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Garrett Stephen, Senior Managing Director and Co-Head of Origination at First Eagle Investments, on identifying a niche in private credit investments


In a recent fireside chat hosted by Giovanni Amodeo, Garrett Stephen, Senior Managing Director and Co-Head of Origination at First Eagle Investments, shared his insights on private credit investment. The discussion covered a range of topics crucial for investors and industry professionals. Here are the key highlights:

Background and Role: Garrett Stephen began by outlining his role at First Eagle Alternative Credit, where he focuses on sourcing deals exclusively with private equity firms. He emphasized the importance of diversification and maintaining a good margin of safety across portfolios.

Identifying Niches in Private Credit Investment: Stephen discussed strategies for identifying niches within private credit investment. He highlighted the significance of having a broad strategy and the ability to increase fund size and hold size to remain relevant in the market. He also noted the importance of running diversified portfolios to mitigate risks.

Market Evolution and Trends: The conversation touched on the evolving market dynamics, including the rise of platform deals and the increase in M&A activity. Stephen predicted more platform deals over the next 12 to 18 months, driven by the heating up of M&A volumes.

Asset-Based Lending and Cash Flow Lending: Stephen provided insights into the asset-based lending vertical, focusing on lending against strong assets in various sectors. He also discussed the symbiotic relationship between cash flow business and asset-based lending, particularly in the context of market slowdowns and distressed refinancings.

Growth Prospects in Private Credit: Looking ahead, Stephen anticipated significant growth in private credit over the next two to three years. He expected dramatic growth within asset-based lending strategies and continued growth on the cash flow lending side.

Market Consolidation: The discussion also covered market consolidation trends, including mergers and acquisitions among asset managers and the rise of joint ventures. Stephen highlighted the strategic importance of filling gaps in portfolios through M&A and joint ventures.

Advice for First-Time Fund Managers: In the final segment, Stephen offered advice to fund managers looking to spin off and start their own funds. He emphasized the importance of showcasing a strong track record, including handling underperforming deals and achieving recoveries for investors.

Conclusion: The fireside chat concluded with Stephen reiterating the importance of diversification, strategic growth, and risk management in private credit investment. His insights provide valuable guidance for investors navigating the complex landscape of private credit.

Key timestamps:

00:09 Introduction to Iron Influencers Fireside Chats
01:22 Garrett’s Professional Journey
03:06 Market Cycles in Private Credit
05:49 Understanding Market Positioning
08:01 The Future of Mid-Market Investments
09:07 Unique Selling Proposition in Private Credit
10:00 Investment Thesis Development
13:44 Building Relationships with Private Equity Firms
15:28 The Evolution of Deal Origination
17:55 The Role of Technology in Investment Workflow
20:03 Investor Demand for Data and Insights
22:01 Market Predictions for Asset Management
25:57 Strategies for Success in Asset-Based Lending
27:59 Advice for First-Time Fund Managers