Mark Jenkins on Leveraged Finance and Pension Plans

Episode Summary

Executive Summary: Barry Ritholtz interviews Mark Jenkins, Carlisle’s head of global credit, about his path from accounting and Goldman to pension investing and private credit leadership. Jenkins argues that private credit’s growth is driven by banks retreating, investors seeking illiquidity premiums, and a wider platform approach spanning liquid credit, direct lending, infrastructure, real estate, aviation, and structured equity.

Main Topics: Jenkins’s Career Path Into Credit (Priority: 5/5): He traces his interest in business from early jobs, accounting training, Goldman Sachs, Barclays, and CPPIB, showing how skepticism, downside focus, and “defense” mindset led him into credit investing. Why Credit Fits His Investing Philosophy (Priority: 5/5): Jenkins frames credit as a defensive asset class focused on capital preservation, downside mitigation, and reliable return of principal rather than equity-style upside. Private Credit Market Expansion (Priority: 5/5): He explains the structural rise of private credit since 2008-09, citing bank retrenchment, lower interest rates, and institutional demand for illiquidity premia as the main growth engines. Carlisle’s Multi-Vertical Credit Platform (Priority: 5/5): The firm organizes credit across liquid credit, illiquid/private credit, and real-asset credit, allowing it to source broadly and pivot capital across geographies and market dislocations. Infrastructure, Aviation, and Real Estate Opportunities (Priority: 4/5): Jenkins details how Carlisle deploys credit in hard-asset sectors such as aircraft leasing, infrastructure financing, and opportunistic real estate, emphasizing contractual cash flows and asset-backed security. Portfolio Construction in a Higher-Rate Environment (Priority: 4/5): He says rising rates are currently a valuation issue more than a credit crisis, and that inflation matters mainly through company margins, pricing power, and security selection. Scale, Fundraising, and Investor Demand (Priority: 4/5): Jenkins argues that scale matters because it widens opportunity access and that performance is necessary to raise capital; Carlisle’s platform growth reflects demand from pensions, sovereigns, insurers, and increasingly high-net-worth investors.

Key Arguments: Credit is fundamentally about getting principal back, so downside analysis and capital preservation matter more than equity-style upside. The retreat of banks from lending created a large void that private credit has filled, especially in leveraged loans and direct lending. Investors can justify illiquidity when they are paid 100-500 basis points more than public fixed income for taking less liquid risk. A broad platform across liquid, private, and real-asset credit allows Carlisle to pivot quickly when markets dislocate. Rising rates are not yet the key problem; the bigger issue is how inflation and slower growth affect borrowers’ margins and debt service. Infrastructure credit is attractive because many assets have regulated or contracted cash flows and can match long-duration liabilities. Real estate and structured equity opportunities become more compelling when banks are efficient only at the top of the capital stack. Performance is a prerequisite for fundraising, and scale helps win larger, more complex global transactions. Private credit’s expansion is reinforced by more companies staying private longer and by strong dry powder in private equity that needs financing.

Data Points: Carlisle Group AUM: about $301 billion - Size of the broader firm discussed in the introduction Global credit AUM: about $73 billion - Assets overseen by Jenkins at Carlisle Private credit market size (current): $1.1 trillion - Jenkins cites current market size after major post-crisis growth Private credit market size (2008-09): $300 billion - Baseline before growth acceleration Alternative assets total: $8.9 trillion - End-of-last-year figure cited for total alternatives Combined fixed income and equity market: $229 trillion - Used to show private credit remains a small share of global assets Expected private credit CAGR: 10% to 12% - Jenkins’s forecast for the next five years Bank credit inventory decline: down 80% - He says banks now largely ship risk rather than hold inventory Leveraged loan market size: $1.5 trillion - Current scale of the liquid loan market Private equity dry powder: over $1.3 trillion - Used to explain future financing demand for private credit Private credit platform growth: $73 billion to 2x what it was four years ago - Shows Carlisle’s rapid expansion in global credit Deal selectivity: about 5% close rate - He says Carlisle closes only a small share of opportunities it reviews High-net-worth ticket size: as low as $10,000 - He notes the platform can accept smaller investor tickets in credit products S&P 500 year-to-date move: down 8.5% - Used in comparison with credit performance during rate volatility High-yield year-to-date move: down 4% - Illustrates relative resilience of credit versus equities Leverage loans duration: about 0.5 duration - Explains why floating-rate loans are less sensitive to rising rates Default rate expectation: from 1.1% to 1.25% - Spread-implied default rate outlook cited by Jenkins Investor return target: 7% - Typical long-term institutional return objective discussed Illiquidity premium: 100 to 200 bps or 100 to 500 bps - Ranges cited for excess return from private/illiquid assets over public fixed income Equity long-term forecast: 6% to 7% - Used to argue public markets alone may not meet institutional targets Current annualized equity returns since 2009: roughly 15% - Context for why future returns may normalize lower CPPIB allocation to equities: 85% - Illustrates how long-duration pools can lean heavily into risk assets Aircraft leasing scale: 15th largest to 6th largest lessor - Carlisle’s rise in aircraft leasing after restructuring and acquisitions Global airline relationships: 110+ airlines in 80+ countries - Shows breadth of Carlisle’s aviation platform Real estate transaction size: $3 billion - iStar asset referenced as a significant real estate credit opportunity Fund ticket minimum: $10,000 - Low-end access point for some investors in credit products

Pivotal Quotes: "The sacred trust, where literally 19 million people are giving you money to invest on their behalf, is a sacred trust." — Mark Jenkins: Describing his responsibilities managing pension assets and fiduciary money "Credit, generally, is defense. I'm not looking for massive upside that you shoot the lights out on the equity side." — Mark Jenkins: Explaining why he gravitated toward credit as an investing discipline "Hope isn't a strategy." — Mark Jenkins: Arguing that institutional investors need diversified alternatives rather than relying on public-market returns

Implications: Private credit appears positioned to keep expanding as investors seek yield, diversification, and illiquidity premiums. Firms with broad, global platforms and disciplined selection may gain the most, especially as rates rise and borrower quality becomes more important.