Best time for private credit is during market volatility and dislocation – Arcmont’s Mattis Poetter

04/04/25 • 25 min

For private credit, the best dealmaking times are when there’s more volatility, says Mattis Poetter, chief investment officer of leading European private credit firm Arcmont Asset Management, on the latest edition of the ‘Credit Exchange with Lisa Lee’ podcast.

“Volatility is generally a very good thing for us in terms of dealmaking and new underwriting,” Poetter told host Lisa Lee, managing editor at Creditflux. Private credit in the past five years has really expanded market share in periods of dislocation.

Though still too early to really tell, if there’s more volatility in public markets and increased credit spreads, Poetter can see substantial capital withdrawing from the liquid market and private credit market in Europe, which are much smaller and more inefficient compared to their US counterparts. That would be very good for the large, incumbent European players.

Poetter points to 2022 and 2023, when Arcmont saw a vanishing of competitive intensity in Europe. Capital in the European middle market was very hard to come by, liquid markets were shut, US players focused on their home market, and small European lenders struggled to fundraise.

The drawback with Trump tariffs is the possibility they will damage the economy or reduce certain trade flows and negatively impact the portfolio of existing loans, Poetter says.

The drawback with Trump tariffs is the possibility they will damage the economy or reduce certain trade flows and negatively impact the portfolio of existing loans, Poetter says.

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More volatility, more uncertainty and more tailwind for private credit: KKR’s Dan Pietrzak

The markets are experiencing a bumpier road than expected on January 1st, said Daniel Pietrzak, global head of private credit at KKR, on the latest issue of the Credit Exchange podcast. Markets have shifted in the past eight weeks, or from the election in November, but the economy still remains in pretty good shape, Pietrzak told Lisa Lee, managing editor at Creditflux. KKR is starting to see a couple of places where they can step in, and perhaps get terms and conditions or pricing that didn’t exist a few weeks ago.

These types of markets, when there is volatility, are when private credit should be able to shine. It provides a good tailwind, said Pietrzak. M&A and LBO financing activity hasn’t been as busy as Pietrzak had guessed in November, when the world was coming around to the idea of the Trump presidency being arguably pro-business, pro-deal, and anti-regulatory in some way. Instead, markets have become focused on tariffs and the uncertainty with the knock-on effect of a 'wait-and-see' approach on sale processes. Still, KKR’s private credit team is probably busier than they've been throughout 2022, 2023 and 2024.

Pietrzak does worry about what the impact could be over the medium-term. Does this trigger some type of recessionary concern? Does it impact the consumer and their related spending? For Europe, though, the narrative has turned on its head. The markets are getting excited about government spending and the multiplier effect of that, and what that can mean for economic growth.

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Trump tariffs will materially impact credit, raise financing costs – Napier Park’s Jon Dorfman

The Trump administration chose a shock-and-awe approach to begin tariff negotiations, and backpedalling from the more extreme stances is the right decision, said Jonathan Dorfman, co-founder and CIO of alternative credit manager Napier Park Global Capital, on the latest ‘Credit Exchange with Lisa Lee’ podcast. Regardless, it’s clear there will be some tariffs, and credit investors should take that very seriously, Dorfman told Lisa Lee, managing editor at Creditflux, in a podcast taped 9 April.

Companies in the non-investment grade space that are exposed to tariff risks are looking at survival or no survival. Defaults will be higher. Companies will find it harder to get financing and face higher cost of capital due to the big movement in the long end of Treasuries, combined with widening credit spreads, said Dorfman.

The violence of the market movements will create more uncertainty at the corporate C-suite, as well as among consumers, who have already been psychologically damaged. All that risks slowing down the economy pretty meaningfully, cautioned Dorfman.

Credit markets so far have softened, but not materially. That’s because of the Federal Reserve. If these market moves had happened five or ten years ago, the credit market would have completely collapsed. What’s changed is the base rate. There’s very little leverage in credit markets, which means no margin calls. No margin calls means no forced selling. Because most credit buying has been based on gross yield, unlevered buying, the system has held up pretty well, Dorfman said.