Episode Details

Private credit often gets called opaque. 

Inside the funds, lenders get an overwhelming amount of data. Borrowing bases, compliance certificates and covenants are written into the loan. The numbers arrive every month, and some funds track them weekly.

By Kevin Hsu's count, 60% of the private credit funds Lumonic talks to are still in spreadsheets. Many are trialing AI tools for underwriting and diligence. The post-investment side is where most are still working their way out of spreadsheets.

Monitoring data drives portfolio decisions and often ends up in front of LPs.

Kevin and Andrew Riess found almost no software built for that work. So they built Lumonic. PitchBook acquired it within two years.

With Lumonic 12.0, they're working toward the self-monitoring portfolio. The idea: financials come in and get spread automatically. The system can flag a covenant breach and even draft the email to the borrower. 

How close is it? Andrew argues the answer doesn't hinge on a smarter model.

So their advice for managers just getting started: make the data legible first. The AI comes after.

In this episode of the Modern Capital Podcast, Kevin, Andrew and Marc cover:

• The three generations of portfolio monitoring, starting with “putting the numbers on the internet”
• Why the moat is state: an audit trail that traces a number back to a bounding box on a PDF
• Defining adjusted EBITDA once at onboarding and carrying it forward across a whole portfolio
• Why spreadsheets work until a fund reaches 20 to 40 borrowers
• What breaks when a firm builds its own AI workflows and the person who built them leaves
• The rise of the private markets CTO, and what separates the role from IT

"On the monitoring side, I do think it's more deterministic. There is a right answer, and that's kind of the world that we operate in."

Private credit already gets the data on schedule. The machine that monitors it is still being built.