YouSaid · the spoken record

Ron Kantowitz

lines on the record: 71
first: 2025-07-17
most recent: 2025-07-17
sittings or episodes: 1
sources: podcast

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“It's continued to grow the platform. I don't know that it's a new chapter. It's just going to be a continuation of what we've been doing. To build a business from start, there's this trajectory. It takes a while to get lift. We've just gotten to a place where we've got significant lift and significant inertia. If we start to see the market rebound in terms of M&A volumes, I think for us, maybe it'll be called explosive. We're going to see some pretty explosive growth in our platform over the next five years.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's easy because it rolls off the last question you asked me. I've got two amazing daughters. They're teenagers. They're both going to be in college in the next handful of years. The next chapter in our life would probably be entitled Transition. We spent the last 17 years of our lives, my wife and I worrying about them, supporting them, doing everything we possibly can for them. I'm a little bit wary of what our lives are going to look like when they leave the nest and we're looking at each other and our dog and trying to figure out what we're going to do next.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“My mom instilled in us be kind to people. And don't be kind to people because you're looking for something back in return. Be kind to people because it's the right way to be. My wife and I have tried to instill this in our daughters and I think in the world we're living in today. It's a pretty good ethos to live by.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“I joined the Royal Bank of Scotland, there were two individuals that brought me on. Their names were Leith Robertson and Ewan Hamilton to Scotts. I was just the deal guy. I had private equity relationships. I'd done a bunch of deals. They gave me a white canvas at the fifth largest bank in the world to build a leveraged finance business in the U.S. The mentorship they provided, the guidance they provided, I will forever be grateful to them. That job changed the direction of my career. They were incredible bankers. They're still good friends today and I can't say enough things about how grateful I am to them for giving me that opportunity.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“The market has changed as so much capital has come in, deals move pretty quickly. What drives me nuts is when people try to cut corners or take things at face value. Everything in our business is sale. Selling you this is a good company. I'm selling you should provide this kind of leverage. You can't take anything at face value. You got to do your work. And it's hard because things are moving at lightning speed and it's easy to sort of, well, you know, they like it at this leverage, so it must be okay, but nothing drives me crazy more than you got to do the work.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was probably the most difficult 10 or 12 weeks of my career. I so clearly remember how stressed I was and how difficult it was. You come out the other end of it, you feel pretty good about yourself. You can pretty much take on anything. I learned a lot about myself in that process and what I was capable of.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“You join EDS, the first thing they do is they send you down to Texas for this EDS training program. It's 10 or 12 weeks of really intense training to develop your skills. But the model for that training program is to challenge you from a multitasking perspective, a resource-constrained perspective. You go down there. There were 40 of us in the training program, and you'd have eight hours of classroom training, and then you'd have the equivalent of eight hours of project work to do it. It was pretty intense. You'd come into class some mornings and a seat would be empty and the instructor would come up to the front of the room, and very matter of fact, say, you know, so-and-so has been terminated for performance reasons. Over the course of those 10 or 12 weeks, 22 made it through the program. I was reasonably convinced if any day someone's going to tap me on it, I was going to be the next one out the door. But what it taught me was we all underestimate what we're capable of doing when put in challenging environments to this day that”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“They should and they will find a way to get involved in this business, but it's hard. They're not really able to take these assets on their own balance sheet. All the issues that we all live through during the GFC, they're muted today, but they still resonate with banks. And I think they've just got to figure out how to manage those dynamics. But they'll be back. I don't doubt it for a second.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“If I were working at a bank, I would be pulling my hair out saying, why is it okay for us to leverage these lever deals, but we can't actually do these lever deals? But I think it's treated as an asset-backed risk, and it's all in the Basel III regs. I wouldn't even pretend to be able to articulate to you why they're able to do that, but not traditional stuff. Thanks for very sophisticated. I think they've been struggling over the last handful of years as this asset class has grown. And they are trying to come up with solutions. We've met with a lot of the large cap banks. They're each thinking about it slightly differently. They have significant competitive advantages in that they have tremendous corporate relationships. They have historically great private equity relationships. The challenge for banks is to figure out how to navigate within the regs. You're seeing some start to partner up with other direct lenders. You're seeing some start to raise third-party capital. I wouldn't count the banks out.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Circle back to bank involvement. Big part of this market moving in the hands of asset managers was banks. You have banks willing to buy leverage to you and also getting interested again in this business. How do you see the banks playing into the competitive landscape and the risk of banks even lending to direct lending funds going forward?”