were heavily invested in, you know, were heavily raising significant amounts of capital in the wealth channel were invested, ultimately invested heavily in software and AI. And so I think the criticism that certain credit managers are overexposed to software and to AI more broadly, I think is very legitimate. I mean, when we look at the core middle market, which is nowhere near as dependent on software and nowhere near as dominated by software deals, we saw software as appropriately a 5 % asset class, maybe 10 % at most. So, you know, we were always thinking about diversification and not wanting to be heavily exposed to any one industry or anyone in the market.
35:40Ken Kencel:Whereas I think in the dynamics up and around all this retail capital raising, I think it forced certain firms that went into that large cap world into doing a lot in software. So I think the criticism about concentration, regardless of credit quality, is just overly concentrated. I think AI is absolutely a very, you know, certainly a very, it's a headwind, it's a tailwind, you know, but it's definitely going to impact significantly, particularly in the area of software. And I think that certain managers kind of lost sight of those principles regarding diversification. And I think so that criticism, I think, is very real.
36:22Ken Kencel:I also think, you know, the deployment pressure that was felt in that retail space, you know, also resulted in terms getting more aggressive. Things like ARR loans, which are basically revenue based financing. You know, certainly now people are looking at those deals saying, well, gee, you know, you're financing a business that, yes, has recurring revenue, but may not have cash flow or net cash flow. And relying on that company to turn off their growth in order to be able to repay that loan doesn't seem like a great bet now. And so firms that went deep into ARR loans or deep into software, I think there's an argument to be made that that was on the more aggressive spectrum.
37:17Ken Kencel:And certainly you saw that in leverage levels and deals, frankly, that maybe were done covenant-like that probably should have been done with covenants. And so I think there's some, I think some criticism regarding more aggressive lending is warranted, but I think the bigger criticism would be in and around our concentration in various industries or sectors where there was a lot of deal flow, which led to deployment, but also led to very, very significant concentration. And another example of risks that were always there, but may not have surfaced for some time until they ultimately show up in the data.
37:58Ken Kencel:Yeah, no, I think that's right. I think that's right. But it's also interesting, you know, when you look at the dynamics of the institutional market and what has happened in wealth, I would tell you that today what we're hearing from the wealth side of our world, and we have about 5 billion or so in uh private wealth overall in our platform actually in our private bdc which is really the redemption you know the area that would be subject to redemption it's about 3 billion uh what we see is that our clients our private equity clients are now asking us the question, you know, how exposed are you to retail, right?
38:53Ken Kencel:They're also concerned about having a lending partner that has significant stability and dry powder and is not suddenly going to find themselves on the receding end of quarterly redemption requests, which make us, make them or us less able to finance those business. Again, back to the partnership I alluded to making us much less effective if we don't have that kind of dry powder and that capability to finance them. So we are getting that question a lot from our private equity clients. Literally, they're asking us, you know, what percentage of your portfolio is in retail or what percentage is subject to redemption?
39:32Ken Kencel:Because if it's a lot, you know, that impacts, you know, our decision to use you or view you as a good long-term partner for financing our companies. The other thing I would say is that when you think about the investor side of it, we've also heard from our institutional investors. They want to know about our retail exposure. And interestingly, our retail investors want to know about our institutional exposure. They want to know that we have significant institutional long-term committed capital and that they're not going to be the fulcrum point in a redemption dynamic that could force unnatural acts with respect to our portfolio.
40:22Ken Kencel:And the good news is it won't and isn't because we're 96 % institutional. But I will say that there is more balance on the institutional side because you don't have this redemption dynamic playing out. So if we fast forward five years and we look backwards, what do you think investors will conclude were the real risks in private credit versus the perceived risks? Well, certainly the perceived risks are things like liquidity and AI and software and some of the dynamics around that. I think the real risks are more fundamental. And as you said, those are not necessarily oftentimes the ones that appear right away.
41:05Ken Kencel:You make a loan, unless you've made a horrifically bad decision in that loan and assuming that you have covenants, it could be several years before you really know whether or not you've over levered a business or you haven't gotten sufficient covenants to protect you in a downside scenario. um so and it's even worse if you've done a deal cove light where you you may not have an ability to to bring the borrower back to the table for for for at all and how in terms of let alone in the you know in several years so i think there's certainly a recognition that um uh when you think about the the challenges regarding a portfolio it could very well take you know a number of years for those to play out when you think about the fundamentals.
