Investments that Produce Cash Flow

THE FINANCIAL COMMUTE

This week’s episode of THE FINANCIAL COMMUTE features a special session recorded live from Morton Wealth’s 2024 Investor Symposium. Our Chief Investment Officer Meghan Pinchuk welcomes our fund managers, Rich Gammill of Proterra, John Ahn with WhiteHawk, and Himani Bhalla with Symbiotic to discuss how they find investments with higher yields and lower relative risk.

Here are some key takeaways from their conversation:

- WhiteHawk is an asset-based lender focused on underwriting to bankruptcy while Proterra and Symbiotic are niche-focused lenders in the food and healthcare sectors, respectively.

- The discussion emphasizes private credit as a favored asset class due to its ability to deliver equity-like returns with lower risk through downside protections and strategic structures.

- The growth in private credit is driven by reduced bank lending and higher interest rates. This shift provides opportunities for private lenders to step into underserved markets.

- Sector-specific knowledge and strategic partnerships (e.g., with organizations like Farm Credit) create unique advantages for private credit managers, allowing for better terms and premium returns.

- Loans are typically customized based on the borrower's assets, risks, and needs. Examples include milestone-based disbursements and covenants tailored to specific growth stages.

- A common strategy lenders use is underwriting loans with the assumption that borrowers might default. This helps to ensure robust collateral or recovery plans, emphasizing downside protection and capital recovery.