00:00In just about 20 years, Churchill Asset Management has grown from nothing to, well, everything.
00:04Just today, it announced its largest fundraise in its history, raising more than $16 billion in commitments for one of its newer senior lending programs.
00:12Joining us right now is Ken Kinsella. He's the CEO and president of Churchill Asset Management.
00:17Ken, great to have you here.
00:18Great to be here.
00:19Yeah, I always like to talk about your origin story because I'm always so fascinated.
00:22But let's talk about the here and now.
00:24You've got $16 billion in your pocket, more or less.
00:26Yes.
00:27It's not just the fact that you raised that amount of money, but put it in context relative to the previous vintage.
00:33Sure.
00:34And the idea of what's actually transpired over these last three or four years with regards to the direct lending space.
00:39Yeah.
00:39Well, look, I think it's interesting.
00:41I mean, if you look at the evolution of direct lending and private credit and senior lending that we do, I think you've seen a tremendous growth in institutional interest.
00:51We're up about 35 percent from our prior fund.
00:53And despite all the noise and some of the headlines you've seen in the fourth quarter, the reality is institutions are continuing to increase their commitments to private credit.
01:03If you look year over year, another year of increased commitments to private credit.
01:08And I think it's a recognition that the value proposition is quite attractive today.
01:12So what was all the grumbling about over the last year or so?
01:15Well, the grumbling in the fourth quarter, as you and I know, we talked about this in a prior discussion, was really in and around those deals that had problems.
01:24So there was Tricolor and First Brands and some of those other deals that ran into issues, but they really weren't private credit deals at the end of the day.
01:31They were really more broadly syndicated deals.
01:33So as institutions and investors got closer to understanding what was really going on in those transactions in one or two cases, it was fraud.
01:41I think there was a recognition that actually the overall credit quality in portfolios is very good.
01:46And deal activity continues to be very active.
01:49We were up, you know, 80 percent in the fourth quarter year over year in terms of deal activity.
01:54So M&A is picking up.
01:56You know, I heard, you know, Ted Peck's comments earlier.
01:59I very much agree with him.
02:00I think 2026 is going to be a very, very active year.
02:03Well, given that it seems like activity is increasing across the board, let's talk a little bit about competition here.
02:09Sure.
02:09Because you closed out this fundraise.
02:11I know that this is something that you started at the end of 2022.
02:13What does the competition look like when it comes to deployment opportunities?
02:18Where are you finding those?
02:20Sure.
02:20I would say that, you know, we focus only on private equity owned companies, right?
02:26So our world is sponsor backed M&A and buyouts in the core middle market.
02:30But, you know, I think that what has happened from a fundraising perspective is the larger players are raising more and more capital.
02:37They're institutionally validated.
02:39The brands are raising more capital from a retail perspective with individual investors.
02:43And I think it's a bit of a characterization.
02:45It is a bit of a dynamic where the rich get richer, right?
02:47The larger platforms are raising more capital.
02:50They're able to commit more in transactions.
02:52And so I think the competitive dynamics favor large scale platforms that have institutional relationships.
02:58So it's certainly competitive in terms of putting capital out there.
03:01But I think the firms that have differentiated sourcing and relationships are really leading the way.
03:06And deal flow, you can see.
03:07I mean, as I said, we were up 80 percent year over year in terms of deal activity in the fourth quarter.
03:11Well, let's talk a little bit about, you know, where you specialize.
03:15And that is those middle market companies.
03:18What is a middle market company in this day and age?
03:21And what sectors do you particularly like?
03:24So, first of all, as we define it, middle market would be companies with 10 to 100 million in EBITDA.
03:30So these are companies that are larger than the kind of local regional businesses or small cap businesses, but not so large as to have graduated into the syndicated loan market.
03:40Where do we see opportunity?
03:41I think the reindustrialization, you know, anything in and around financing businesses that are really playing into the technological revolution that we're seeing.
03:51You know, we don't finance data centers directly, but we've got six and a half billion dollars invested in companies that's middle market companies that support data centers and invest in those health care, business services, software, all very attractive areas for investment.
04:08And we're seeing a lot of that in increased eminent activity to support that.
04:12You started off this talking about kind of the commitment by institutional investors to staying invested in these types of assets.
04:19I am curious about individual investors and the wealth channel and the potential growth that everyone seems to be talking about these days.
04:25Is that something that Churchill is leaning into?
04:27Absolutely. So if you look at the wealth market today, it's about a 70 trillion dollar market.
04:33You think about that's that's only the individual wealth market, not even counting, you know, retirement and the potential move into 401ks and 403b.
04:40So that's that's a whole nother move that I think we'll, you know, we'll be seeing.
04:44But if you look at the overall wealth market, it's about 50 percent of the investable capital overall, but less than 20 percent of the underlying allocation to wealth.
04:53So to alternatives. So I think there is a huge opportunity in wealth.
04:58Obviously, all the larger players continue to lean into that space.
05:01And I think it's going to continue to be a driver, along with insurance in growth and private credit.
05:06All right, Ken, great to get some time with you, especially on today, which I know is a busy day for you.
05:11That is Ken Kensell. He is CEO and president of Churchill Asset Management.
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