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Where AI Is (and Isn’t) Creating Value

17:30 recording · EN · 2 speakers

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Brief overview

Aries sees no fundamental cracks in private credit; scale, industry expertise and performance separate the leading managers.

  1. No fundamental problem visible in private creditKip: non-accruals and defaults are low versus historical standards and portfolio company profit growth is good across corporate, asset-based, real estate and infrastructure books.
  2. Scale and industry teams win the first callA sponsor raising a billion dollars calls two or three lenders, not 25, and Aries wants to lead structuring, pricing and docs.
  3. SaaSpocalypse hits equity owners, not lendersAt 20 times EBITDA purchase prices with six or seven turns of leverage, the valuation question sits with the equity, not the debt.
Executive Summary AI
  • Hugh MacArthur opens Dry Powder by setting the very negative private credit headlines against what practitioners actually see, and previews whether AI is creating real risk for software lenders or whether the feared SaaSpocalypse is far less disruptive.0:00
  • Kip says no one at Aries is a trader: the firm builds lasting edges in markets with real scale advantages, and eight or ten years ago added dedicated power, renewables and oil and gas, healthcare and life sciences, software and services, and financial services teams so it can go direct to company with industry knowledge rather than a generalist.1:29
  • On the state of the market, Kip says Aries is not seeing any fundamental underpinnings of a problem in private credit: non-accruals and defaults are low against historical standards, underlying portfolio companies show good profit growth, and the firm's twenty-odd-year aim of 8 to 12% returns in illiquid credit still holds.5:25
  • On software, Kip argues the SaaSpocalypse is more a problem for owners than lenders, because companies bought at around 20 times EBITDA were levered only six or seven times, leaving room for reduced valuations, and AI disruption was already part of Aries' 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 direct lending fund despite non-traded BDC redemption headlines, and sells nine wealth products built on durable private-markets income, tax-advantaged real assets and diversified equities.12:01
Key Quote
“we're actually not seeing any fundamental sort of underpinnings that would say there are problems in private credit.”
— Kip5:25
Key Quote
“Credit is a business where as you get bigger, you get better.”
— Kip1:37
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