YouSaid · the spoken record

Jonathan Lewinsohn

lines on the record: 92
first: 2026-02-02
most recent: 2026-02-02
sittings or episodes: 1
sources: podcast

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“Will it come out the other way? That's why we have a differentiated portfolio in direct lending because of that obsession with businesses.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“But if I look back at places where we've lost money and credit, do they line up in those type of situations more often than I would like? Yes. There are people who say, I only invest in great businesses. I only invest in monopoly businesses. That's not our business. We look at every new high-yield deal, every levered loan, every direct lending. But starting with first principles of what makes a good business, debating that. I ask everyone I interview, what makes a good business, why is it a good business? People struggle to talk about what it means, and we think it's, are you earning if you're like an industrial or are you earning return on capital, if you're a financial firm, are you earning a really good return on equity such that not only are your assets secure, but you could trade at a multiple of book? And in direct lending where you can't trade, where you can't get out of it, we spend a lot of time saying, hey, do we think it's a good business? Do we think it has the right to earn a high return on capital such that it could handle all this leverage? If it goes through a recession or there's technological change,”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's many ways to skin the cat. There are plenty of people who are more successful than we are who look at credit as a credit and say, I'm at the top of the capital structure, I'll be fine. Scott and I and the team think of ourselves as investors. There's something generational here. Distress at investing was such a frontier, say at least 25 years ago, even before the financial crisis, you didn't need to really care if it was a stock company or a steel company. You knew bankruptcy. The other guys didn't. That has been competed away and has competed away more every day. Technology helps level the playing field in terms of just going through docks and understanding process. The more deals we have, the more like knowledge we have about what could happen and how we could get screwed. We start as investors. We start with is it a good business? Will we invest in a business that we don't think is amazing because we think it's good enough where we are in the capital structure? Certainly.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“And where the debt is trading at a discount because it's over levered. That's really the sweet spot. Frankly, we don't want restructurings. Restructurings are painful. I've got to put faith in one judge to see the world in a way that we see the world. We'd much rather find businesses that might be overlevered today, but have excellent manager teams, excellent sponsors that we can work through on the other side. Maybe they need a little more capital. Maybe they need a little relief, can get an earnings bonanza from the microcycle ending. We've seen that telecom has been the microcycle that we've prosecuted the most since COVID that's been incredibly profitable and with limited bankruptcies. It's been about finding companies at an inflection that are about to benefit from AI or are spending a lot of money laying fiber, but that will yield to higher penetration and market share over time, investing in those and then riding it out.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Everyone's business is different. There are many people who do equities, and so they have a broader universe. We are blessed to be credit guys. We get to be a little slower. We look at capital structures that are overlevered in businesses that can make a good return on capital. One thing that we emphasize at diameter is what is a good business. Some people talk about management, some people talk about margins. For us, we say, let's go back to first principles. What is the return on invested capital for the business? Simply take tax-affected EBIT and look at whether it's PPE makes sense or the last five years of CapEx. Does the business earn a good return? If it does seem to earn a good return, why? Oh, there's only two guys who do this. They distribute to Home Depot and Lowe's, and then through building products distributors. That's a pretty interesting business. So we're trying to find good businesses from a return on capital perspective that can get price when things come back.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“to realtors to the place we've been most interested which is building products which work for renovations you've got lots of lbos in the space an enormous amount of debt good companies every micro market is different some have two or three suppliers some have four or five understanding the distribution trains understanding the liabilities we see it as a cyclical microcycle then I don't know when rates are going to come down everyone has been wrong calling rates coming down for most of the last three years but when they do you have a very interesting microcycle on the upside and you've seen building products in particular earnings expectations have really capitulated in 26 which could create an interesting environment for outperformance”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“And divorce is theoretically you could live with your ex-spouse, but you might rather be dead. We think that the non-discretionary moves are about 3 million of the 4 million. Which means we only have a million homes per year where people are saying, hey, I got a better job in Cincinnati. I'm taking it. Or, hey, things are going well. Let's get a better house or things aren't going well or the kids are gone. Let's downsize. That is not a sustainable thing. At the moment, population growth is low, so that helps. We also had a boom for a while in housing