In a recent fireside chat hosted by Giovanni Amodeo, Alfonso Erhardt, the founder of Oquendo, shared his insights on finding attractive niches in private credit in Southern Europe. The discussion covered a range of topics, including the evolution of private credit, the challenges and opportunities in the Southern European market, and the future of private lending.

Key Points Discussed:

Background and Evolution of Oquendo (2007-2023):
Alfonso Erhardt, an ex-banker, founded Oquendo in late 2007 with a university partner, initially focusing on mezzanine financing, the only private credit available at the time. Over the years, this evolved into a more complex asset class.

Expansion and Fundraising:
Initially focused on Spain, Oquendo expanded to other Southern European markets. They have raised several funds over the years, including mezzanine and senior lending funds, and are currently raising their third senior strategy fund and planning the fifth for their Flex capital strategy.

Market Strategy and Investor Relations:
Oquendo has adapted its strategies over time, from mezzanine to a mix of debt and equity, catering to different transaction needs. Their investor base was initially Spanish but has become more international, with plans to balance Spanish and non-Spanish investors.

Challenges in Market Penetration:
One of the main challenges was educating the market about the benefits of using mezzanine financing over traditional equity or bank debt, which offered increased flexibility but at a higher cost.

Opportunities in Different Markets:
Erhardt provided an overview of the private credit landscape in Spain, Italy, Portugal, and France. Each market has its unique characteristics, with Spain and Portugal experiencing significant bank consolidation, creating opportunities for private lenders. Italy is seen as a market that is gradually opening up to private credit, similar to Spain’s situation a decade ago.

Future Outlook and Technological Impact:
Looking ahead, Erhardt is optimistic about the growth of senior debt strategies due to the ongoing consolidation in the banking sector across Europe. He also touched on the role of technology in the industry, noting that while it has made some processes easier, the bespoke nature of many deals still requires significant human interaction.

Investment and Fund Performance:
Oquendo targets low double-digit returns for junior strategies and high single-digit returns for senior strategies. The discussion also highlighted how investor expectations have evolved, with a greater emphasis now on stability and risk management in returns.

This comprehensive chat not only shed light on Oquendo’s strategic approaches and market insights but also highlighted the broader trends and shifts in the private credit sector within Southern Europe, offering valuable perspectives for investors and industry stakeholders.

Key timestamps:

00:09: Introduction to Influencers’ Fireside Chats
00:35: Background and Early Years of Oquendo
01:34: Raising the First Fund
02:35: Advantages of Being the First Mover
03:39: Evolution of Funds and Asset Management
05:11: Investor Base and Target Investors
05:34: Future Fund Sizes and First Close
06:09: Expanding Investor Base
07:06: Investor Types and Ticket Sizes
07:43: Deal Origination and Workflow
08:33: Providing Finances and Ticket Sizes
10:07: Market Overview of Southern Europe
11:27: Challenges in Entering the Italian Market
15:19: Impact of Interest Rates on Deal Flow
17:52: Market Expansion and Future Plans
20:04: Return Targets and Investor Sophistication
22:37: Product Preferences and Talent Acquisition
25:21: Impact of Technology