Welcome to 25 or 25 the credit sites 25th anniversary edition of our no more risk better podcast five episodes 25 questions insights from our expert analysts and industry veterans We revisit the origins of credit sites share hard one lessons from across cycles and unpack the art and science of credit analysis We'll highlight how we collaborate and explore the future of credit research What's changing and what still matters if you want to know more so you can risk better here in the right place Let's dive in celebrating 25 years of credit site. Hello everyone and welcome back to the credit sites no more risk better podcast This is when you see their global head of strategy at credit sites and this is episode two of our special edition 25 for 25 podcast series celebrating the 25th anniversary of credit sites today I have a great roster of research experts joining me to talk about research Amid times of crisis first. We have Chris know our global head of research from much annoying head of Asia Pacific research and head of financials in the region Brian studio so our European head of research and of course is at Griffiths our head of US investment grade and macro strategy Thank you guys for joining me to talk about volatility and research and all of the lessons we've learned Alright, let's start with the first question and this one I think that we've had a lot of things lately but really over the past 25 years And it is how did your team respond during key credit market disruptions? We've had the 2008 financial crisis COVID-19.
We've had recent volatility around trade policy and the potential Evolution of the Fed and the president's role within the Fed Chris I'd love to hear from you. How have you kind of led the team through all of these different events? Well, thanks, thanks. We back on the pot just to careful note I've not led the team through all the cycles that we've seen but I think when I think about our response as a team There's a couple core elements that were really proud of here at credit sites experience and independence I've been with the team here in the industry for over 20 years I know when you've seen several cycles and made the team members here On average our senior analysts have been in their sectors in the industry for about two decades And so that's what we bring to their sponsor credit crisis And so when I think about the founders glen Reynolds and Peter Pettis when they built this business They come from organizing teams at Lehman at Deutsche Bank and before starting our credit sites 25 years ago And so I think experience enables the team to identify which aspects of an emerging crisis take hold Financial system liquidity catastrophic in GFC But turns out to be a bit more manageable in covid credibility bank gap with the banks big problems during GFC But ultimately been the stabilizing for stirring covid on the independence front.
I recall back in GFC There was 10 point bid ass reds for bank paper crossing desk in that environment I think a lot of investors are looking for independence having someone to speak to A trusted voice that's going to speak to how we see it in the markets That necessarily was going to make the most money off of our our clients And so that combination of the experience the independence and then just the overlay of hard work when I was looking at GFC I was covering the gaming lodging sector at that time and I borrowed again from one of the founders glen Reynolds He made mention of operations about hurt covenants main and liquidity kills and it's a lot of work to navigate those things You know you got to look at the demand drivers house that facing the industry demand falls off 20 30% You kind of smoke through a lot of liquidity questions that are there You know that brings that next conversation with the banks are they gonna give up? You know some covenant room to give some bar and capacity to get them through to what ultimately is the thing that really damages companies which is the lack of liquidity and ultimately end up seeing names like six flags and Stations on those kind of companies fall through so you know as we look at navigate these things It's really think about the experience the independence and then just the hardware to to try to figure all these things and bring it to our clients in the investor base Yeah, I love the experience that the credit site analyst team has and I think it brings a sense of maturity to a lot of the research I think a lot of times when people see these market disruptions their major reaction is I need to say something without necessarily thinking What is it that I need to say like what is going to be most useful? Do I even understand the full facts of what's going on right now? And this is true of so many of these periods Chris I just be curious as a follow-up How do you balance that speed to market right like we want to be out there in front of our clients with the reality that if you're the first To the market you might not have necessarily gathered all the facts appropriately or really understand the live land That's attention that we face all the time.
You want to get information out there I want to have an analyzed information that's out there as quick as possible You know since we don't trade ourselves our ticket to entry is to be really thoughtful and to have you know Again that trusted voice that's in the marketplace that people come to us And so you know in some ways are teaming up with LFI really enables us have partners that are putting out content in the market right away New events to help in the marketplace and then you know We just have to balance it out and only that there is a sort of a half-life to all of the work that we do and You know being first opposed is very important But you know we ultimately tend to see a bit more and making sure that we have a quality analysis That's out in the marketplace and I think that's what a lot of our clients look to us to do Yeah I think it's huge Chris you point out the level of experience and you can't prepare or replicate that and so having analysts that have been through These various periods are extremely valuable and gives us the ability to balance that first to market versus having a thorough and fully thought out Explanation or thesis or expectations for the market during those times of Volatility and stress in the market so Brian I want to go to you and ask what lessons you learned during those market crises that are still prevalent in The work the team in Europe does today and how you think about some of the big picture events and how that's shaped how we do research here at credit sites going forward Yeah, thanks for the question. I appreciate it. I think you know there's a couple of ways to look at it I guess practically speaking more of a refresher than a lesson learned is you know Just having that appreciation for good management teams and the credits to be covered, you know among among those issuers The management who embraced the volatility by you know upping disclosure upping you know Communication with the investment community where the companies that were often better positioned to kind of relay the risks and the challenges that they're facing and getting a general investor comfort with them And with the path forward and also you know in terms of you know approved management terms of disclosure often you get other Areas of prudence such as you know, you know, it's the running of the business strategy or things like you know short-term funding source management or addressing kind of you know Near-term risks and exposures from short-term debt to factoring or you know managing the machinations of you know working capital flow management No one appreciation for quality management behind the issue where was was a bit of a refresher I guess in terms of lesson learned I had never built a Modeler forecast on a monthly or weekly basis. So I mean that was new and it wasn't really anyone there to teach us that We all kind of figured that out on the fly But I guess one of the more enlightening lessons.