starts in places that were warm and may have lower taxes, but that is petering out as well. We see housing as this coiled spring. It has to come back. There has to be more dynamic movement in the housing market. You have vacancy rates that are historically at levels that you don't see for these periods of time. You see when rates have dipped for a little bit of time, you get extra activity right away. We think the housing market, which is everything from builders,”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not moving from Stuttgart to Lisbon, it's culturally a totally different place to live, Portugal and Germany, even if it's part of a monetary union. In the US, part of what made us so dynamic is if you live in Columbus, Ohio and get an offer in Cincinnati, that's better you go. If you live in Las Vegas, you move to Orlando and America has been culturally homogenous enough to make it feel like I still live in America, make new friends, join a church or a country club and the public school and just roll. We've been frozen. We can't do it because you can't trade a 3% mortgage for a 7% mortgage. So what's happened? Existing home sales go to 4 million from an average of between 5 and 5 and a half. We've dug into it and it turns out that we think about half of those come from deaths, divorces, and homes that don't have mortgages. So we call those the deaths and divorces. We call them non-discretionary moves. Death is self-evident.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bought a house, moved, or refinanced. So you have an environment where a very high percentage of mortgages were at historically low rates. You then have the inflation event and rates go up very quickly as people realize that transitory was a four-letter word. You move from a period of historically low rates to a period of historically high rates just after you had historically high activity in the mortgage market. And that means you're frozen. We go from 5 to 5.5 million of existing home sales down to four, where we were, by the way, in the financial crisis, which was a housing and solvency crisis. This freezing is a real impact on the dynamism of the country. One problem that Europe has as a monetary union compared to us is that if you are from Lisbon and get a great job in Stuttgart, you're not taking it. It's probably too the other way around.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Housing is a fun one because the US has a large housing market, about $150 million for a big country. And we've been frozen. We've been frozen in terms of transactions since interest rates started to go up. You might ask why the modern housing market is many ways 75 years old. We've been through ups and downs with interest rates before. Why did this interest rate move, which by the way, even though we've all been moaning about interest rates for a while from realtors all the way to 1600 Pennsylvania Avenue, this isn't a historically high interest rate environment relative to other things. What you did have that was different this time, which is that in 2021 and 22, Americans were number one obscenely rich. We became the greatest welfare state in the world pretty quickly, and the stock market did pretty well. And interest rates were essentially zero. Everyone in the country”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Something that has to be worked through, and might you get an opportunity to buy things with a higher margin of safety than you usually do because the market as a whole is saying we're not sure how this is going to see through, people who can think about the asset side and the liability side, restructuring and what companies are worth together get a chance to kick it through that microcycle. We think it's the most important thing to do.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Corporate have been historically underlevered. Debt acts as a boot on your neck. You cannot innovate. You can't spend. You can't do things if you have debt. Imagine you take out a mortgage you can't afford, then you lose your job. You're going to stop spending immediately because debt operates that way. Microcycles are caused because industries have too much debt to pivot and do the innovative things they need to do because of change. Creates enormous opportunities because I don't want to buy a distress company because it's disappearing. I don't want to buy a Yellow Pages business that is being eaten by an online business. We don't want to buy a mall-based retail business that doesn't have a great reason to exist. You want to buy something that's in a cycle that's going through something. What a microcycle means is the industry is going to come out of this. We are going to have telecom. We are going to have healthcare services. We are going to have housing. But there's”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Career in Scott's career when the muni market got blown up because of some choice words said by a famous analyst after the financial crisis, even the European kind of double dip recession in the peripheral countries, then the energy microcycle in 2015-16, the California power microcycle, which most of California was impacted by and many counterparties, when Amazon and online retail upended mall-based retail and mall-based real estate, then after COVID, what we've seen in telecom, we're seeing now in housing, we could see in software, it means when a whole industry that has a lot of debt is impacted by either technological transformation or policy volatility or both. And handling things when you have a lot of debt is the problem. Part of the reason we've been more bullish on the economy than some others over the last few years is the US consumer and the”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“human beings as citizens we don't want environments of upheaval they're terrible for humanity as investors particularly investors who have an aspect of our business we were interested in stress and distressed debt investing in recessions or credit cycles gives you the type of margin for safety that you crave because you're buying top of the capital structure things at a discount For a variety of reasons, we don't have those type of cycles as frequently as we used to have. We haven't had a true recession that is coming from outside an exogenous force didn't impact it like COVID in a while 0809. You had the endogenous buildup of the housing cycle. That was a big investment opportunity. And then you have the 2000 recession, but of course 9-11 played a role in that. What it means is the best opportunity for distress has been microcycles. Go back during just micro.