42:02Ken Kencel:And that's why I think it's very important when you're looking to select a manager that you're working with or allocating to a manager that has been doing this a long time. And that this isn't two years in, three years into their business. They've been doing it for 15, 20 or more years. And certainly the folks that we compete with, the ones that certainly we respect the most and have worked the most with are firms that have been doing it for, you know, that period of time, you know, 20 years, 25 years, 30 years. And I would argue that, you know, that those are the investors that both institutions and private wealth clients should be, you know, should be the ones that they're looking at to allocate to.
42:54And besides experience, what do you feel separates the firms that can successfully navigate multiple credit cycles from firms that simply benefit from favorable markets?
43:05Ken Kencel:Well, certainly culture. I mean, if you've, as we have, we've worked very hard to institutionalize our approach to credit and make sure that our investment teams are aligned in how we analyze credits, how we underwrite, how we approach portfolio management, and even in worst case scenarios, work out. And I think that when you look at our approach, um you know i i think what what it is emblematic of is an organization that um you know is built for the good times in the bad right and and is built for those down market cycles because you really don't know how well your manager is doing unless you you know unless you're subject to a more challenging environment.
44:05Ken Kencel:And so sticking to your knitting, staying focused on quality, building an institutional culture that understands that things like turnover and, you know, recruitment and mentoring and retaining the talent and the top talent in the industry is incredibly important. And you really learn that when you go through that downturn, right? It's easy to perform well in an upmarket and all tides rise all boats. But when the tide goes out, you kind of see who's not wearing a baiting suit and who's maybe been cutting corners or maybe has not had the same kind of discipline from an underwriting perspective.
44:50Ken Kencel:And so I think what distinguishes it is really a longstanding track record, but ultimately it's culture. Right. It's building an organization that from the bottom to the top is is is all aligned in terms of your underwriting standards, your commitment to diversification and portfolio management, all of those things. And that takes a long time to build. And, you know, and we've been very fortunate. We've been doing this for 20 years. All my original partners, but for a couple that have retired, are still with the firm today. And so we're very proud of that. We're very proud of the stability and the consistency of our investment teams.
45:33You've talked about private credit being fundamentally relationship-driven. In a world that's increasingly shaped by technology and data and AI, does that become more valuable or less valuable? I think it becomes more valuable, right?
45:49Ken Kencel:So I have an interesting way of thinking about AI. I was describing this to a colleague of mine, but if you think about AI at its most successful or in a positive way, what does it do? Well, it essentially universalizes fundamental knowledge from a credit perspective, right? So whether it's industry information, whether it's company information, whether it's, you know, synthesizing that data in a way that lends itself to better investment decision making, all of that, I think, AI can help develop and grow. It can even help in terms of sourcing, right? I mean, if you have a portfolio like we do, we have 350 names in our portfolio.
46:38Ken Kencel:If you're using AI effectively, you can identify the businesses that are the most attractive refinancing candidates, not just in our loan portfolio, but across our entire portfolio, including our private equity investments and our fund commitments. So AI can be a tremendous tool from a credit perspective, an analysis standpoint, a sourcing standpoint, all of that. But what that leaves you with and what I think is extraordinarily important are the relationships, are the fact that, I mean, if you look at our best private equity relationships, there are firms that we have done 20, 30, 40 transactions with.
47:22Ken Kencel:So those relationships can't be replaced by AI, right? You can certainly use AI to gather, synthesize, and ultimately contribute to an incredibly robust knowledge base and investment process, sourcing, identifying the best candidates for financing, utilizing that data and that information to make the best decisions, right? We're an LP in a fund. Who are the top performing partners within that fund? What are the top performing industries with that private equity sponsor? So there's a lot of information that can be gleaned through AI, but I don't think AI will ever replicate the trust and the partnership and the history that a firm like ours has with our private equity colleagues.
48:18Ken Kencel:colleagues. And I think that's where, in many respects, AI will be a tailwind with respect to those technical areas, but I don't think it can ever replace, or ever hope to replace, the relationship side. And so we're very proud of the history we have with top-tier private equity funds, and we think that that increasingly could be even more of a differentiator, given that AI kind of evens the playing field, if you will, from a data or an information standpoint. And I think you hit on the key differentiating element of doing dozens of transactions with the same firms over decades. And that is this notion of trust that a computer can't really take over.
