How to Underwrite a Private Credit Manager | Art Vinokur, Franklin Templeton

Art Vinokur of Franklin Templeton Investment Solutions speaks with Adam Smallman at the PEI Private Credit New York Forum about how he underwrites credit managers. He lays out four skill sets he looks for — origination, structuring and underwriting, management and oversight, and workout experience — and explains how their relative weight differs between public and private credit. The conversation also covers valuation transparency in each market, the convergence of public and private credit, and risks in blended and evergreen structures.

1. Vinokur looks for four skill sets in a credit investor: origination, structuring and underwriting, management and oversight, and workout experience.
2. The weight given to those skills differs between public and private credit, with sourcing far more important in private markets.
3. He argues transparency is a matter of degree in both markets, and fewer observable data points make diligent valuation work more important in private credit.
4. On evergreen and tender-offer structures, he sees gating provisions working as designed and identifies investors' understanding of what they own as the main risk.