I think was an appreciation of how our investor our investor clients Were facing the decisions and trying to look at it through their lens and through lenses that we wouldn't typically Look on our side, which would be more of a kind of box standard relative value analysis We're looking for catalyst driven trade ideas. So this is sort of like having an acute attention to finding dislocations or you know evaluating evaluating a trade idea given a background of limited Market liquidity or or for an investor based looking for alternative Options to the crisis to finding that liquidity. So this kind of built up I guess a bit of a lesson and bit of an appreciation for how our our clients think Which is sometimes you know hard to see on our end but you know the more you can partner with clients and understand how they're thinking The better you are to help them. Yeah, I think that's a great point Brian I gotta ask was there any one specific client interaction or perhaps specific topic that stuck out to you that sort of You know set off a light in your head in terms of how maybe how the investor base is thinking about things in these periods It's a stress a little bit differently than the fundamental analyst might try to tackle it before maybe kind of zooming out and trying to gain that Different perspective.
Yeah, I think it goes back to kind of that liquidity question. You know when we usually look at Exiting investments or selling around to perform recommendations, you know, it's kind of you know Sell what you want but you know having an appreciation for a scenario where you have to sell what you can and what you can Sell is always what you want to sell but as you run into those, you know liquidity requirements on you know Grouse my slider in terms of our client base You know, that's just kind of a framework that I hadn't put myself in the driver's seat for so that was just you know One of the things I stand out in terms of you know, navigating that crisis Yeah, that's such a good point and Brian I liked your comments around management teams and understanding who was really kind of with the program as to what's going on and How they can use research really to benefit their relationships with investing clients when I was on the high yield desk at Wells one of those questions that sales always asked when we had a new deal what we know about management What's our relationship with them? What's their track record? And that really stuck out to me as so important because that relationship that Understanding of who these people are and how they conduct business can just be absolutely crucial especially when we're facing market crises or periods of Specific company volatility or idiosyncrasies so promote how do you balance risk and opportunity when we have periods of instability?
Right? We know that sometimes the companies that are getting the hardest hits today are the ones who are going to be coming roaring back with a Vengeance six months from now. How do you navigate that particular lens? Yes, I think some of it very much depends upon what the horizon is So if you are in a period where you can anticipate some degree of instability Then you do all the right things right you you go up and in quality you prepare yourself To Brian's point you decide, you know how much is going to be the liquid stuff that hopefully you can sell in case things get pretty volatile But you don't put everything into that bucket you also have a little bit of high beta stuff because otherwise you're going to underperform quite quite dramatically and Of course, you're for every four such situations.
Maybe one works out like that So over time then like it's a little bit better, but when things go, you know Quite strongly downwards and this could be something like credit Suis coming apart and bank 81s and per prices in Europe falling by 20 to 25 points. It's it's deciding What really are the those those vital points at which there's a turnaround so when the regulators from other jurisdictions basically step in and say Hey, we're not gonna do what the Swiss national bank did we're gonna go down a resolution route Then you know that there's a bottom in those those particular prices and it's more a question of like when they come back up And hopefully they come back sooner rather than later But when you're faced with something like COVID which is how long does it extend for and all the chaos that we saw in the early days? Then it's very much a question of engagement with different people in different segments of the market. So how's how's fun flow?
I the asset managers are the you know, the banks will definitely not have you know unlimited inventory capability So, you know, how's markets getting made our markets getting made the way you expect them to for the private banks Are they trigger points? Is there for selling at what point of time does that stop? So you you keep attuned to what's happening and that's when you have a sense of where You know spread the right to or prices are gonna fall to and then you have a better sense of calling the bottom and then moving on with a Proper investment recommendation in terms of catching that bottom So I think it's it's a little bit of being prepared as well as that very strong engagement with different segments of the market so that you have all the information to Need you need for for giving that client advice? I think that's a huge point promote when I think about what I've come to value most or find as most valuable to clients is getting that Perspective across the globe from a wide variety of clients and I think we can really highlight that here on this call across Europe and Asia I think having the strong franchise that we have in the relationships with clients across the globe for example a couple months ago When he was in London in Geneva seeing clients.