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“And many don't. I don't worry about it in the context of our portfolios because I know what's in those portfolios. I know how we're selecting those assets, but the investor drives that decision and will accommodate them either way, whether they want it or not.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Leverages a really interesting element in the direct lending space to some extent it's driven by investor risk tolerance. We have some investors that very early on said we don't want leverage on the vehicles. And part of the thinking was you're in the double digits. That's all we need. We don't want to take the incremental risk associated with adding leverage on top of these vehicles. And then we have other vehicles and other investors that have asked for leverage across all of our vehicles, even where we have leverage, we tend to skew more conservative. We will put more than a turn of leverage on a vehicle and you will see some direct lenders go as high as two turns of leverage on their vehicles. And I don't think it's a bad strategy. A turn of leverage will generally afford you somewhere in the neighborhood of 300 basis points plus of incremental yield. So it's not inconsequential. Of course, the problem with leverage is the obvious one. If things go wrong, you've leveraged the negative. We look to our investors. Some want it, and we're happy to provide it.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“To be most conservative, you got to really focus on diversification. We look at diversification on a single name basis, diversification on a sector basis, diversification on a sponsor basis. On average, our typical investments will represent somewhere in the 1% to 3% position. So across the portfolio, I'm expecting to have 40 to 50 investments. The reason for that, you think you're doing great credits more often than not, if you're going to have a problem, it may not be the credit you thought was going to give you a problem. But as long as you diversified the portfolio enough, as long as there's no single name that can actually do any damage, even if you have something that goes sideways, it's not going to impact the overall performance of the portfolio. When we think about construction, it's very much focused on making sure we build a very diversified book of business across all of our funds.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not a great environment, but it came through the other side of it perfectly. We actually just exited the business last year. It was sad to see it go, but it went to a large cap direct lending strategy without a covenant for us. That was sadly the point where we shook hands and we said goodbye. But it was a real fun opportunity.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“I did a deal a handful of years ago, it was a gym business. The sponsor was somebody I'd known for probably 10 or 15 years. We got in a van with the management team. And we literally drove for two days from site to site, and we get out and you just watch the interaction. These guys were just incredible. You get out and you'd look at, you got to clean the window there or go in. He'd hug the lead trainer. I hadn't done a Jim Dale prior to that. And they are really unique animals. The thing about gym businesses On average, you lose 40 to 50% of your clients every year. What business in the world would you lend to or invest in where half your clients quit every year? But notwithstanding that, when you look at the macro dynamics in the US, gym membership grows every year. These guys were just incredible operators. And from start to finish, I was in that business for 10 years through three financings, through multiple sponsors, and including COVID, which was for gym business.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sticking to our mandate, which is orienting around capital preservation, being great stewards of our investor capital is where we're going to focus.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we talk a lot about it. Earlier in my career with my partners, we ran mezzanine funds. We did a lot of aggressive equity co-investing. It was somewhat a function of the market. The path we've set ourselves on at Investco for now certainly is to stick at the top of the capstack. We look at our investors and we say in the context of your overall portfolio of investments, you should think about us as that very safe, secure, low double digit opportunity. You can tuck it away. You're going to get quarterly distributions from us. You're going to sleep well at night with respect to what we're doing for you. And we like doing that. Is there an opportunity down the road to play in different parts of the capstack? Maybe. I think it would really be more a function of what the market opportunity looks like for example if we went into a significant recession and you saw valuation start to plummet. Maybe there'd be a better opportunity to play at some of the junior capital and take more of the equity upside. But I think in the current environment.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you think about capital solutions for the middle market businesses on the larger end? You see all different types of financing structures in the large alternative asset managers. You're just focused on the senior secured piece. How's the team thought about, oh, there should be a different risk reward opportunity below that into the equity?”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Asset investor. We want to be investors. We like investing. We'd have to raise a whole lot of money before that will be a problem for us. We've got a long road ahead of us in terms of making hay within the middle market.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a huge challenge. Throughout my career, it's always been the dynamic. The more successful you are, the more capital you raise, the harder it is to continue within your strategy. Now that said, we have a lot of private equity investors that have been doing this for 25 years, and they have consistently said, look, we could raise more, but we like this segment. We're sticking to the middle market. This is where we've been successful, and this is where we're going to stay. We have a similar philosophy. I don't aspire to go bang heads with the entities that are deploying $5, $10 billion a quarter. It is a different market. It's not where my expertise lies. It's not where we have fun. It's not where our clients are. We're just going to be really careful and measured about the capital we raise, the capital we deploy. Maybe someday it becomes a problem. I guess it's a high class problem if it happens, but it's not something we're trying to do. One of the terms you'll often hear when you get to a certain size, you become an asset gatherer versus an asset.