In a recent ION Influencers fireside chat hosted by Giovanni Amodeo, Dushyant Mehra, Co-CIO at Hildene Capital Management, shared his insights on the evolving landscape of asset-based lending and structured credit. The discussion covered a range of topics, providing valuable perspectives for investors and industry professionals alike.

Background and Role at Hildene Capital Management: Dushyant Mehra began by outlining his extensive experience in the financial sector, including his tenure at Hildene Capital Management. He highlighted the firm’s focus on structured credit and its growth from a niche player in CDOs and Trust Preferred Securities to a multi-asset manager with over $15 billion under management.

Importance of Structuring Cash Flows: Mehra emphasized the critical role of understanding cash flows and legal structures in structured credit investing. He explained how his background in structuring CDOs and CLOs at Bank of America provided him with the skills necessary to identify value in complex financial instruments.

Evolution of Asset-Based Lending: The conversation delved into the evolution of asset-based lending, particularly in the wake of the 2008 financial crisis. Mehra discussed how private capital has stepped in to fill the void left by banks, leveraging securitization markets and insurance capital to finance lending activities.

Interaction with Insurance Capital: Mehra provided insights into the relationship between asset managers, originators, and insurance capital. He explained how insurance companies, which can only buy investment-grade assets, play a crucial role in financing loans originated by asset managers.

Regulatory Changes and Market Cycles: The discussion touched on the impact of regulatory changes on the structured credit market. Mehra noted the introduction of risk retention in the CLO market as a pivotal moment that expanded the market and raised awareness among institutional investors. He also highlighted the opportunities created by over-regulation in certain sectors, such as the mortgage market.

Sourcing Opportunities and Technological Infrastructure: Mehra shared his views on sourcing opportunities in the asset-based lending market. He emphasized the importance of building technological infrastructure to onboard and monitor loans effectively, ensuring operational efficiency and risk management.

Future Outlook and Investor Concerns: Looking ahead, Mehra expressed confidence in the steady growth of the asset-based lending market, despite macroeconomic risks. He also addressed the complexity of structured credit and asset-based lending, noting that educating investors about these asset classes is key to gaining their trust and investment.

Conclusion: The fireside chat with Dushyant Mehra provided a comprehensive overview of the trends and challenges in asset-based lending and structured credit. His insights underscored the importance of innovation, regulatory awareness, and technological infrastructure in navigating this complex and evolving market.

Key timestamps:

00:06 Introduction to the Fireside Chats
01:25 Overview of Hildene Capital Management
02:04 Lessons from Early Career in Banking
04:39 Observing Market Cycles in Structured Credit
05:41 Niche in Asset Based Lending
08:27 Role of Insurance Capital in Lending
10:32 Investor Concerns in Asset Based Lending
13:35 Hildene’s Evolution and In-House Reinsurance
15:08 Navigating Regulatory Changes
18:06 Future of Banks in Capital Markets
19:51 Distinguishing Great Investors
22:23 Future Projections for Asset Based Lending
23:34 Interest Rate Outlook: Long-Term Predictions
24:35 Investor Concerns: Complexity in Asset Classes
25:47 Conclusion and Acknowledgments