Key Takeaways
- • Investors are increasingly testing private credit managers on how they handle borrower distress, not just on origination volumes, according to panelists at the Alfi Private Assets Conference on 10 November.
- • Florian Bentele of Allianz Global Investors argued that "underwriting is just half the job," and that manager differences often emerge several years after investment, when a borrower deteriorates.
- • Aymeric Martin of Tikehau Capital said performance cannot be properly assessed after only one or two years, and that investors should examine consistency across fund vintages.
- • Panelists urged investors to scrutinise the source of returns, distinguishing cash interest from payment-in-kind interest and the contribution of leverage, fees and valuation movements.
- • Reservations were raised about the expansion of private credit toward retail and wealth clients, with panelists stressing that placing a loan in a semi-liquid vehicle does not make the loan itself liquid.
Summary
At the Alfi Private Assets Conference on 10 November, panelists argued that the true test of a private credit manager begins when a borrower struggles. Aymeric Martin, Managing Director and Co-Head of Private Debt France at Tikehau Capital, said investors are asking larger platforms more often whether they can handle difficult situations, and expect dedicated workout teams or operating-partner resources alongside deal originators and underwriters. He described a shift from emphasising deployment volumes toward demonstrating experience, discipline and consistency. Florian Bentele, General Counsel Private Markets at Allianz Global Investors, said "underwriting is just half the job." The discussion was moderated by Nick Smith, Managing Director, Private Credit at AIMA.
The panelists agreed that manager differences often surface several years after an investment. Bentele argued that when a borrower deteriorates, lenders need expertise, governance arrangements and contractual tools to protect value. Martin said this is why performance cannot be properly judged after one or two years, and that investors should examine consistency across fund vintages and how managers have handled difficulties. Staying close to management teams and private equity sponsors can help identify weaknesses early. Where that relationship fails to produce an effective resolution, Martin said the investment team may need to intervene in governance and take control of the business. Steve Sabatier, Managing Director at Chenavari, highlighted covenants as early-warning mechanisms, noting that a distressed borrower may need time or amended terms, and that lenders must recognise problems and retain the ability to respond. Bentele stressed that managers must be prepared to reject transactions rather than make excessive concessions, even amid strong competition for established mid-sized businesses.
On returns, Bentele said the key question is "not simply what return a manager has generated, but rather where that return came from." Investors should separate cash interest from payment-in-kind interest, which is added to the debt rather than paid immediately, and assess the contribution of leverage, fees and valuation movements. Similar reported returns can mask different cash flows and risks. Bentele also urged scrutiny of how deterioration is reported and whether amendments and PIK arrangements are clearly explained. He described current investor sentiment as "conviction without euphoria": allocations continue to rise, but investors are increasingly aware of the risks they accept.
The panel's strongest reservations concerned the expansion of private credit toward wealth management and retail investors. Sabatier questioned whether retailisation was the right direction. Bentele voiced concern about loosening liquidity features simply because other managers were doing so, and suggested higher entry tickets and a greater focus on high-net-worth investors as part of a sustainable approach. Martin noted that placing a loan in a semi-liquid vehicle does not make the loan liquid. Bentele said gates and other liquidity management tools are necessary when underlying assets cannot support unrestricted withdrawals. Sabatier also warned of valuation risk and leverage across the investment chain, since investors and underlying assets may themselves be leveraged.
The panel also addressed artificial intelligence. Martin said Tikehau uses AI to assemble information, analyse historical trends and review investment proposals, but that the investment team remains accountable for validating outputs. Lenders must assess whether borrowers adopting AI can keep early gains as competitors follow and customers press for lower prices. Bentele raised a longer-term concern that reduced junior workloads could weaken the training pipeline needed to develop future investment professionals, and argued that educating juniors may require more investment than before.
The panelists agreed that manager differences often surface several years after an investment. Bentele argued that when a borrower deteriorates, lenders need expertise, governance arrangements and contractual tools to protect value. Martin said this is why performance cannot be properly judged after one or two years, and that investors should examine consistency across fund vintages and how managers have handled difficulties. Staying close to management teams and private equity sponsors can help identify weaknesses early. Where that relationship fails to produce an effective resolution, Martin said the investment team may need to intervene in governance and take control of the business. Steve Sabatier, Managing Director at Chenavari, highlighted covenants as early-warning mechanisms, noting that a distressed borrower may need time or amended terms, and that lenders must recognise problems and retain the ability to respond. Bentele stressed that managers must be prepared to reject transactions rather than make excessive concessions, even amid strong competition for established mid-sized businesses.
On returns, Bentele said the key question is "not simply what return a manager has generated, but rather where that return came from." Investors should separate cash interest from payment-in-kind interest, which is added to the debt rather than paid immediately, and assess the contribution of leverage, fees and valuation movements. Similar reported returns can mask different cash flows and risks. Bentele also urged scrutiny of how deterioration is reported and whether amendments and PIK arrangements are clearly explained. He described current investor sentiment as "conviction without euphoria": allocations continue to rise, but investors are increasingly aware of the risks they accept.
The panel's strongest reservations concerned the expansion of private credit toward wealth management and retail investors. Sabatier questioned whether retailisation was the right direction. Bentele voiced concern about loosening liquidity features simply because other managers were doing so, and suggested higher entry tickets and a greater focus on high-net-worth investors as part of a sustainable approach. Martin noted that placing a loan in a semi-liquid vehicle does not make the loan liquid. Bentele said gates and other liquidity management tools are necessary when underlying assets cannot support unrestricted withdrawals. Sabatier also warned of valuation risk and leverage across the investment chain, since investors and underlying assets may themselves be leveraged.
The panel also addressed artificial intelligence. Martin said Tikehau uses AI to assemble information, analyse historical trends and review investment proposals, but that the investment team remains accountable for validating outputs. Lenders must assess whether borrowers adopting AI can keep early gains as competitors follow and customers press for lower prices. Bentele raised a longer-term concern that reduced junior workloads could weaken the training pipeline needed to develop future investment professionals, and argued that educating juniors may require more investment than before.
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