Ted Denniston, Co-Head of NXT Capital, recently spoke with Private Debt Investor to share his perspective on what the new administration’s policies could mean for private credit. Read the full article here.
Highlights from Ted:
- It has not been an easy period. “What private equity investors are looking for, and finance providers are looking for, is stability and predictability,” says Ted Denniston, co-head of lower mid-market direct lender NXT Capital. “What we have seen over the last few months is probably best described as chaos, and it is very hard to transact in a chaotic environment.”
- The Portfolio Perspective:
- “I haven’t seen a single economist anywhere who says that tariffs are not going to lead to inflation,” says Denniston, “so there probably will be a pullback in consumer spending. For us, it’s about building a portfolio that can withstand that.”
- NXT Capital has consumer exposure, but Denniston remains confident it will be insulated. “On the consumer side, we have always been focused in two areas. First is low-cost, highly recurring services like lawn care and pest control, which are moving to subscription models and have typically proven to be pretty sticky during a recession. The other is services such as heating and air conditioning, which are things that, when broken, need to get fixed.
- “We will never know what the next big macro shock will be – we didn’t predict COVID, just as we didn’t predict 9/11 or the great financial crisis. We just try to build portfolios that can handle stress and still provide an above-market return to our investors.”
- Will Regulatory Hurdles Follow?
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- As they did during COVID, lenders are preparing for a bumpier ride but largely expect no significant uptick in defaults. “All lenders are probably going to be more measured on the deployment side, and frankly, if any manager is not taking things slower, LPs need to look closely at the risks they are taking,” says Denniston. “That means deployment for LPs is going to become a challenge.”
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