49:02Ken Kencel:I think that's absolutely right. I mean, when you talk to our private equity relationships, what you will hear again and again is, you know, we go with Churchill because we know them. We trust them. We know that there's going to be twists and turns in a transaction, but at the end of the day, we know they're going to be good partners. They're going to be reasonable and they trust the same of us, of the private equity firm. There's a high level of recognition that the right answer in private equity and private credit is often to work together, to live, to fight another day. It's often not to necessarily put these companies into bankruptcy.
49:41Ken Kencel:it's to come up with a solution that may involve private equity firm putting up additional capital it may involve the lender like ourselves you know uh waving some covenants or softening some covenants to give the company some room to recover uh working with the private equity firm to come up with a new game plan that you know brings performance back over a period of time those Those kind of things get worked out in the spirit of a shared history and a trust that you're both trying to do the right thing to recover value or at least put the company and the business and the management team in a position to get back to the value proposition that you saw in the original deal.
50:33Ken Kencel:So I would argue that trust and history and relationships are a huge part of our world. And again, as I said earlier, when we first started, very different from the large cap world, right? Large cap world, the investment banks that do the transaction literally go out with a book and they solicit bids from hundreds of investors. if the private credit solution is competing with that, then it is going to be much less relationship-driven and it's going to ultimately have to compete based on more of a commodity like dynamic. Whereas I think in our world, pricing, I know that may sound funny, but it's ultimately almost never about pricing for us in terms of losing a deal.
51:27Ken Kencel:If we like the credit and we're comfortable that it's super high quality, the sponsor's writing a significant check and it's a market-leading business in a sector we feel comfortable with, defensible, et cetera, et cetera, all those things, the pricing in our market is pretty consistent. And it's been, you know, certainly the last year or so, it's been in the kind of$450 to$500 over range. So if we like the quality, we're not going to lose the deal over 25 basis points. And if the private equity firm wants to partner with you, they're almost certainly not going to partner with an inferior firm or a firm that they have no history with and do that over 15 basis points, right?
52:10Ken Kencel:They're going to come back to you and say, look, we've got these other proposals, but we know you guys, we've done 30 deals with you. We've got a long history. you know if you can move a bit we really want to work with you you can come in you know a small amount let's just wrap this up and do the deal with you because we want to do the deal with you and if you've done 20, 30, 40 deals with that firm you know there's real value in that right there's a long history and a feeling that okay if Churchill gives us a commitment letter and we're going to use that letter with the seller to secure the deal lock the deal up We trust those guys.
52:48Ken Kencel:They're not going to bait and switch us. They're not going to come back to us two weeks after we use their letter and say, you know, those two terms that we had in the letter, just kidding. You know, here's the fine print. Or we changed our mind. Or, you know, we want X, Y, and Z. We didn't talk about those things. So there's a course of dealing that really is very critical to how we do business. I'll give you another example. When we do a transaction, the odds are, you know, because we've done so many deals with that sponsor, the documentation is 90 % of the way there. Right. So so the normal toing and froing in the documentation process is much, much more limited because we've done so many deals together.
53:34So, you know, I think investors maybe sometimes don't appreciate that.
53:39Ken Kencel:They just think, oh, it's a relationship. But is it really a relationship or is just you've done a lot of deals together? And I would argue that in almost every case, it's a real relationship. You know, there's real connectivity. There's a real shared history. There's a real recognition that, you know, we're going to work to solve problems together. and as you know, in the middle market, there could be a lot of twists and turns in a deal. So it's very important. And again, I think the fact that we are an LP in 350 middle market private equity funds sit on 250 some odd advisory boards, there's an added element there of continuity and not only do we have a history, but we've got a formal history and a commitment as an investor.
54:31Ken Kencel:And I think all of that lends itself to a very differentiated sourcing from a relationship standpoint. I think we're one of the few firms that have both those LP relationships, but also the scale in our core lending business that have made us so very effective. And it's been a real advantage for us in the market. but it's more than just familiarity that we've done deals. It's actually the trust and the confidence that's born of that history. You can think of it as history plus trust equals relationship. Correct. It's history plus trust. It's not just, you know, it's not just, oh, we've done a lot of deals together.
55:17Ken Kencel:It's we've done a lot of deals together and we've been through, you know, we've been through the wars together. And and, you know, and we know that these that that their firm and our firm, whoever private equity firm we're working with, you know, we've faced the challenges together. And we know that, you know, each of us are going to are going to behave reasonably to try to get get to to a solution. And, you know, look through COVID, you know, it was pretty draconian. And there were businesses that literally had their cash flow, you know, dry up completely overnight. Right. And so it was like, OK, private equity firm, we all know that it's a good business.
