Värde Partners Co-CEO and CIO, Ilfryn Carstairs, Speaks at Milken Asia SummitDecember 14, 2020
SINGAPORE – Värde Partners, a leading global alternative investment firm, today shares commentary by Co-CEO and CIO Ilfryn Carstairs from the recent Milken Institute Asia Summit. Joining the Summit in person from Singapore, Ilfryn discussed the state of Global Capital Markets, with other panelists appearing via video conference and even hologram.
Reflecting on the profound changes in 2020, including the combination of even lower interest rates with an over-reliance on central bank intervention, calling into question whether this confluence of events has put the last nail in the coffin of investors’ worry about risk, Ilfryn said:
“There is a massive cost-to-income problem in markets where risk premiums have come down. There is this almost undying view that central banks and governments will bail you out if risk starts to occur. Yields are very low so there is no fixed income cornerstone for portfolios. It’s a subtle, but profound, change and we’re going to see the effects of that very significantly next year. It almost leads to an asset shortage, because everybody needs assets to generate income, yield and return, but there’s not a lot of it out there. As investors we need to think about how to generate that return, in scale, for our LPs.”
Expanding on central bank policy and the potential impact of inflation, Ilfryn went on to state:
“One shouldn’t expect central banks to pull back from low interest rates quickly. It is a fundamental premise of the market that central bank support will be there and that rates, therefore, will stay low. The missing link will be inflation, and inflation will ultimately be the thing, when it comes along, that forces central banks’ hands. The more important question is then what do investors do about it? And we’re not interested in where average markets are; we remain focused on trying to find places where those top line averages deceive.”
Ilfryn reflected on the heavy reliance of some markets on the banking system, and how traditional lenders typically pull back in response to a crisis as a driver of investment opportunity:
“You don’t have to go to difficult places to find attractive opportunities. A big feature of many markets is how they’re still very bank dependent, and where the demand for credit outweighs the supply. One of the areas on which we’re very focused is originating credit, and getting credit to those places where it’s not flowing freely.” He continued: “It’s a win-win of providing capital into places that are really looking for it, against high quality projects and companies, in order to finance growth.”
This is particularly acute in Asia where Värde has been on the ground for 12 years. Ilfryn noted his view that credit and banking markets are not providing capital efficiently in the region, and the shadow banking market has struggled:
“If I look at what’s happening in India at the moment, on one side of it the credit markets there have been hit very hard – you had a very significant NPL problem in the state banking system, you had some large issues in the in-country shadow banking system, and you don’t have a high yield market fully developed there. So when we think about what we can do, and where we can generate that win-win in markets, I think we’re only going to get paid properly for our investors when we’re positively helping solve a capital problem – and we believe there are lots of places in the world where we can move capital and help solve problems.”
About Värde Partners
Värde Partners is a leading global alternative investment firm with roots in credit and distressed. Founded in 1993, the firm has invested more than $75 billion since inception and manages over $14 billion on behalf of a global investor base. The firm’s investments span corporate and traded credit, real estate and mortgages, private equity and direct lending. Värde employs more than 300 professionals worldwide with offices in Minneapolis, New York, London, Singapore and other cities in Asia and Europe. For more information, please visit www.varde.com.