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“H100 is going to be worth in three years. If we don't have a clue, how do we lend against it without amortization or a guarantee? That's the area that we're least comfortable, but we want to be a place that is a capital solutions provider that we can price risk. And we're seeing all sorts of different risk that is exciting to price.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Day later, and then I worry there's no such thing as bad bonds, there's bad prices. There's very few things that we won't try to price. We have struggled to price chip residual risk. You're a creature of who you are when we were very involved in hertz both before COVID and then in its restructuring and its emergence. It was a successful distress debt investment. Kenret Hertz had a problem coming out of their restructuring that they had too many Teslas. It wasn't only that people didn't want to rent Teslas. I think people found Teslas interesting to rent their great cars. The problem was the residual value was much worse than was modeled. Didn't have the history that you have with a internal combustion car of what is a Chevy Malibu going to be worth 18 months later after it's gone from MCO to Disney World a thousand times. What I worry about is do we have any clue what”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Story as the funding numbers go up and up and as the IG market becomes more saturated in the amount of debt that it can take from this asset class. The devil's in the details as they say.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“The metas, the Amazons, the Microsoft, the Googles of the world, but you're also getting your money back in an amortizing way. That's the gold standard. There are then deviations from that. Is it just chip finance? Are you financing residuals? We've not financed long-term residual risk. We think it's been too hard for us, but this is America. Everything could be trunched. We've invested at the top of the capital structure in an amortizing way. There are construction loans that do get done at S plus 225 that are just construction. There are guys building things that have never built anything before, and the hyperscaler will come on board once it's built. You get paid a little more to do that. Or you can go and build with someone who has built one thing is building a bigger thing, has maybe a NeoCloud customer. The flavors have metastasized and you've got to be detail-oriented in the nitty gritty of the deals. What type of risk are you taking? That's going to be a real.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've been referring to AI as the super duper microcycle. We believe it's been the place to invest in stress and distress, thinking about industries that are going through major change. Part of that super duper microcycle has not only been creating a fun little toy on cloud code or the LLMs or investing in venture names, but has also been financing power and data centers and other parts of it. We've been at the forefront doing that now for a number of years. Our approach has been a humble one given the technological transformation that we see. We're not pushing ourselves out on the frontier of what you can finance, but it's a really interesting experiment in capitalism meeting technology. The gold standard is financing a box, a data center that is being used by a hyperscaler, being guaranteed by a hyperscaler that amortizes, then you can feel comfortable that not only you have a really important company of consequences.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look back to when yellow pages were having trouble because online ads were coming, directories yellow pages before and then right after the financial crisis. I remember meeting with Yellow Pages companies and they said, okay, we get this internet thing. I think they used air quotes. But we have sales teams. We have advertising teams. We're the ones who can go around sell ads if we're not going to sell ads in the directories. We'll sell ads online. We'll sell ads on the Google. And we know that didn't happen. So why didn't that happen? Because internet native ad companies rose up to do a much better job of selling ads. You're going to see that across the AI universe that AI native companies might deliver solutions that legacy software doesn't do or doesn't do easily. That's what we're trying to figure out.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Things that you can do and look at. For example, if there's currently AI solutions to the problem that their software solves, that's an issue. If there are easy AI solutions, I would say things around data standardization, comparing pieces of data, it's important to consider the AI impact. Bringing in an AI solution would dramatically simplify tech stacks right away. you have to be worried at the moment. It's a thing we're studying most. When we go through any direct lending name or any BSL name, we sit and say, okay, how will AI impact this in the near term and in an AGI? And will it actually be able to participate in it or is it going to be impacted by a native, a new AI software?”