Specialty Finance Primer
Background and basics
I am starting this Substack for those interested in specialty finance or SpecFin, a sub-sector of private credit. SpecFin, rightfully so, is included in the broader conversation of private credit - but I believe it should get more dedicated attention. When I read research and blogs, listen to podcast interviews, watch webinars, attend industry conferences, and engage on social media, the dialogue is centered primarily on private credit (its merits, navigating risk, growth in client portfolios, potential regulation and lately - tokenization).
You can now listen to prior and future posts on my ATLalts podcast. Subscribe to the ATLalts podcast on Apple, Spotify and other podcast platforms.
When you read a private credit white paper or a quarterly update from a large asset manager, private bank, or investment consultant, specialty finance will often be mentioned, but remains the distant cousin in coverage to traditional private credit strategies like direct lending, mezzanine, and real estate debt. These, and a few others, get most of the attention because they are, lets face it, larger by sheer size of dollars at work. However, and this is another reason I wanted to do the blog, is SpecFin opportunities are more idiosyncratic, niche, specialized, and complex. I personally think SpecFin is more interesting, undergoing more rapid change, and intersecting more and more with fintech, the area I work in daily at Bay Point.
I will endeavor to use this blog and other mediums to highlight what I find most interesting in SpecFin and in the process hopefully provide some useful content to increase your awareness and knowledge of this space. I hope to explore emerging themes and topics in this specialized lending area plus provide access to news, materials, links to events, and exposure to industry movers and shakers. Against a backdrop where banks continue to pull back (and target the largest, safest borrowers), more private lenders joining the fray, rates and the economy in flux, and everything seemingly becoming embedded, now is a good time for a dedicated forum to engage in quality, relevant SpecFin content, meet new relevant professionals (especially if you are not based in NY/NJ/CT/CA where content/connections/networks in SpecFin are most prominent) and build valuable and focused relationships, and increase your knowledge and effectiveness in preparation for closing your next transaction.
Whether you are a fintech entrepreneur trying to raise a debt facility or explore financing options, specialty lender, bank, direct lender, PE firm, hedge fund, insurance company, pension fund, endowment, consultant, I-banker, lawyer, auditor, administrator, rating agency, data vendor, debt capital management SaaS vendor, regulator, family office, wealth manager, HNWI, academic, student, journalist, or curious passerby, I welcome your feedback and suggestions for improving this blog.
Let’s start with some background via a few documents available on Google:
Magnetar, KKR, Cambridge Associates, San Francisco Pension, Iowa Pension - Beginning on Page 36
Where to go from here is always the $64,000 question. Depending on where you sit in the industry, and like everything in finance, fintech, asset management, etc. - it just depends. A framework for how to think about SpecFin is the typical format so I wont try and reinvent the wheel. The links above are a start but I think the team at Finley do a bang up job of breaking down specialty finance and what it entails. Full disclosure note: I helped hire Finley at a prior fintech startup for their debt management software, but they aren’t paying me to mention them here. They have a good solution, helpful content and Co-Founder, CEO Jeremy Tsui (and team) are approachable, easy-going and active partners to borrowers and lenders in this space.
On my next post I will dive into some of the asset classes (and collateral) where you can expect to see specialty finance in action.
Thanks everyone!
About me:
My name is Andres Sandate and I am based in Atlanta, GA where my family and I have lived since 2006. My wife and I have three young children who keep us very busy, but also making lots of memories. I grew up in Newton, Kansas, attended The University of Kansas and then did an international MBA while living and working in Italy for several years in the early 2000s. For fun I love to coach my kids sports teams, cheer for the KU Jayhawks in basketball and Kansas City Chiefs in football, exercise, and read. I have spent my professional career in capital markets, alternative investments, the securities business, and most recently a couple of fintech startups and a private credit fund. I am passionate about innovation, exploring new topics in our industry, and meeting (as well as learning from) new people. Three years ago I created a podcast called ATLalts to share what I discovered across private markets, alternative assets, startups, and the world of non-traditional asset investing. Interviewing CEOs, startup founders, investment managers, and investors in order to inform, educate, and inspire listeners is a goal of each episode. If you want to reach me email andres@atlalts.com.
January 4, 2024