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's hard to see our equity markets growing 10, 15% from here in the near term, given all the volume in the markets. But if you choose to invest in this asset class and you can deploy, you're going to be sitting there generating low double-digit returns, hopefully without a whole lot of risk to the portfolio. As more capital comes in, it absolutely does create more competitive pressures. We have seen spreads come in 50, 75 basis points. But the reason you're still seeing so much capital coming into the market is on a relative basis, it's still an incredibly attractive asset class. We are consistently generating low to mid double digit returns across the cycle. That's a pretty good place to be in almost any environment.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a couple of dynamics here private equity have raised record sums of capital, and it's a challenge for them because we spent about half our time talking to investors and the other half of our time talking to our private equity clients. And thematically what we've heard from them is it's slow. They keep waiting for deal volumes to pick up. So they're sitting on cash. Problematically for them, they're not able to sell these businesses. You think about the cycle for private equity investor of raising money, investing in companies, improving those companies, exiting, distributing capital back to their investors, and doing it again to your point, there is a bit of a bottleneck there. And we hear it from investors all the time who are telling us we're just not getting distributions back at the pace we had hoped. So then you pivot to the credit side. Why is that asset class just continuing to raise more and more capital? It's a function of the fact that it's a pretty attractive asset class in the environment we're living in today. You look at these equity markets.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Feels like in the private equity market, there's a little bit of the bottleneck of capital because you haven't had liquidity. And yet on the credit side, it feels like there's almost insatiable demand. You seen as those two come together”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you start to see portfolios that were structured with all cash starting to suddenly show up with pick components, if you're restructuring your deals where you're converting some of your current cash into pick, there's only one reason you're doing it. You're doing it because the company doesn't have the free cash flow to service your loans. That's a key red flag. If I were speaking to an investor and they said, well, how do I assess this direct lender versus that direct lender or this portfolio versus that one? One of the things I would say to them is look into the portfolios. Look at what opening leverage was, look at where current leverage is today. Look at what percentage of the deals started out all cash and what percentage of the deals today have a pick component. If those things have moved in the wrong direction, those should be red flags. You better dig in a little deeper.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“The two things that most simplistically are telltale signs for are you going to get in trouble or not are leverage and covenants. If you start to see leverage creep up, you've got to start worrying. If you start to see deals coming without covenants, you should start worrying. There is another red flag in the market, and it's something you're hearing more and more about these days. And this is the advent of bringing pick into your transactions, payment in kind. Our deals are all done cash pay. That's the way you're supposed to do see your debt deals. And if you look at a portfolio, it should be all cash. There are going to be times when you structure a deal day one where for company specific reasons, maybe you're going to have a pick component. Perhaps the company's got some significant capital expenditures they need to make over the next two years. So you'll put some pick in there just to give them a little bit of additional free cash flow relief. But you're doing that knowing why you're doing it. If there's a red flag or a canary in the coal mine in the markets today,”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Find our way to the other side of this. The markets at some point will stabilize. And what's going to be really unique about this opportunity set then, because of all the uncertainty we've been living in for the last two to three years, you've got private equity investors that are really long assets, need to sell them but haven't been able to because buyers and sellers just haven't been able to acquiesce around valuation. But when we get to that point where markets start to stabilize, there's going to be a huge backlog of opportunities that are going to come to market. Today, we're being really selective. We're keeping our powder dry. We're watching. We're all over the portfolio, but we're also waiting because we do believe there's going to be a pretty significant opportunity coming down the pike.