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Oak Hill Advisors' Eric Muller - operating at the intersection of public and private credit: live from iCapital Connect
Description
Welcome back to the Alt Goes Mainstream podcast.
We were live from iCapital Connect’s conference in Phoenix, where we sat down with some of the industry’s leaders across asset management and wealth management.
Eric Muller is Portfolio Manager & Partner, CEO - BDCs for Oak Hill Advisors (OHA). Oak Hill, which was acquired by T. Rowe Price in December 2021, has $112B AUM across performing and distressed credit-related investments in North America, Europe and other geographies.
Eric shares responsibility for leading OHA’s private credit business and has primary management responsibility for OHA’s BDCs. Prior to joining OHA in 2018, Mr. Muller worked in Goldman Sachs’ Merchant Banking Division, where he was a Partner in the Private Credit Group, responsible for leading its private senior lending business in North America and managing vehicles that invested across the spectrum of the credit market.
With credit on the minds of many, Eric provided a nuanced perspective on the current state of the credit markets and where to uncover both opportunity and risk in the market.
Eric and I had a fascinating conversation about the current state of private credit. We discussed:
- How his experience in private equity has informed how he approaches credit investing.
- What are the risk / reward trade-offs in private credit?
- Why credit investors need to be pessimists.
- How LPs should evaluate private credit firms and why the ability to do workouts matters.
- How do private equity sponsors pick their credit partners?
- Why private credit firms might have higher recovery rates than liquid credit markets.
- How OHA’s combination with T. Rowe Price has helped the firm productize for the wealth channel.
- What are misconceptions about private credit risk and liquidity?
- Where are the opportunities in liquid credit versus illiquid credit?
Thanks, Eric, for sharing your wisdom, expertise, and passion for private credit and private markets.
Show Notes
00:00 Relative Value Lens
00:11 A Message from Ultimus Fund Solutions
01:08 Live at iCapital Connect
01:46 Early Career at Goldman
01:59 Mezzanine Fund Era
02:23 GFC Timing Advantage
02:51 Running Private Credit
03:03 Joining Oak Hill
04:15 PE Lessons for Credit
04:30 Different Investor Questions
04:56 Credit Risk Reward Mindset
05:45 Optimistic Pessimist
06:16 Downside With Right Tail
06:47 Workouts and Distressed Skills
08:02 Private vs Liquid Recoveries
08:19 Aligned Lenders in Private
08:54 Sponsor Relationships Matter
09:22 Choosing the Right Partners
10:46 Volatility Reveals Behavior
11:22 Is Capital Commodity
12:39 OHA Distressed DNA
13:31 Crossroads of Markets
14:26 Challenges of Unconstrained
15:22 Risk Spectrum for LPs
16:19 T Rowe Deal Rationale
17:18 Democratizing Alts Access
19:10 One Ticker Multi Strategy
20:28 Liquidity Wrappers Tradeoffs
21:49 Quasi Liquid Reality Check
22:35 Liquid vs Illiquid Risk
23:27 Diligence Questions for LPs
24:33 Origination Edge and Speed
26:19 Public-Private Financing Choice
26:55 Alts in Target Date Funds
28:41 Private Credit Misconceptions
30:30 Closing Thoughts
A Word from Our Sponsor, Ultimus
This episode of Alt Goes Mainstream is brought to you by Ultimus, the full-service fund administrator and transfer agent powering asset managers in private and public markets. As alts go mainstream, you need real expertise to handle complex fund stru