Capital Allocators – Inside the Institutional Investment Industry Josh Friedman – Master Class in Credit Investing at Canyon (Capital Allocators, EP.263)
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Jul 25, 2022 Josh Friedman, Co-Founder and Co-CEO of Canyon Partners, shares his journey from banking at Goldman Sachs to building a $25 billion investment firm specializing in credit. He delves into the evolution of credit markets, discussing private lending and liquidity challenges. Friedman also emphasizes the importance of aligning incentives within investment teams to manage market fluctuations effectively. His personal insights on cycling and the mentorship that shaped his philosophy highlight the blend of passion and professionalism in investing.
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Investment Team Structure
- Canyon organizes its investment team primarily by industry specialization but uses dedicated teams for specialized products like CLOs and securitized products.
- They are evolving toward more separation based on fund and function, rather than pure industry focus.
Team Incentives and Patience
- Reward investment team members for patience and not just for investing, especially during down cycles.
- Align incentives with overall firm performance to discourage unnecessary risk-taking in unattractive markets.
Growth of Private Markets
- Private markets have grown substantially, impacting institutional roles and reducing systemic risk.
- The shift toward private lending creates a safer, more competitive environment than the pre-2008 system.