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“trying to figure out are we going into a recession are we looking at stagflation are things going to settle out what's the fed going to do you can look at all these macro dynamics in the market you can handicap them but at the end of the day in all those scenarios where do you want to be in the cap structure we want to be safe secure we want to be at the top of the capital structure we want to have lots of capital beneath us we want to have full collateral in all the assets of the businesses we lend to and we're going to be really selective about the types of businesses we lend to if we think we're going into a recession we're going to stay away from highly cyclical businesses we focus a lot on the health of the consumer we're not leaning in on discretionary consumer products these days we're thinking about all the things that could possibly go wrong we're doing our best to either mitigate those and make the investment or not make the investment I don't mean to sound draconian here because I do believe at some point we're going to”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've lived through credit cycles, market dislocations, great recession. Every time you have a credit cycle, it's different. Every time you have one, nobody predicted it or certainly nobody predicted why it happened. Today we're living in a really unique environment. We have been for the last couple of years. Since 2022, we've been living in this rising interest rate environment where we were worried about inflation. We were worried about recession. We had all these geopolitical conflicts. A lot of things to worry about. In fact, it actually has had a pretty significant impact on M&A volumes and deal flow. But we live with an eye towards the glasses half empty. I never deal. We run recession scenarios and we're very, very selective about the types of businesses that we're going to invest in. We've been living in a higher for longer interest rate environment. We're staring in the face of some type of tariffs. Nobody actually knows where we're going to end up. But ultimately, they're going to have some type of impact on the economy.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“We do a fair amount of analytics and sensitivities across our portfolios on a quarterly basis. We run all sorts of sensitivities. We look at what's going to happen if interest rates go up, what's going to happen if margins go down. We look at it on a name-by-name basis. We look at it systemically across the portfolio. We also look at all sorts of analytics. What's happening at the top line across the portfolio? What's happening at the margin side? When we sit in front of investors, everybody's got the sound bites of what's going on on the market. We can tell them what we think is happening vis- ⁇-vis our access to the middle market. In many cases, we can sort of front end what we're going to ultimately hear. If something's going to go wrong, we're going to see it earlier than perhaps we're going to see it across the broader market. The key thing for me on the portfolio management side is you just don't want to get caught by surprises. If you can get out in front of problems, if you can understand where things are going, you have a far better chance of fixing them, putting yourself in.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we should be on top of it and we should be aware of it. If something goes wrong, you need to have restructuring capability and resources, or you're going to find yourself in trouble. On my team, we have workout resources. One of my partners ran restructuring during the GFC at the bank he was working at. On any deal we do, we immediately drop him in and he becomes captain if we have a problem and accredit. But I think more important than that across our private credit platform, we have significant resources. We have a distress team that does something all day but focus on challenge credits loan to own. There's a wealth of resources at our disposal such that if we find ourselves in a situation, you want to make sure you've got proper resources available to be able to address it.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the nice things about the middle market is you get tremendous transparency in terms of performance. In almost every deal, we get monthly reporting, we get quarterly reporting, because we have covenants, we get compliance certificates, we get annual budgets, because these are small deals. We know the management team, we know the sponsor. Every month our analysts take those monthly numbers and they spread them. And if anything doesn't seem right, they'll raise it to the deal captain and we'll look at it. Usually it's nothing, but if there's something we don't understand, we'll pick up the phone, call the sponsor, call the CEO. On a quarterly basis, the whole team goes offsite for a day and we do a fulsome quarterly review of the entire portfolio and then post that we sit with investment committee and we walk them through any names that we think need to be highlighted for them. And it's a fairly extensive rating system we go through, all of which to say it is rare if ever that we're going to be caught off guard or surprised by something really bad. If something's going wrong, if there's a trend, we should see it coming real early.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Once you're in a loan of company and a sponsor, think about two different scenarios. One is everything's going fine. Maybe you have to monitor it. And the other is something's not going well. I'd love to get a better understanding of what you're doing in each of you.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Most of our competitors are our friends. You treat everybody with integrity, you be transparent with them, and over the long term, it tends to work out. If we win a lead, we'll invite a couple of lenders in and they'll reciprocate when they win a lead. You're not really incented to do silly things to win business. There are always going to be exceptions, and when we see those, we walk. We have a bit of a life too short philosophy.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“what I want to do is lead every deal I can. If you think about your private equity clients, they may have two or three direct lenders that are their core relationships. So they're going to rotate you. In Vesco, you're going to lead this deal. You're not going to lead the next deal, but we still want you in the deal. None of us are really incentives to go in there with aggressive pricing because even if you win, you lose. We're all going to be in the deal regardless. You compete on things like relationship. You compete on things like sector expertise. You compete by trying to bring them ideas, value add. But generally speaking, we're all fairly regimented when it comes to thinking about things like leverage and pricing. I find it to be much more of a collaborative market relative to the upper end of the market. I don't mean any way to disparage the upper end of the market, but it's just much more intense. You have huge players all vying for really, really significant positions, competing not only with each other, but also with banks in the middle market. It is much more collaborative.