In a recent fireside chat, Symon Drake-Brockman, Managing Partner and Co-Founder of Pemberton, shared his insights on the trends in private credit and alternative lending. With over 35 years of experience in the industry, Drake-Brockman provided a unique perspective on the evolution of the market and the opportunities that lie ahead.

Key Takeaways:

Consolidation in European Private Credit Market: Unlike the US, the European private credit market is more consolidated, with 10 firms accounting for 60-65% of the financing for private equity firms in the mid-market space.

Importance of Originators: Human touch and experience are crucial in private credit, making originators indispensable in the industry. Technology can enhance efficiency, but it won’t replace the expertise of experienced originators.

Repeat Business: Private credit firms can expect repeat business as companies grow and require additional financing. Pemberton, for instance, has a high repeat business rate, with 80% of their business coming from first-time buying and the rest from second-time ownership.

Differentiation through Footprint and Fund Structure: Pemberton’s broad coverage and deep knowledge of domestic markets, combined with their three direct lending funds, provide a unique value proposition to borrowers and investors alike.

Growth of NAV Financing: NAV financing is expected to be a significant growth area, allowing private equity firms to hold assets longer and generate higher returns. Pemberton has partnered with ADIA to tap into this opportunity.

Education and Adoption: While less than 10% of LPs currently use NAV lending, the industry is expected to see increased adoption as education and understanding of the benefits grow.

Buy-and-Build Strategy: The European private equity market is likely to see more buy-and-build deals, driven by the need for cost synergies and value creation.

Bullish on NAV Financing: Drake-Brockman is most bullish on NAV financing, which provides attractive yields and diversification benefits.

Key timestamps:

00:09: Introduction to ION Influencers’ Fireside Chats
00:28: Background and Formation of Pemberton
01:19: Impact of the Global Financial Crisis & Formation of Pemberton
02:06: Establishment of Pemberton, Partnership with Legal & General
03:11: AUM & Growth Strategy
03:35: Comparison of Private Credit Markets – Europe vs US
04:18: Factors Contributing to the Consolidation of the European Private Credit Market
05:03: Infrastructure and Market Coverage in Europe
05:38: Differentiation of Independent Asset Managers from Integrated Asset Managers
06:21: Role of Technology in Originating Deals
08:11: Importance of Originators in the Private Credit Market
09:58: Impact of Technology on Deal Origination and Human Touch
11:57: Repeat Business and Corporate Journey in Leveraged Finance
13:01: Primary Buyouts and Growth Prospects in Europe
14:30: Key Differentiators of Pemberton’s Strategy
16:41: Investor Concerns and Attractiveness of the European Market
19:03: Evolution of Fund Financing and NAV Lending
21:44: Usage of NAV Lending
22:37: Transition Period for Portfolio Management
23:15: Future of NAV Lending in Private Equity
23:53: Market Trends in Europe
24:22: Bullish Strategies in Private Credit
25:20: Sponsored vs. Sponsorless Markets
26:15: Conclusion