An All-Weather Approach to Opportunistic Credit
In this PDI Q&A, Bryan High discusses the key elements that form Barings’ capital solutions strategy and explains how flexible capital, bespoke origination and deep structuring expertise are critical when constructing an attractive through-the-cycle opportunistic credit portfolio.
What is a capital solutions strategy? How does it differ from traditional direct lending?
At Barings, we think of ‘Capital Solutions’ as an opportunistic, all-weather strategy that aims to deliver attractive risk-adjusted returns across various market environments. These strategies typically target a premium over traditional direct lending by sourcing and structuring bespoke financing opportunities. We typically focus on situations beyond the remit of a traditional direct lender. Often, these are less trafficked deals in which the supply and demand of capital tends to be more favorable, positioning us to potentially achieve an enhanced return.
One key differentiator of this strategy is that the capital is flexible and thus able to migrate with the different phases of the market cycle, aiming to uncover the most attractive opportunities at any given time. There is a common misconception that Capital Solutions centers on stressed or distressed opportunities that are more episodic, or tied to particular parts of the cycle. And while those opportunities certainly exist, other opportunities within the strategy are appropriate through the entire business cycle and tend to be more idiosyncratic.