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Go back 10 years ago, we were told they're coming any minute. Took a long time. The reason was it was close. It was 98%, 99%. But if you're sending cars out to streets, it's got to be 100%. It has to be able to deal with deviations that aren't in the model and not kill people while it does it. AI, which works splendidly until there's a deviation. Agents are working well doing a lot of things, but they're 98%. They make mistakes. AI is not there yet for prime time. So we can't predict where it's going to go. The same thing with the shale revolution. We all know that the US is a major producer of hydrocarbons. Shale worked, talked to everyone on Wall Street who got wiped out in 15 and 16 because it wasn't linear. To answer the question of which software companies are going to have real problems and which are not, I need more of a crystal ball than I have at the moment. But there are”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“The hard part to that question is you have to answer the AI question, which is one of the biggest questions in our economy to answer. Waiting for Godot, the Samuel Beckett play, is all about what is the nobility of waiting? When you're waiting, what are you accomplishing? What's been interesting about the purgatory of the current situation is no one is happy with AI. Everyone wants AGI, despite the fact that our lives are transformed by AI already. We are not comfortable with AI. We want it to be AGI right away. The reason is we're spending so much money. It has to be much better. When you think about what the future is, we like to look back to two analogs. Analog one is the self-driving cars. If you spend any time in places like Los Angeles, you now see the Waymos everywhere. They work. There's a debate about just where they will be, how fast they will go, but they work.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“What creates a microcycle in an industry? A lot of debt, meeting technological change or policy volatility. There's a lot of debt in software. Boy, oh boy, is there a lot of technological change? What we'll see in direct lending is a recession could challenge it. Direct lending would do quite well in recessions because of the asset liability mismatch is gone, because you're working closely with sponsors. It would do quite well on a relative basis. You want to own nothing in a recession. But the biggest threat is industry concentration and software going to impact portfolios in a way that wasn't expected when they were underwritten.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“But someone comes along with an AI solution and says, don't unplug, put me in in a new pipe. All of a sudden you're in the same position that legacy on-prem software in defensive industries was. Now that I've been spending time on cloud code since my Twitter feed in early December said that if I didn't, I'd be out in the cold, I've been building things and I don't have a coding background. Once you go from buy is much easier than build to, hey, build is something that all organizations can do what does that mean for a software ecosystem that has sold itself? So that's a long-winded way of saying there are many amazing software companies to say that all of them are going to collapse is ridiculous. Many of the sponsors who do it are the smartest people around, but you do have 30% of direct lending in the software space. We've spent a lot of time making sure that we have sub 10% of our direct lending business in that space because”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have to create a cloud solution early. Because who's going to take the risk to unplug them even for a second? What happened is native cloud companies came in. They offered a solution, said, don't unplug your existing. Plug us in on a new pipe. See if we worked and then unplug. We have now a decline in some of the legacy software providers. It's not only in security. It's everything from software to run college courses to software for auto dealers. Now let's think about AI, which it's amazing. What does AI do very well? AI standardizes non-standard data sets. It can look across things. And what almost every SaaS software loan that's in the direct lending portfolios do? It either standardizes data, standardizes workflow, enhances workflow, data visualization, workflow standardization, visualization. AI is great for that. These are mission-critical software products. They're not just going to be unplugged over.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Middle of a night, three years ago, and shaken you from a slumber. And said, Ted, there's a recession coming in the US, but you must own something in corporate credit. What do you want to own? Before calling the police, you would have said, that's obvious. I want to own something in SaaS software related to cybersecurity. Because no matter what happens, no matter what recession we have, JP Morgan, Coca-Cola, Goldman Sachs, they're not unplugging their cybersecurity. Now fast forward to last year. and look at the syndicated loan market amongst the worst performing SAS software loans, security names, RSA, Avanti, McCaffey, Barracuda, they'll have their own issues going through LME. How is that possible? How is the most successful place in the market to hide from cyclicality the worst performing? The reason is that many of these cybersecurity type of businesses didn't have to innovate.