Recording intelligenceAI-generated brief · check the source for context

Where AI Is (and Isn’t) Creating Value

17:30 recording · EN · 2 speakers

Listen to the original

Listen to the episode

Brief overview

Despite negative headlines, Aries sees private credit fundamentals healthy, with software risk falling on equity rather than lenders.

  1. Scale compounds into a durable credit edgeKip: credit is a business where as you get bigger you get better, across the loan, high yield, private credit and real asset markets.
  2. Being the first call beats being everywhereA sponsor raising a billion dollars calls two or three lenders, not 25, and what Aries passes on falls to managers without those advantages.
  3. SaaSpocalypse is an equity problem, not a debt onePurchases near 20 times EBITDA levered six or seven times leave lenders room for lower valuations, and AI-exposed companies were avoided at underwriting.
Executive Summary AI
  • Kip tells Hugh MacArthur that no one at Aries is a trader, and that credit is a business where getting bigger makes you better, so playing the loan, high yield and private credit markets together creates lasting advantages that also carry into real estate debt, infrastructure and secondaries.1:23
  • Aries grew up in direct lending as a sponsor coverage business, then eight or ten years ago added dedicated industry teams in power, renewables and oil and gas, healthcare and life sciences, software and services, and financial services, which lets it go direct to company with differentiated knowledge instead of putting a generalist in the room.3:21
  • On the state of the market, Kip says non-accruals and defaults are low relative to historical standards, profit growth in portfolio companies is good across the corporate, asset-based, real estate lending and infrastructure books, and the original goal set 20-odd years ago of 8 to 12% returns in illiquid credit is still being delivered at scale.5:25
  • On the SaaSpocalypse, he argues the problem sits with the owners rather than the lenders: companies bought at around 20 times EBITDA were levered six or seven times, so a re-test at 12, 14 or 16 times hits equity first, and AI disruption was already part of the underwriting and investment committee discussion.10:38
  • On fundraising, Aries runs about 150 institutional salespeople across the US, Europe and APAC plus around 150 on the wealth team, is raising its fourth commingled regular-way direct lending fund with strong institutional interest despite non-traded BDC redemptions, and sells nine wealth products built on three themes.12:01
Key Quote
“Credit is a business where as you get bigger, you get better.”
— Kip1:37
Key Quote
“we're actually not seeing any fundamental sort of underpinnings that would say there are problems in private credit.”
— Kip5:30
Key Quote
“if you're a private equity firm that's trying to raise a billion dollars to go do a deal, you don't call 25 people, you call two or three people, right?”
— Kip8:05