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Competition is a fact of life in our business. So much capital has come into the market. Whether you're looking at the middle market, whether you're looking at the upper end of the market, there are a lot of participants and it's competitive. I think there's a subtle difference, though, between the competitive dynamics in the middle market relative to the upper end of the market. If you look at the middle market, the word you'll often hear used is clubby, with maybe the exception of one or two. On every deal we do, we will partner up with one or two other direct lenders. I like doing that for a variety of reasons. We know most of the other middle market direct lenders because we've all been in the business so long. Many cases we worked together earlier in our careers at banks. But equally, it's never a bad thing to have more eyes looking at the same transaction and looking at it each with your own unique vantage point as a means to make sure you mitigate risk. But the point on competition is one where you're not really incented to be too aggressive where it comes to things like rates. Because at the end of the day,”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“A sponsor that you have a relationship with is doing a new deal, you have this balance of you want to be accommodative, you want to be relationship, you also want to win the deal in a competitive market. How do you navigate that?”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“What are the adjustments like? And all too often what you discover is the actually is materially less than what's being portrayed. And sometimes those adjustments are legitimate, but other times they're not. Most often, we'll look at something and optically to look great, but we start digging through the numbers and we start understanding what's happening pretty quickly. We'll back away. And I think the trick to this business, you've got to triage. You certainly can't spend time on 500 deals. You've got to be able to pretty quickly figure out which ones you're just going to let go and where you're going to spend time.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Typically, when you start a process, you'll get a sim, a document that sells you on the deal. It's written by a sell side banker. So it's generally pretty positive. You'll look at this business and you'll say, you know, revenue grew nicely and EBITDA grew nicely. And the Ask on leverage is pretty conservative. And you start out thinking this could be a really nice business. Most often where we walk away from something, there's this thing called quality of earnings, which is there are all sorts of adjustments that go into EBITDA. I'll pick the gym business as an example. If a sponsor is buying a gym, they will ask when we first break ground on a box, we spend money on it, we may want pro forma adjustments to reflect the box when it becomes mature. And we say, well, that's great, but today it's doing zero. As we go through our diligence process and we go through the quality of earnings, you start looking at all the adjustments. This is what they're telling you, EBITDA is what was EBITDA? And it's always a primary discussion for us in any of our credit meetings.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Intent is to sell the business. If you do it right, your risk off pretty quickly. We're going to be in this deal for three, four, five years. The amount of analysis and diligence we're going to do is pretty extensive, and we're going to want to drive documentation. You can find the best business in the world, but you can blow the investment on the documentation. Think about a leverage covenant. The definition of EBITDA in a credit agreement is two pages long. If you get that definition wrong, the covenant may be toothless. Everything from start to finish for us is hands-on, primary. A typical deal will take us anywhere from two to three months from start to finish to get it done.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's deep and extensive. It starts with our simple premise Relentancing your debt, you should not lose money. The way we think about it, everything we do needs to be primary diligence. If we were to get a call from another direct lender who said, hey, we've closed the deal. We're long $50 million. We'll send you our IC memo would you guys want to buy it? Not for any reason other than that's just not how we conduct business. gracefully say thanks, but no thanks. For us, everything needs to be primary. We fly down to the company. We want to look management in the eye. We're going to do our own forensic diligence around the accounting. We're going to go deep in the quality of earnings. We're going to engage our own third-party sector experts to make sure we understand all the subtleties around the business. It's a very, very extensive process. It's not dissimilar to what private equity you're doing. One of the subtle delineations between what we do in the direct lending side and what's historically done on the syndication side is if you're in the banking market and you're syndicating, you're doing your diligence, but you're”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“As long as you treat these relationships like partnerships and understand their needs and can address those, you should have an annuity of opportunities across a fairly wide base of them.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“First component is I brought with me my three senior partners that I'd worked with for the past 20 years between the four of us. We had built businesses together on banking platforms and non-banking platforms. Not only do we know how to do this, but we had a fairly broad base of core sponsors that we knew we could rely upon. This was the other attractive dynamic as relates to our coming onto the InvestCo platform across the InvestCo private credit platform, we have over $25 billion of capital invested in the portfolio companies of more than 200 private equity firms. There was already more than just name recognition, tremendous connectivity with a wide swath of private equity firms, many of whom crossed both Broadly Syndicated and what we were doing in the middle market. In many cases, the name partner at these private equity firms was an associate when we were associates 25 years ago. So there's history there.