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Course, we should all appreciate that the risks that hit are usually not the ones that we're worried about. Those of us who live through the pandemic, of course, appreciate that better than other generations of investors. The irony is that people have been worried about private credit for a while because it's a fast-growing asset class. The worry was cyclicality. Oh, and you get a recession, this hasn't been tested, right? Everyone's always terrified of recessions everywhere, particularly indirect lending. So what did the people who were running direct lending business do? They prioritize non-cyclicals. There was a period of time where there were a lot of energy loans in direct lending products that didn't work in 1516. And so the portfolios morphed towards safer things, business services, healthcare, and then the elephant in the room, software. Software was amazing because non-cyclical mission critical, if I had barged into your home in the”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“And what was the debt service coverage ratio? Then let's plot it out on a graph and see what were leverage of those deals with a higher or lower than current deals and what was debt service. What we saw amazed me, sure enough, those 21-22 deals had a lot of leverage and interest rates were really low. The future deals that came afterwards had less leverage, have worse debt service coverage. If people are sick of hearing about direct lending, argument is you shouldn't be. It's a great asset class. But this capital solutions secular trend is coming down the pike where people can offer actual capital solutions to LPs. For us, it mostly has meant direct lending. We've been doing it for almost three years. We've done over 70 deals. As I like to say, no defaults, which of course we don't have enough track record for, we're proud of the team and the record. The key is, do you do risk management? Where there might be problems in private credit, what we're most proud of at diameter is we risk manage everything.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“you can't pay 11 you need a capital solution which might be junior capital to help you bridge the gap to pay down debt i was with a large lp overseas recently was talking about this secular change that sponsors need help dealing with 2021 2022 vintage deals she said oh come on this is the latest thing from managers you can't raise any more in direct lending so now you're raising capital solutions She said, I apologize for being cynical, but I'm cynical. I'm never one to push down cynicism. I've made should look at my Instagram feed is just memes of comedians being cynical, not to mention my personal humor, but I said, how can we quantitatively demonstrate what we're seeing, which is a flood of these opportunities. So we went back and looked at the syndicated loan market and said, let's actually look at deals by day, every day that we have a deck going back to 2021, how much leverage”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have invested in it, and it's Wall Street, and so they know whenever there's a fad that grows up, it eventually implodes terribly. They're trying to say, oh, is that going to happen to private credit? The good news is private credit is not a fad. It's been around for a while. It's still a relatively small part of the levered finance market. It's now hit underrated. To answer your question, the best way for people to divide private credit, which can mean so many things, is direct lending is top of the capital structure often to sponsors, more and more to non-sponsors as well, usually for M&A or event transaction. Private credit overall includes more things. It includes direct lending, but also capital solutions. Imagine that you're a private equity sponsor that has a business that was bought in 2021. It has a lot of debt and didn't fully grow into its capital structure. This is a big secular trend. It has coupons that look like they're from a bygone era. All of a sudden, you wake up in 2026, you can't refinance.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's crazy, but it was actually, to go back to the overrated, underrated, really important evolution in finance to be able to step in for middle market companies, whether sponsored or non-sponsored, particularly in less cyclical parts of the economy, and add more leverage in a period of time where banks were limited in how much leverage they could do, and work with the borrower in a long-term relationship, not just, hey, we're doing the deal, we'll syndicate it, let's move to the next, work with the borrower when there are problems, when they need more debt, when they want to do important M&A, it became an asset class that worked for borrowers, worked for lenders, because you got a little more spread because of the illiquidity and because of the more leverage and created a new asset class for allocators to not only diversify their portfolio, but reach the type of companies they couldn't reach before. Direct lending has now reached the point because of a few, I think the term de jour is cockroaches.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“It got almost too breathless when we were going into the industry. I was reading everything I could on it. And I came across a paper from a competitor that said 2010 was a very important year. Steve Jobs announced the introduction of the iPad, which transformed work. And the first Unitranch transaction.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“step back and think a little bit about history. If you come out even before the financial crisis, you have people making private direct loans. You have people, particularly in middle market parts of the world that weren't being properly paid attention to by the large banks, where my history and Scott's history with it really coming through the financial crisis, you had a problem where you had too many funds who had been making direct loans all across whether they were good loans or harier loans. Everything got in trouble during the financial crisis. And they were doing it with liability structures that didn't match. All of a sudden, if you were lending out of a hedge fund and you had to mark things down and you were getting outflows, it was a terrible situation because you had to sell good things at a significant discount. What came from those ashes was an industry that matched assets liability duration. You have funds that grew up post-financial crisis really doing middle market lending. It was needed in a place of the market that couldn't necessarily get the attention for levered loans or for high yield.