55:54Ken Kencel:We know that, you know, when we financed it, it had tremendously strong credit characteristics, maybe even market leading. Question now is, how do we get through this very unusual period? And I think a lot of that had to do with the fact that the private equity firms that we worked with stepped up, you know, and in many cases wrote a check to support the business and we of course acted appropriately and um you know in working out the terms and the structure and giving them enough flexibility to feel comfortable putting in additional capital supported so so you know it's an it's certainly an important element of of what we do and how we do it and um and one that i think is still quite unique in the market, you know, and, and, uh, you know, there are a handful of firms like us, but you know, it's interesting.
56:44Ken Kencel:I was, I forget one of our peers did a study of private credit firms that were around 20 years ago. And I think there's like four or five of those, you know, literally it's a handful. And, um, and, and, and, you know, we compete with each other, but we do in many cases end up in deals together. Not because we're clubbed up up front, and I alluded to the fact that that's changed, but the sponsor themselves may say, you know what, you know, on this one, we're going to 50 % to you guys and 50 % to, you know, another lender. And so we are, you know, a co-lender with other lenders and deals. Even if we propose the whole solution, they may say, well, great, we'll take half and we'll bring in another partner.
57:31Ken Kencel:So we have to work together with other credit managers as well. So it's important to us to not only work with the sponsor, but also recognize that, you know, there are other firms that do what we do and do it quite well. And we want to make sure that we're viewed by them as a firm that is going to be, you know, a good lender, a good partner on the lending side. What is the most important question an allocator should ask a private credit manager that is rarely asked? The most important question, which I think is, we've had investors ask us this question a number of times, maybe not necessarily in the first meeting, but ultimately they get around to it.
58:12Ken Kencel:And that is, talk to us about when things didn't go well. Talk to us about a problem situation. Talk to us about why you decided to invest in the first place, which gives them great insight into our process and our approach and hopefully our selectivity. And talk to us about what went wrong and how you handled that situation. and give us an example of where you fixed it and maybe give us an example of where you were not able to fix it or where ultimately you know um you you had you have a loss and and i think it's a great question to ask because it really does give you an insight into not just how you handled the problem but also how you ended up in a situation that maybe wasn't as expected and and and you know one of the things that i i've heard from our investors on many occasions when we do that is that yeah actually now that you've described your investment process and your approach and how you decided to make the investment in the first place we would have agreed you look like a pretty good deal right 65 equity reasonable leverage market leading business um uh strong management team.
59:37Ken Kencel:You know, I can think of a business in particular that, you know, a business that we financed that went through some challenges where there was significant changes in the healthcare industry. You know, business where, you know, the world completely changed in terms of medical development. And it's rare, but you could have all those fundamental elements in place and the world changes. But the question is not only, you know, you know, does the world change? Because that does happen. And in our case, it's rare, but it does. But then how do you handle that? And how do you, you know, do you have covenants that actually bring the private equity firm back to the table?
1:00:22Ken Kencel:One of the things that I think is really, really important and we lean into heavily is the importance of having covenants as a way to ensure that when we do have that economic dialogue and a workout, the private equity firm that we're working with has an incentive to fix the problem, right? If they've done a deal and they've paid a dividend to themselves and all their capital is out of the deal, or they did a deal and they were successful in negotiating cov-light, meaning they don't have any covenants. You know, there's very little you can do as a lender, short of just taking the keys and walking away with the company that can get that sponsor to come in and support the business.
1:01:05Ken Kencel:So we like covenants. We like significant equity. And we like situations where the private equity firm has at least 50 % of their capital still in the business, right? So there's still skin in the game. And if you have all of those things, then the covenants will bring that private equity firm back to the table, which will enable you to get an effective fix or solution implemented. But how you deal with problems and the structures that you have in place that enable you to deal with those problems are really important. So it's the question I would ask if I were investing in credit, aside from the normal stuff, track record, loss rate, performance, selectivity, ratio, all of those things.
1:01:59Ken Kencel:But I would pay very close attention and analyze very carefully, you know, tell us about where things didn't go well and how you handled it. And did you ultimately reach a successful conclusion? and why, you know, why do you, why did you make the investment in the first place, but also what was your approach in fixing the problem? So, so for us, you know, that that's a big part of our story is when you get into the discussion about workout. You know, I think you learn a lot about a firm and their approach and their culture, because by the way, there are some firms that when they describe their workout it's literally like you know a reign of terror right like oh we've we've been you know we're gonna work out and we're gonna bring in the most you know you know the most aggressive nasty you know rip your face off you know you know uh the guy over there in the corner that you know we bring him out we trot him out when things are bad well you know what that may sound good in practice but you know good luck working cooperatively with that private equity firm going forward.
