In a recent fireside chat hosted by Giovanni Amodeo for the ION Influencers’ Fireside Chat Series, Johan Hultner, Senior Partner and CEO of ARCOS Capital, shared his insights on the outlook of private credit for 2024 and beyond. With over 25 years of experience in banking and leveraged finance, Hultner and his team of ex-bankers established ARCOS to address the gap left by banks in the traditional senior private debt market in Europe. This niche focuses on the more conservative end of the sponsor-led corporate lending market, which has seen a lack of attention from private funds.

Hultner discussed the evolution of private debt funds post-global financial crisis, noting a significant influx into high-risk segments of the market. However, ARCOS aims to cater to the more conservative end, offering a stable through-cycle strategy that appeals to pension funds and life insurers looking for stable returns. Despite the crowded nature of the high-risk end of the private debt market, Hultner sees a genuine gap and opportunity in the traditional senior loan market, where banks are retracting due to new regulations and capital requirements.

The conversation also touched on the impact of interest rates on the market, with Hultner expressing scepticism about a return to a zero-rate environment. He anticipates a relatively high-interest rate environment for the foreseeable future, which will influence M&A volumes and cycles. Despite these challenges, Hultner remains optimistic about the gradual improvement in the M&A market and the role of private debt in facilitating transactions.

Hultner highlighted the importance of experience and tailored structuring in the private debt market, suggesting that technology could enhance transparency but would not replace the need for expert structuring. He also discussed the potential for consolidation in the private credit market, with asset managers possibly acquiring funds or launching their strategies to enter the market.

Overall, Johan Hultner’s insights provide a comprehensive overview of the current state and future prospects of the private credit market, emphasizing the importance of focusing on the right market segments and the potential for growth in traditional senior loan markets.

Key timestamps:

00:09: Introduction
00:35: Founding of ARCOS Capital
01:28: Identifying the Niche
03:23: Value Proposition
04:24: Market Gap and Approach
05:27: Fund Size and Deal Commitments
06:22: Transition from Investment Banking
07:44: Deal Origination and Workflow
08:50: Role of Debt Advisers and Technology
11:27: Data Management and Insights
12:07: Market Outlook
15:50: Impact of Interest Rates
17:38: Demand and Structure Preference
18:08: Transaction Workflow
20:17: Focus on Private Credit
21:41: Competition and Market Crowding
23:13: Supply-Demand Imbalance
23:37: Gap in the Traditional Senior Loan Market
24:51: Acquisitions and New Entrants
25:17: Challenges for Asset Managers
25:44: Building a Strong Team
26:23: Hiring Strategy
27:31: Transparency in Private Credit