Aaron Peck

Aaron Peck,

Managing Director and Portfolio Manager,
Monroe Capital,
Sub-advisor to Ninepoint-
Monroe U.S. Private Debt Fund

Q&A with Aaron Peck

The COVID-19 pandemic has impacted businesses of various sectors unequally. For institutional investors who look for yield in private debt sector, there are similarities and differences from investing in public companies. Aaron Peck, Managing Director and Portfolio Manager, Monroe Capital, Sub-advisor to Ninepoint-Monroe U.S. Private Debt Fund, comments on strategies with private debt sector.

Q:  How did the COVID-19 pandemic impact mid-market private companies and what does this mean for institutional investors that are looking for yield?  

A: Broadly speaking, the impact was similar to what has been seen in larger public companies. That is, businesses who were highly dependent on face-to-face interaction were affected in a significant way. This challenge was not shared equally but was more pronounced in industries such as travel and entertainment, restaurants, and retail consumer businesses. Other businesses, in industries like technology, healthcare, and logistics performed better, in some cases with fundamentals stronger now than they were going into the pandemic. Overall, the opportunity in lending is very attractive in our view if you can pick the right places to be and execute accordingly.

Q: What are some key considerations that investors should look out for, when structuring covenants with portfolio companies?

A: The point of the deal structure is to give the lender options if something starts to move in the wrong direction with the borrower. It is less about a specific covenant and more about the giving a lender the ability to intervene, which must be accompanied by willingness and experience to understand what is required and how to go about doing it.

Q: What should investors keep in mind while sourcing deals in the current environment?

A: This is a relationship business. As always, people want to work with those they know and trust. Having a wide industry network is helpful in gaining a wide purview into deal opportunities. This allows a lender to be more selective than if they are very limited in what they see. This is far easier said than done, as it takes a very dedicated effort to build and maintain such relationships as well as a reputation that comes from being in the market and executing deals.

Q: If investors look for managers for managing private debt, what questions should investors ask potential candidates in sourcing the best-in-class managers?

A: As with manager diligence in general, it’s about the people and their experience. With private debt it is about managing the process of commercial lending – from sourcing deals to understanding borrowers, structuring deals with meaningful protection, executing diligence and closing effectively, monitoring post-close, and, as necessary, managing difficult deals.

AARON PECK, Managing director and portfolio manager, Monroe capital, Sub-advisor to Ninepoint-Monroe U.S. private debt fund, spoke at Institutional Connect Virtual Forum in October 2020

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Mr. Peck is a Managing Director and Portfolio Manager of Monroe Capital, sub-advisor to the Ninepoint-Monroe U.S Private Debt Fund. He joined the firm in 2012 and is a member of Monroe’s Investment Committee. Mr. Peck has over 25 years of experience in credit, lending, high yield, distressed credit and public company operations and investor relations. Prior to Monroe, Mr. Peck was Chief Investment Officer at Deerfield Capital Management and was responsible for the investment teams at Deerfield including syndicated and middle market loan teams which managed over $5 billion in assets. Mr. Peck was also chief portfolio manager for Deerfield’s publicly traded specialty finance mortgage REIT and in that capacity, was the key point of contact for all institutional and retail investors, investment banking research analysts, lenders, and investment bankers. Prior to Deerfield, he worked in leveraged credit at several investment firms including AEG Investors, Black Diamond Capital, Salomon Smith Barney, and ESL Investments. Mr. Peck earned his M.B.A. with Honors from The University of Chicago Graduate School of Business and his B.S. in Commerce from The University of Virginia, McIntire School of Commerce.

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