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Gerald Well esley


“A set of covenants does not make a bad loan good. You want a good loan to start with.” Gerald Well esley, Punter Southall Governance Services


with the management company and how trustworthy they are. Just because things have become cov-lite and you may not have all the bells and whistles you previously had does not necessarily mean that you should avoid that area completely. That is too dogmatic. You have to underwrite appropriately. If you have management information or the financials, in practice how does that help? Could you have solved a particular problem? Does it tell you anything? What practical difference does information make? Wellesley: A set of covenants does not make a bad loan good. You want a good loan to start with. It is more the case in the property area that getting control earlier rather than later is an absolute advantage. It is a question of discipline and I am not sure what is providing that when there’s a wall of money going into this space. In the past, where this has been mostly on banks’ balance sheets, it was a manager’s budget that they have to make and if the margin is half what they were making before they have to make twice as many loans. So there has been a lack of discipline there. At the moment, I’m not sure where the discipline lies. You hope it lies within the realms of the manager and if they have a diversified approach maybe they can be more selective, but I am not sure your aver- age pension trustee has the discipline to say: “I’m not comfortable here, it looks like we are not getting adequately compensated for the risk that we are taking.”


October 2019 portfolio institutional roundtable: Private debt 17


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