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd love to double click on private credit has come to be this very broad encompassing category can mean a lot of different things and a lot of different assets. I'd love to get your perspective on direct lending, capital solutions, and other areas that you've chosen not to participate in under this broad umbrella of private credit.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“From being perhaps overrated and too overhyped. Today, diameter is a hedge fund, a dislocation fund, a direct lending business, a capital solutions business, which we think of direct lending, top of the capital structure, pristine situations, capital solutions is when there's a problem that needs capital. It's one of the rare things on Wall Street that the words actually mean what they mean in real life. That's a big secular trend because there's a real need for that. We also have a few other things, but the key is Does it complement? Does it not cannibalize and will it not distract? If you see us running a Chinese equities business one day, you should give me a call and say, how does that fit in? I can't imagine we'd be very good at it either. It's a bigger firm. I'm happy to say that Scott and I spend our day much the way we did before we had these other products, and we're better because the other products.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's CLO we knew we would do from day one. Direct lending, the business evolved, what was once a niche part of markets, doing healthcare, software, business services, is now a key part of what we call levered finance. And deals go back and forth. We've built great direct lending business. Scott and I don't run that day to day. Same thing with the CLO. We have other people running it minute to minute. We sit on the investment committees for it. And we've built that direct lending business into something special. Direct lending is one of these things Bill Simmons, the pod father. He's a sports podcast that I like to listen to. He has this thing where he says overrated, underrated, or properly rated. Direct lending, which is a big part of what we do now, got very hyped up. Everyone's saying, oh, you have to do it, whether it's allocators, investors, GPs. And now it's gone all the way to the point that people are so afraid of it. They miss what's great about the business and what it does for everyone involved. But it's now underrated.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“CLO business has not only produced excellent returns with a market level of risk, but I don't see how we could run the hedge fund and the dislocation fund without seeing the loans first, without seeing all these loans that come through the CLO. It's a seamless complementary part of what we do and really helps everything in our business, not only be relevant as a capital solutions provider, but learn all the names that are going into the lever loan market. And the lever loan market has changed as high yield has become higher quality. Lever loan market is often lower quality. That's been a big part of what we've done. You may not be aware you are constitutionally required to have a private credit business if you were on credit. It's required. The Supreme Court has said it. We have a direct lending business.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“We try to do is say, how can we do things in corporate credit that will complement the hedge fund and the dislocation fund, will not cannibalize it, and will not distract us? What we've done most since 2021 is we've built a CLO business. Our CLO business today is, I think, on deal 16. We have four deals in Europe and a warehouse. For those who don't know, a CLO is a collateralized loan obligation, which is a levered entity.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“To remember exactly in time, it's like with your children, what were they like when they were seven? When you start a business and build a business like I have with my partner Scott Goodwin, the comparison to children is unfortunately apt in many ways. Good thing is Scott and I continue to do what we've done almost every day since 2017, which is manage our hedge fund and our dislocation fund, what we call the sun of our ecosystem. I spend most of my day going through credits. I would say 80% of my time is going through investments that we're considering, going through investments that we have. The remaining 20% is talking to our investors and dealing with running the business. I could probably do a better job running the business. The two of us do our best at it, but it's not necessarily our highest and best use. I had an old boss who used to call investment firms popcorn stands from a running the business perspective. Sadly, I've learned that he was more right than I appreciated. As a firm, we've grown.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“Good to see you too, although people will only be able to hear us, which I guess is lucky Face for Radio works in this medium. Thanks for having me back.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source
“What it means is the best opportunity for distressed has been microcycles. Go back during just my career in Scott's career, when the muni market got blown up because of some choice words said by a famous analyst after the financial crisis. Even the European kind of double dip recession in the peripheral countries, then the energy microcycle in 2015-16, the California power microcycle, which most of California was impacted by and many counterparties. When Amazon and online retail upended mall-based retail and mall-based real estate, then after COVID, what we've seen in telecom, we're seeing now in housing, we could see in software. It means when a whole industry that has a lot of debt is impacted by either technological transformation or policy volatility or both. And handling things when you have a lot of debt is the problem.”
2026-02-02 · Capital Allocators · Jonathan Lewinsohn – Credit Microcycles at Diameter (EP.484) · IDENTIFIED FROM THE TRANSCRIPT · source