Värde Partners Co-CEO and CIO Participates in Milken Institute Credit PanelApril 27, 2020
SINGAPORE – Värde Partners is pleased to share that Co-CEO and CIO Ilfryn Carstairs participated in The Milken Institute’s recent webcast titled “The Global Credit Crunch.”
Ilfryn and fellow panelists, including Milken Institute Chairman Michael Milken, discussed the impact of Covid-19 on credit markets, the effectiveness of various economic stimulus measures, and the investment opportunities they expect to emerge from what is now a major global economic cycle. A key theme of the discussion was the importance of not generalizing – either about the shape of the recoveries in different markets or about credit selection.
Contrasting fiscal stimulus measures in the U.S. with countries that have less flexibility to respond, Ilfryn noted: “We tend as a marketplace to try and think about cycles, or think about economic events, as if they’re a single global thing, and really this one – maybe more than any other that we’ve had in recent or modern memory – will have different impacts in different industries, different impacts in different parts of the world. You see that particularly with the degrees of freedom countries have to deal with it…it’s very important not to generalize and not to think that every place will come out of this with the same trajectory.”
Commenting on how Värde approaches investing in this phase of the cycle, Ilfryn noted: “There is no such thing as credit as a general category at the moment. It’s very much a credit selection market, and we’re stress testing every situation that we’re looking at for not just the ability to make it through in a base case, but also to sustain its operations if this thing is much worse than the base case currently assumes out there. When you do things that way, when you apply a real fundamental analysis to the market at the moment, you would say that there are a lot of things that seem to be priced reasonably attractively and there are a lot of things in the same breath that can’t really withstand this being much worse than what’s expected out there.”
He added: “In black swan events, assumptions can move in a way that even quite rightly weren’t in any risk model so all sorts of things are impaired and all sorts of things in the economy are being downgraded…that nobody thought about. That really makes things interesting in places like the structured credit markets or even in illiquid asset markets because there are all sorts of assumptions being tested and it’s creating that motivated selling. When we think about purchasing stressed credit, the best trade that we can do in many ways is to buy non-stressed assets off distressed sellers and get paid distressed returns for participating in things that don’t require restructurings.”
Ilfryn warned: “I think when you look at all forms of market pricing at the moment things might on average make money from here, but that will be an average of some very big winners and some very big losers so tread carefully and make sure you’re doing it with very strong fundamental analysis.”
Värde recently published Värde Views: Phases of a Credit Cycle with additional commentary on the market environment and what investors should expect as the cycle unfolds.
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 $68 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 across 13 offices worldwide. For more information, please visit www.varde.com.