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Credit Managers' March Madness Picks
They're at the top of the oh-so-hot private lending game, but can these managers deliver basketball bracket alpha? Find out…
Barack Obama has a U.S. men's college basketball bracket. A nonagenarian nun is the defacto mascot and number one fan of the Loyola-Chicago Ramblers.
March Madness — the Division I men's tournament — turns nontraditional fans into sports betting junkies, and count private credit managers among them.
Wells Fargo Securities is once again playing (legal) bookie and soliciting brackets from the thriving sector's top managers.
Benefit Street Partners, led by firm president Richard Byrne, looks to defend its 2017 win, competing under the team name "Benefit Street Repeat." But 2016’s winner GSO Capital — captained by senior managing director and noted Canadian Brad Marshall — matched three of Benefit Street’s top four picks with Villanova, University of Virginia, and Duke. Between these two former bracket champs, it will come down to GSO’s Kansas State bet versus Benefit Street’s University of Michigan. Both picks made the Sweet 16.
"Rival BDC/private credit managers have been planning their strategy over the past year to unseat the well-respected reigning champion," wrote Wells Fargo analysts Jonathan Bock, Finian O'Shea, and Joseph Mazzoli in their latest research note, published late last week. "But by the looks of some of these picks... we recommend that certain private credit managers keep their day jobs" — namely, TCP Capital and New Mountain Finance.
[II Deep Dive: Be Damned Careful]
The most popular pick to win among the managers was Villanova University's Wildcats, selected by 40 percent as the ultimate victors. The team qualified for the sweet sixteen after topping Radford University and the Alabama Crimson Tide in earlier rounds, and is set to face off with West Virginia University on March 23.
But as with many bracketeers, the majority of the lending elite made a losing bet on the University of Virginia finishing in the final four. UVA's stunning loss in round one hit teams from Ares Capital, BlackRock Capital, Solar Capital, and THL Credit especially hard, all of them having predicted a Cavaliers championship win.
They also shared another feature in common: boring team names. "'Ares And1' shows a modicum of creativity," the analysts acknowledged, but "BlackRock Capital" and "Solar Capital - Gross" (after leader Michael Gross) could use more inspiration.
In the tournament of team names, Owl Rock Capital and Antares Capital would compete for the championship.
"'The Winning Owlgorithm' ranks solidly in creativity which we ascribe to Owl Rock's entrepreneurial nature," the analysts wrote. "Owl Rock has been competitive in both raising capital from investors and deploying that capital, quickly becoming a large player from scratch without a major alternatives patron."
Antares — led by managing partner and co-CEO David Brackett, fittingly — channeled the state of direct lending with their name. "'TermsDon'tSeemToMatter' stands out as the funniest manager bracket this year and it's likely what the folks at Antares say daily as they assess market conditions," according to Wells Fargo's Bock, O'Shea, and Mazzoli.
Unfortunately for Owl Rock and Antares, pun performance didn't translate into pick performance. Both The Winning Owlgorithm and TermsDon'tSeemToMatter selected Michigan State University as the ultimate 2018 March Madness winner, but the Spartans are out of the running, having lost to Syracuse in the second round.