E139: How HIG Went from $75 Million to $67 Billion AUM

In this episode of How I Invest, I engage with Jackson Craig, Managing Director and Co-Head of H.I.G. Bayside's U.S. Special Situations and Distressed Debt Strategy. With over 20 years of experience in private equity investing, Jackson shares his expertise on navigating distressed debt markets, building resilient portfolios, and uncovering hidden opportunities in complex financial situations. From sourcing distressed assets to managing risk, Jackson offers a masterclass on investing in challenging environments.

Highlights: H.I.G. Capital’s Growth: How the firm expanded from a $75 million fund in 1993 to managing over $67 billion across multiple asset classes, including private equity, real estate, infrastructure, and credit.

Understanding Distressed Debt: The mechanics of distressed debt investing, including yield benchmarks and risk perceptions in distressed securities.

Risk Management in Distressed Investing: How H.I.G. constructs portfolios with a high hit rate and limited downside by focusing on first-lien debt.

Sourcing Distressed Opportunities: The unique ways distressed debt investors find deals—often without companies even being aware of the transactions.

Building Strategic Relationships: Why success in distressed debt relies on long-term relationships with restructuring attorneys, turnaround consultants, and industry insiders.

Portfolio Diversification Beyond Industries: The importance of avoiding over concentration in single risk factors, such as interest rates or energy prices, rather than just industry or geography.

The Role of Optimism in Distressed Investing: Why successful investors need to see beyond the immediate problems to uncover long-term value.

Lessons from 16 Years at H.I.G.: Jackson’s biggest takeaways, including why leadership stability is often a key indicator of a company’s strength.

H.I.G.'s Investment Philosophy: A deep dive into the firm’s focus on small and mid-cap, value-oriented, cash flow-centric investments and its commitment to seeking out complexity.

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Guest Bio: Jackson Craig is the Managing Director and Co-Head of H.I.G. Bayside's U.S. Special Situations and Distressed Debt Strategy, overseeing investments in special situations, restructuring, and turnaround opportunities. With over 20 years of experience in private equity investing, Jackson has been instrumental in the firm’s growth and success in alternative investments. His expertise spans private equity, credit markets, and distressed investing, making him a leading voice in the industry.

Our Podcast now receives more than 300,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at dweisburd@gmail.com.

We’d like to thank @JuniperSquare and @ReedSmith for sponsoring this episode!

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Sponsor: Juniper Square is dedicated to transforming the private markets investing experience. The company provides a full range of modern, connected fund technologies and services for over 2,100 private markets GPs across fundraising, reporting, fund administration, treasury, compliance, and business intelligence. Today, over $1 trillion of assets and 600,000+ LP accounts are managed through Juniper Square software and fund administration services. Learn more at www.junipersquare.com.

Sponsor: Reed Smith is a dynamic international law firm dedicated to helping clients move their businesses forward. With an inclusive culture and innovative mindset, Reed Smith delivers smarter, more creative legal services that drive better outcomes for their clients. Their deep industry knowledge, long-standing relationships and collaborative structure make them the go-to partner for complex disputes, transactions, and regulatory matters. Learn more at www.reedsmith.com.

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Stay Connected: Twitter: David Weisburd: @dweisburd

LinkedIn: David Weisburd: https://www.linkedin.com/in/dweisburd/ Jackson Craig: https://www.linkedin.com/in/jackson-craig-458b645b/

Links H.I.G. Capital: www.higcapital.com

Questions or topics you want us to discuss on How I Invest? Email us at dweisburd@gmail.com.

(0:00) Episode preview (1:25) Understanding distressed debt investment (4:53) Identifying and assessing distressed debt opportunities (7:24) Investment process and due diligence (9:02) Sponsor: Juniper Square (9:36) Relationship management and distressed sales (10:39) Tax considerations and investor base (11:33) Investment discipline in distressed debt (12:36) Success factors in distressed debt investing (14:43) Portfolio diversification and risk management (19:03) Sponsor: Reed Smith (19:38) Evaluating business quality and management in distress (21:02) Navigating the bankruptcy process (22:02) Long-term strategy in distressed investing (23:19) Overcoming sourcing challenges (23:48) HIG's distinct investment approach and LP feedback (25:21) Competitive advantage in distressed markets (25:45) Closing remarks