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“You mentioned that when you came here, there was within UNSCO these sector coverage with deep expertise, and you had to build out the origination. How have you built out the sourcing of these opportunities in the private markets?”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“is do two things really well. Pay your interest, amortize your debt. The thing we talk about all the time as a senior lender, the best you could ever hope for is to get your money back. You're not supposed to lose principal when you're lending senior debt. Everything about our philosophy was oriented around conservative structures. Everything had to have covenants associated with it. It wasn't an accident that that's the model we built, but it worked for us. This conservative model served us really well. We've come through this cycle much like we've done prior cycles and no style drift. This is how we've set out to build this business. This is how we've done it for the last seven years and touch with us. This is how we do it for the next seven years.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a way to mitigate risk. And then we thought about from a sector perspective, myself, my partners, we've spent our careers in the middle market. It didn't even occur to us to think about going up market. This is the market we knew. This is where we knew we could generate compelling returns. So we focused on the middle market. And then the last piece of this, it's all about asset selection. There are these two words we use over and over again to define the perfect business for us to lend to. Those two words are stable and boring. We're not equity investors. If you show me a business that's projecting 15% top line growth and 500 basis points margin improvement, I'm going to guess there's inherent risks in that that are not going to be consistent with our philosophy of sleeping at night and knowing that capital preservation is at the top of the list. We look for businesses that have long historic track records. When you think about modeling out what that business is expected to do over the next five years, there's no hockey stick projections, slow, stable businesses.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're going to pursue here in your building. So when I joined Invesco, I put a lot of thought behind this because when I joined, we were in a benign interest rate environment. Skies were blue. Nothing was going wrong. Lenders were being fairly aggressive in terms of how they were approaching opportunities. We looked at the investor base at Invesco. We looked at what Investco had done across the private credit platform. We decided out of the blocks to skew very much towards the conservative end of direct lending. It starts with structure. Everything we do is going to be senior secure. First lien, Unitrons. Second lien, we're not doing mezzanine. We're going to be top of the capstack. We're going to have our money attached to $1.1. We're going to have full collateral and all the hard assets, all the IP of the businesses we lend to. So structurally, that's how we thought about it. The second piece of it was we said everything we're going to do we're going to do with private equity. We want partners, folks we know, folks who are putting significant risk capital in these businesses in front of us.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“You bring all these forces together, you have to set out an investment strategy. Where did you come out and say, okay, this is a strategy that we're going to pursue here when you're building this platform.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“and loan loss while you might expect them to be worse they've continued to demonstrate time and time again resilience it's been a difficult market to play in mezzanine unless you're playing really at the smaller end of the market it's not as common”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's just about competitive forces by the nature of the market opportunity and really sophisticated investors of the market. We started to see that fade away. What's interesting, though, at points in time, you've seen it cycle back in different ways. You've got some banks now that will provide something called the first loss tranche within a unit tranche. It's almost reverse engineering that first lied, second lien. We still call it a uni, but there's a separate agreement where the bank will say, I'll take the first turn of leverage in return for that I will take a lower spread relative to what the borrower thinks you take the incremental, but I'm first loss on that first turn. There's lots of different ways to cut it, but I think what ultimately has driven this change, the amount of capital coming into the market and the desire for current yield. And the fact that if you look historically at the performance of this asset class across cycles, it's just been fairly compelling. And you look at default rates.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source
“Earlier in my career, it was usually the case when you structured a middle market deal that you would have this first lane tranche, you would see this mezzanine tranche, and then you'd have the equity. Markets are really efficient. So you started to see lenders come in. They say, well, you've got a senior piece. Maybe that's priced back then it was live or maybe that's priced at LIBOR 4 and you've got a mezzanine piece that's fixed at 12% and it's got a warrant or an equity kicker associated with it. I'll tell you what. I'll just blend those prices. I'll give you a one tranche, the unit tranche, and you borrower don't have to deal with in a creditor, don't have to deal with multiple parties. It's just efficiencies of the market. It started there. And if you were a mezzanine lender, it was challenge because suddenly your asset wasn't as valuable anymore because once we moved away from banks, we had the ability to sort of take leverage beyond the traditional three times leverage thresholds maybe that a bank would think about.”
2025-07-17 · Capital Allocators · Ron Kantowitz – Direct Lending's Evolution and Invesco's Edge (EP.457) · IDENTIFIED FROM THE TRANSCRIPT · source