Episode 188: Leading indicators: The next five years in direct lending

In this episode of the InsuranceAUM.com Podcast, host Stewart Foley welcomes back Kevin Marchetti of Man Varagon for a deep dive into the evolving landscape of direct lending. With rising interest rates and an uncertain economic environment, Kevin provides valuable insights on how the next five years in direct lending are poised to differ significantly from the past decade. He discusses the critical importance of stress testing portfolios, especially in the context of increased borrowing costs for middle market companies. Kevin also highlights the need for insurance investors to focus on key performance indicators, such as interest coverage ratios and the presence of PIK (Payment-in-Kind) interest, to identify early signs of financial stress within portfolios. These indicators, Kevin argues, are essential in navigating the current market dynamics and ensuring robust credit selection.

Additionally, Kevin updates listeners on the recent acquisition of Varagon by Man Group and the strategic benefits this partnership brings. He explains how this merger enhances their origination capabilities and strengthens their ability to deliver flexible financing solutions, all while maintaining a disciplined credit selection process. With a focus on investing in recession-resilient sectors and maintaining strong relationships with private equity sponsors, Kevin outlines why Man Varagon is well-positioned to continue delivering consistent returns despite market challenges. This episode is a must-listen for insurance investors seeking to understand the intricacies of direct lending and how to effectively manage risk in a rapidly changing economic landscape.