Credit Exchange with Lisa Lee

Marc Chowrimootoo, co-head of direct lending at Hayfin and expert in European private credit, offers a clear take on lending prudence. He discusses managing portfolios through geopolitical volatility. He contrasts Europe’s lower software and retail capital exposure with the US. He explains tightened new-deal discipline and why manager selection matters amid uncertainty.

The current period is a “really important rite of passage” for retail access to private credit and direct lending, says Tristram Leach, head of investments Europe at Apollo Global Management, on the latest episode of Credit Exchange with Lisa Lee.“The five percent number is there for a reason,” says Leach, speaking about recent outflows from semi-liquid private credit funds that have seen a pickup in redemption requests (some firms have given back more than the agreed 5%; some have limited at 5%).“It’s important to protect remaining investors. It’s a level of liquidity that has been promised. And in general, we think the appropriate way to proceed is to do what you said you’d do.”Direct lending, he believes, will continue to grow – but it needs to go through a period where there are elevated redemptions in the marlet.“People want their money back. You have to see the products work as they were designed to work. And the way they’re designed to work is they give five percent. That, broadly speaking, is the appropriate design, and how it should function,” Leach contends.He adds that we are still in a fairly early period in the development of wealth access to direct lending. Consequently, it’s understandable that results in a “slightly flightier” asset base compared to institutions.Leach understands the argument that the central composition of the direct lending market does put it more in the crosshairs of this threat. “The very high software concentration, certainly among some of our peers in private credit, does create some additional risk when you think about AI disruption,” says Leach, who is also the co-head of European credit at Apollo.Across the firm, Apollo has around 2% software exposure. Even within direct lending, Apollo is “clearly at the bottom end of the range,” Leach says.Nonetheless, he believes the market was relatively slow to wake up to the potential of AI. “What’s surprising to me is that when Claude Code came out, the market suddenly noticed,” he says. “We’ve been watching the incredible pace and development of large language models for several years now.”On Europe, the Iran war probably represents more of a cyclical threat to Europe than the US because of the energy price dynamic and geographical proximity, Leach believes. “That is definitely a headwind to growth; it’s a headwind to cyclical industries.“Especially for companies exposed to growth in Europe, that’s going to be a challenge, because of the inflation impacts to energy prices.”Nonetheless, that doesn’t materially impact Leach’s expectations for greater infrastructure investment and defence investments on the continent.“There’s been a huge change in the attitude of European policymakers towards the need to spend money, become more productive, become more competitive. All these things are clearly felt viscerally within Europe because of how fragile the continent’s position seems. I think you’re going to see changes, and I think you’re going to see Europe seek to take advantage of the opportunity,” Leach says.Leach also shares why, in football, he is wholly committed to Atlético Madrid.

Jonathan Dorfman, CIO at Napier Park Global Capital and a pioneer in credit derivatives, discusses why his firm has hoarded cash to buy mispriced assets. He talks rising volatility, widening credit spreads, private credit repricing tied to software and AI, geopolitical shocks and market reactions, and why CDX markets show caution without panic.

Andrew Davies, head of credit at CVC Capital Partners, discusses private credit, CLOs and market dislocations. He explores how private markets can buy discounted debt, support sponsors when banks pull back, and why European private credit looks steadier than the US. He also covers geopolitical risks, AI exposure in borrowers, and opportunities from widening spreads.

Joel Holsinger, co-head of alternative credit at Ares Management and leader of Ares’ charitable work, discusses the limits of AI-driven bets given huge capital and power needs. He weighs private credit resilience versus public-market hype. He outlines asset-backed finance opportunities, data-center financing constraints, end-of-cycle credit positioning, and Ares’ Promote Giving philanthropy.

Christopher Sheldon, co-head of credit and capital markets at KKR and author of CTRL + ALT + CREDIT, offers a concise take on today’s tricky credit backdrop. He talks about rebooting credit thinking, why scale and origination matter, how AI forces rapid re-underwriting, the importance of protective deal structures in private credit, and where pockets of opportunity may lie.

Mathew Cestar, president of Arini Capital Management and former co‑head of investment banking, shares views on European credit and private markets. He explains why Europe’s miss on the AI equity boom makes credit appealing. He discusses rising AI capex driving credit supply, a broadening of M&A beyond mega deals, expected upticks in private credit defaults, and the positive role of regulatory scrutiny.

“We have this great tool out there called AI, and we haven’t 100% figured out how to implement it yet,” says Mark Jenkins, co-president and head of global credit & insurance at Carlyle, on the latest edition of ‘Credit Exchange with Lisa Lee’. Jenkins predicts that the next stage is going to be how corporates implement AI into their workflows, and that the process is “really in the first innings of implement”.OpenAI, Anthropic, and many others are developing tools for workflow, and Jenkins predicts they will take “not years, but several months” to impact systems. Carlyle, for example, is already using AI to help its investment group be more efficient, and to consume massive amounts of data in ways that would be difficult without AI, says Jenkins. But one has to use AI appropriately, he adds. “It’s not going to make the decision for you.”While change has been a constant feature during Jenkins’ 35-year career, nothing has been like AI in the past three years. Embrace the change and incorporate it into what you do, because typically, those are the ones that prosper, he counsels.On the broader investing climate, Jenkins is positive about the macroeconomic environment for the next 12 months. But moving out to 2027 and 2028, inflation may rear its head again.

Mitch Garfin, co-head of leveraged finance at BlackRock and seasoned credit investor, discusses AI-driven disruption risks and market reactions. He highlights sector positioning, underweighting consumer and retail while favoring stable cash-flow names. Data center issuance, refinancing opportunities and how BlackRock assesses AI winners and losers are also covered.

“It’s going to be a slow build, and we think a sustained multi-year increase in activity,” says David Miller, head of private credit and equity at Morgan Stanley Investment Management, on the latest episode of Credit Exchange with Lisa Lee, speaking about M&A and LBOs.The geopolitical headlines haven’t yet changed the economic picture, says Miller. But over time, they may impact on confidence and fan uncertainty.“As uncertainty rises, risk premium will rise. So that can change the calculus - but we’re not seeing it in the markets yet,” he observes.Miller also discusses running both the private equity and private credit businesses at Morgan Stanley’s asset management arm, a team that numbers more than 150 strong, and what it’s like being part of a global bank.