1:03:17Ken Kencel:So it has to be tempered with a recognition that you have a common goal to fix the problem and you don't break the company in the process of restructuring it. You want, in an ideal world, you want the private equity firm that owns it. You want other lenders in the transaction to trust you and to work with you constructively. And if you have the workout guy, the old school workout guy that literally doesn't play well in the sandbox, it may sound good in a meeting, but as a practical matter, that is not necessarily going to lend itself to the best solution in terms of getting a recovery if there is a problem.
1:04:02Ken Kencel:So, you know, we I think that asking that question will bring out a lot of color and a lot of background regarding why you did the deal in the first place, what you're doing to fix it. And were you successful and able to get it, you know, being able to get it back on track? And that response is very consistent with how you describe your role as building relationships. because if you are focused on working through those times and those are the environments that solidify relationships, it's helpful to highlight those and walk through that. 100%. And COVID was a great example of that, right? I mean, and it was certainly at the time, it was both draconian in what happened initially.
1:04:49Ken Kencel:Literally, it had companies that were closed, right? There's like no business, right? Not every company, but certain companies. But it was also a scenario where it was pretty clear that the private equity firm had written a significant equity check. Covenants were in place. So everyone was incentivized to live to fight another day. And in many cases, in virtually all the cases in our portfolio where there was a problem like that, the private equity firm stepped up, put in additional capital and tided the business through the other side of COVID. whether that was six months or nine months or 12 months.
1:05:27Ken Kencel:And I think that speaks to the relationship approach we've taken. It doesn't mean we're pushovers. It doesn't mean we're not being quite strong about getting to a solution that protects our investors. But it does highlight the importance of significant equity capital, high-quality businesses, all the fundamentals and covenants to make sure that you bring that sponsor back to the table. So, and that's one of the reasons why we're so big on the core middle market. The problem for us is when you go larger and larger at some level, you hit the broadly syndicated loan market and the standard in that market is covenant-like.
1:06:14Ken Kencel:Now, that standard may be completely appropriate for a traded security, right? Your defense as a creditor is to sell it. It's liquid. If you don't like what's going on, if you see the company deteriorating, you can sell it in the marketplace. So liquidity in covenant light actually makes some sense to me. If you're in a liquid security, you trade out of it or you sell it if you see signs of trouble. But in private credit, certainly in the core middle market where we live, covenants are critical because covenants are what enable you to bring that private equity firm back to the table, often after they've invested 50, 60 % or more equity.
1:06:57Ken Kencel:And so you've got a real incentive for the owner and the lender to work out the solution. Whereas once you get to the dynamics in and around the liquid market, I think it becomes much more challenged. I'd like to ask you one question about your mindset. How do you balance conviction and humility when market conditions seem to validate your investment approach? So, you know, when you think about conviction, I think it speaks to, you know, our approach to investment. So we have conviction if all the fundamentals are there. Right. So, you know, we're looking at, you know, market leading business, reasonable leverage, reasonable pricing, downside protection, traditional covenant.
1:07:53Ken Kencel:So our conviction, if you will, comes from, you know, a business meeting all of the criteria, all of the fundamentals from an underwriting standpoint that are very well known to our team. So in that sense, conviction is a function of the fundamentals being there. And we're not going to have conviction unless we have all of that. Humility for us comes from having lived through probably two of the worst dynamics from a credit perspective that anyone would have seen in their lifetime. right i mean the gfc in many respects was um very bad for a long period of time a and i think actually a lot of the damage in the gfc was done not necessarily just by the the you know uh obviously some of the dynamics in in the marketplace from a credit perspective but also the length of time that it went on the gfc was as you know was a 36 month odyssey and i think there were points along the way where we were saying, okay, well, things are going to start coming back and they didn't come back right away and it took time.
1:09:13Ken Kencel:So it was a long slog, if you will. Um, and so, you know, that certainly teaches you a bit of humility in that, you know, you think things can go down and come back right up quickly. Sometimes they don't. And the GFC is a great example of that. And then in, in, um, in, in COVID it was, I don't think anybody, anybody ever thought that they could go down as rapidly as they did. The GFC was the length of time that was really the eye-opener. And so the humility comes from, wow, we think a recession is typically six months, nine months, maybe it's 12 months. Well, how about three years of essentially a recessionary dynamic?
