Capital Four ceo Sandro Naef and Capital Four US ceo Jim Wiant answer SCI's questions

Q: How and when did Capital Four become involved in the structured credit market?
A: We have been investing in CLO liabilities for more than a decade. In terms of managing CLOs ourselves, it was a natural evolution a couple of years ago to also start managing CLOs ourselves, as we have been managing senior loans and bonds a long time.

Q: What are your key areas of focus?
A: For us, we look at the loan market quite broadly. In the case of Europe, the size of our assets under management of €15bn allows us to cover the entire leveraged finance market very effectively.

We have more than 20 research analysts and follow the leveraged finance markets. We are quite active on the new issuance side.

Q: What is your strategy going forward in terms of developing Capital Four’s US presence?
A: We have not yet entered the US market, but our approach will be similar in terms of strategy and focus. The US loan market has recovered quite strongly from the 2020 volatility. The focus is understanding individual corporate issuers’ liquidity going forward, as we exit this period of fundamental volatility.

Q: Why are you seeking to expand to the US now?
A: Our expansion is very strategic. It is not related to a short-term investment opportunity that we see. That would not be the right way to approach it.

It is about long-term investment. Whether the market was cheap or expensive, it would not have mattered. To plan correctly takes a long time. While we were planning this, the markets have at certain times been more cheap or rich, without impacting our strategic view on developing our business.

Q: Can you elaborate on your CLO issuance plans, if any?
A: Entering the US CLO business is a high priority. We are looking to be active issuers within that market later this year.

In Europe, we will continue to issue CLOs according to our strategy and established platform and track record. Our US strategy will create synergies on investing, distribution and investments in technology.

Q: How will you differentiate yourselves from competitors?
A: We provide capital across the entire capital stack. We can pick instruments, as we have various strategies. We look at where the opportunities are and which instruments offer attractive value.

Credit management will enter the next stage in terms of technology and enhancing the complexity of investment processes. Loan managers need to embrace those developments.

Jim has a leading investment track record and shares our view on investment philosophy and process. Our investment process is repeatable and sustainable, and continuing investments in technology allows us to further develop our process and keep delivering value to our clients.

Q: Which challenges/opportunities do you expect to arise in the future?
A: We think the current environment is enormously active. There are benefits, such as low interest rates.

The trend for concentrated ownership is a strong and powerful movement. The private equity approach is built on concentrated ownership, which translates into highly incentivised management and employees.

Leveraged finance is an important enabler of the private equity model and the growth of the CLO market will go hand-in-hand with the private equity growth. We think, as a company working closely with investors to deploy capital, we can fill important gaps in many companies’ funding structure. 

Jasleen Mann