I was in Taiwan and Hong Kong I know Chris know you were over in Asia for a trip recently as well I think being able to bring together all of those perspectives are extremely valuable and what we can deliver to clients and having that Really going into either periods of volatility or periods of calm knowing how investors in different geographies and with different mandates are thinking about the market That really allows us to have a great perspective and ability to perhaps understand the flows and the different parameters affecting client behavior really well So thinking about that and maybe zooming out a little bit Chris I want to get your perspective on advice that you would give analysts in the credit market today facing various challenges I think from your role as the head of research You can kind of get a big picture of you at some of the changing trends in the industry Whether that be with the financial markets themselves or how we communicate to clients So kind of what's what's the advice that you would give to either new entrants or analysts in the market today? Thanks, Zach. My advice is I guess maybe it's You know enduring in the sense, but it's to try to maintain discipline You know, I think that in the current environment You kind of have those those tensions during tensions between the economy inflation There's a lot of debate on certainty on which of those is gonna carry the day You can kind of think of maybe binary or fork outcomes from which one wins out with another worst case scenario being you know Stigflation or something close to that and so you know we in this current environment believe that those considerations are largely not priced in But then you also have strong technicals influencers going to shave cash in the sidelines and investors really don't have the luxury of waiting out to see if these These jobs are gonna take hold in what shape so you know, we have historically tight spreads And also we have to maintain that discipline about whether or not you're being paid for these risks And so when you exact I think you guys done a really good job on this if you look back to 2023 You take a moment when you have some of the tight spreads We don't know exactly the risk that tickle or gonna take hold but you say are we excited for any risk that could be out there? We didn't predict the you know Silicon Valley bank and the associated regional bank challenges that that that falls suit But at the same time or you mean compensated for the any of types of risk that are gonna come down the bike and so You know, that's the recommendation I have is to try to maintain that discipline and even if you can't identify exactly what the risks are and in this environment We certainly think that there's many up to go on the US and super front But to see if other might be compensated for any risk that can kind of come down and to to use that to shape the investment views Yeah, I first of all appreciate the shout out Chris because Strategy puts a lot of time and energy into thinking about how are we being compensated right now?
And you know, I don't think it's ever the goal of our research analyst or research team to predict the future to my knowledge None of the credit sites analysts actually have psychic powers if they do if they could give me a call that would be super helpful But I think that a lot of our analysts are really great about balancing risk versus reward Identifying, you know specific idiosyncratic catalysts and really providing probabilities and frameworks that our clients then use to make their own Decisions and putting those types of thoughts together I think can be very very powerful and hopefully not in the near term disrupted by AI But we will see how well that unfolds so Brian I want to ask about kind of team prioritization for the future as you've looked at lessons learned from prior disruptions How do you lead the analyst team in terms of prioritizing and how they build resilience for the future? Yep, thanks I mean, I'm not sure that there's a bulletproof solution as every crisis seems to have its unique nuances But I guess the things that I've noticed that help the most is you know Very simple things like teamwork support motivation, you know When these crises hit we sort of immediately kind of got together and just put everything we knew out on the table Everything we don't know out on the table and just kind of you know try and come up together with You know first steps. How do we approach this? How do we approach this individually as sector analysts or a strategist and how do we approach this in a team effort through collaboration?
So frequent group discussions after that because in these rapidly changing environments or volatile markets a lot of new information A lot of new knowledge is built fairly quickly and unevenly across the team So bringing all those you know heads together and you know sharing that evolution of expertise and knowledge Infastating environments is really helpful and I'd say also partnering with You know market participants partnering with our clients You know they're on the front lines and are looking for answers or they're just looking to try and figure out what the right questions are And then you know we go you know figure out the answer to those questions together So really looking to clients as a partner and trying to navigate these these difficult times or crises Is a really helpful way to try and approach the job and then I guess finally just remembering that you know sometimes in these big You know periods of all activity whether it's you know financial crisis or covid the job is stressful But also personal lives also come under stress You know covid was tough on everybody and so pulling together heading in the same direction in the office and together and just helping motivate people you know forward onward and upward is really sort of the best way to build resilience for when the next one comes That is so great teamwork does indeed make the dream work here at credit sites It has been an absolute privilege being part of the credit sites team for just a fraction of the 25 year track record And hopefully we'll have another great 25 years ahead of us at credit sites Chris promote Brian Zach, thank you for joining me today to talk about navigating times of crisis and market volatility I hope everyone enjoyed listening to this special edition episode in our 25 for 25 series Remember you can always like share and subscribe our podcast on YouTube or wherever you get your podcasts and thanks for listening Credit sites Play my all price references correspond to the date of this recording This podcast should not be copied is to be that are reproducible or in part Other credit sites and North affiliates makes any representation or word to you as to the accuracy or completeness any information contained in this But it's not providing investment legal attracting or tax advice is not providing research or making any recommendations Nor is credit sites offering or soliciting any transaction with respect to the purchase or sale of any security Or see by this listener of this podcast is not the giving other guys credit sites for its affiliates