1:09:52Ken Kencel:So the humility was, we think recessions could be relatively short or typically are relatively short. This one went on for three years. In the case of COVID, we think recessions can go down a certain amount and recover at some point. And I think the humility in the case of COVID was how utterly and drastically the market seized up in the sense of companies literally went from in business to not doing anything their business essentially mothballed in some cases good companies good business good market positioning check all the boxes but essentially you're out of business all right you're out of business until at least until you know until covid um you know um gets resolved and so in both cases i think we learned a bit of humility uh both in terms of the length of time and the depth of where a recession can can play out.
1:10:54Ken Kencel:And so we're still very much conviction based on fundamentals and humility based on what we've lived through. And when you've lived through recessions like we have and invested through those recessions, I think that if you're doing your job and you're doing it well, you're learning a lot. And I like to say that we're learning every single day. And certainly those down markets have been important growth mechanisms, growth experiences for us and our people. And I think that's an important part of being a very good manager, a good investor, is that you need to understand that it's not just conviction, it's also having humility to recognize that things could go, things can go south either very quickly or for a very long period of time.
1:11:57Ken Kencel:And you have to have the recognition that that can happen and certainly have a plan to address it if it does occur. Well, Ken, this has been a fascinating conversation. I appreciate you sharing all your experiences and all your insights with me and our audience. Thank you for joining us today. Oh, thank you very much. Thanks, Alex. And I, I really appreciate it. And, you know, I'm a big fan of your, of your podcast and, and the insights that you bring. And hopefully I've contributed a little bit to that folks along the way. Thanks again.
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1:14:28Guests may have current or past relationships with Evoke and MAI, its affiliates, or the host, including as clients, service providers, or business partners. Participation does not constitute an endorsement or testimonial. No compensation has been paid or received for guest participation unless disclosed. MAI and its affiliates may have business relationships with entities mentioned in this podcast, which could create potential conflicts of interest. These relationships may include advisory services, investment management, or other arrangements. MAI seeks to manage such conflicts consistent with its fiduciary obligations and policies.
From the publisher
Ken is Founder, President and CEO of Churchill Asset Management, one of the largest private credit managers in the U.S., overseeing more than $66 billion of committed capital. A veteran of leveraged finance with leadership roles at Churchill, Carlyle, RBC, and Chase, Ken shares how private credit has evolved, where middle-market opportunities remain, what investors misunderstand about risk and scale, and why relationships, trust, and disciplined underwriting continue to matter in an increasingly data-driven world.
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This podcast/webcast is provided for informational purposes only and should not be considered legal, tax, investment, or business advice. It is not a solicitation, recommendation, or endorsement. All opinions expressed by participants are their own and do not necessarily reflect the views of the Evoke Advisors Division of MAI Capital Management, LLC ("Evoke”), its affiliates, or any companies mentioned. Information shared has not been independently verified by MAI or its affiliates. MAI Capital Management, LLC (“MAI”) is registered with the U.S. Securities and Exchange Commission ("SEC"), which does not imply any particular level of skill or training.
Certain information contained herein has been obtained from third party sources and such information has not been independently verified. No representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by any person.
While such sources are believed to be reliable, Evoke does not assume any responsibility for the accuracy or completeness of such information. Evoke does not undertake any obligation to update the information contained herein as of any future date.
The content is intended for a general audience and does not constitute a recommendation to buy or sell securities or adopt any investment strategy. Any examples or scenarios discussed are illustrative only, involve risks and uncertainties, and do not guarantee future results. Non-traditional assets carry significant risks and may not be suitable for all investors. Decisions should be based on individual objectives, risk tolerance, and circumstances.
Statements herein are general and may not reflect an individual’s or entity’s specific circumstances or applicable laws, which vary by jurisdiction. Further, speakers’ views are personal and may differ from Evoke and MAI recommendations and are not specific investment advice; and do not consider client objectives, risk tolerance, and diversification. Guests may have current or past relationships with Evoke and MAI, its affiliates, or the host, including as clients, service providers, or business partners. Participation does not constitute an endorsement or testimonial. No compensation has been paid or received for guest participation unless disclosed. MAI and its affiliates may have business relationships with entities mentioned in this podcast, which could create potential conflicts of interest. These relationships may include advisory services, investment management, or other arrangements. MAI seeks to manage such conflicts consistent with its fiduciary obligations and policies.
(As of December 22, 2025)
