The transcript from this week’s, MiB: Mark Jenkins, The Carlyle Group, is below.
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BARRY RITHOLTZ, BLOOMBERG RADIO HOST: This week on the podcast, I have an extra special guest. His name is Mark Jenkins. He’s the head of Global Credit at Carlyle Group, which runs about $301 billion in assets. Mark manages about $73 billion in credit assets. He has a fascinating career, doing all sorts of work across the credit universe. And there aren’t very many people as knowledgeable as he is in as many types of fixed income and credit investing as he is, whether it’s aviation, real estate, liquid, illiquid, private investments, distressed assets. Really across the board, his focus on alternative credit assets is quite comprehensive.
Carlyle is one of the fastest growing credit shops and private equity shops out there, that publicly traded. And I just found this to be a master class in how to put capital at risk when you can’t get a whole lot more than 1.5%, 2% in fixed income, but you don’t want to see the same sort of volatility and risk that you see in equity. What’s the sweet spot in between the two? Really, just an absolutely fascinating conversation and I learned a lot, and I think you will also.
With no further ado, my conversation with Carlyle Group’s Mark Jenkins.
ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: My extra special guest this week is Mark Jenkins. He is the Managing Director and Head of Global Credit at Carlyle, the private credit and investing giant, with over $300 billion in assets under management. As head of the Global Credit Desk at Carlyle, Mark oversees $73 billion in assets under management. Previously, he led the Canada Pension Plan Investment Board’s Global Private Investment Group. And prior to that, he was at Barclays, where he was Managing Director and Co-Head of Leveraged Finance.
Mark Jenkins, welcome to Bloomberg.
JENKINS: Barry, thanks for having me. I appreciate it.
RITHOLTZ: I’m excited about this. This is an area that I don’t think people understand or hear enough about. It’s usually all day long equities. And I’m excited to talk a little bit about the various types of credit you manage. But before we do that, let’s get into your background a little bit. You attended Queen’s University in Canada, where you earned a Commerce degree. How does that translate into an interest in credit and investment?
JENKINS: Yeah, sure. Barry, I think, you know, when I grew up, I grew up in a town called Oshawa just outside of Toronto. And you know, growing up, I didn’t really have any influences that were in the business side. And so as I was kind of progressing through my childhood and through high school, I sort of was very interested in commerce and how that works.
So you know, my first job really was working at a corner store, where I used to stack what we would affectionately call in Canada pop bottles —
RITHOLTZ: Right.
JENKINS: … but you call soda bottles.
RITHOLTZ: I did that as well.
JENKINS: If you’re in Minnesota, you might call them pop bottles as well. And I used to sweep out the parking lot as well. That was sort of my first job at 13. And I was very interested in how that gentleman ran that store. And my brother-in-law actually ran a small lumber yard in town that I worked at as well. And so I was very, very interested in how businesses worked, you know, how that operationally work, not just the actual element of working at them. And so I kind of looked at people who had progressed into business, and most of them in Canada, at least, had Commerce degrees. So that’s how I went to Queens Commerce.
RITHOLTZ: And you come out of school, you ended up at Goldman Sachs pretty early in your career, right?
JENKINS: Yeah. Actually, I took a bit of a short stop first. So I — back in the day, when I was sort of, again, trying to explore how to get into business, I noticed a lot of chief financial officers in Canada had a CPA, or back then a CA. And so I actually spent two years at Coopers and Lybrand, working on my CA. In Canada, you have to intern at accounting firms. So I work there in corporate audit and business investigations, which basically back in 1989, ‘90, did a lot of the bankruptcies in real estate. So in fact, one of my early experiences was working on the Olympia and York bankruptcy …
RITHOLTZ: Sure.
JENKINS: … with the Reichmann brothers. Yeah.
RITHOLTZ: So — so I have to imagine that’s a useful set of skills to have, when you’re trying to decide, hey, am I going to see a return of capital as well as return on capital for this particular credit?
JENKINS: Yeah. It’s — it certainly taught me how to understand like how you’re going to get your capital back, if you will. I think that, you know, that I think by early formative years in terms of business was one of skepticism because ’89, ‘90 was — at least, in Canada, was going through large, you know, recession, predominantly in real estate owned, why it had overextended itself building out in Canary Wharf at that time.
RITHOLTZ: I recall.
JENKINS: Cross collateralization, that was kept from all the banks, of course, which was part of what we discovered. And I think my formative years, it was started with a lot of skepticism, which probably led me into credit, as a result.
RITHOLTZ: So — so from Coopers and Lybrand, and accounting, how do you make your way to fixed income and Goldman.
JENKINS: Yeah, sure. Well, I — I — I realized that the accounting profession, probably long term, wasn’t going to be for me, and most people would move on to something different. I had some friends who worked over Goldman Sachs, which frankly, I didn’t know a lot about at that time. I walked across the street in Toronto, ended up working there initially in — in controllers, but eventually worked my way into being a credit analyst there. And you know, very shortly thereafter, I moved down to New York and spent actually most of my career in New York working for Goldman, and always on the credit side.
RITHOLTZ: So Goldman, and then you ended up at Barclays, where you were co-head of Leveraged product. That — that sounds like that’s an aggressive portfolio. Is it what it sounds like?
JENKINS: Yeah. I — you know, I’ve spent over 11 years at Goldman. I learned a tremendous amount of that organization as it, you know, transferred from – transformed from basically being a partnership into a corporate, and all the changes that go with it. But it was an extraordinarily fertile time for me in terms of growth and development, in terms of just being very entrepreneurial and commercial, and I love that aspect of it.
But Barclays, a couple of my friends had left Goldman to start up the leverage finance business there. And really, for me, it was an opportunity to learn how to build a business. I, you know, spent all my years doing very highly structured transactions on the credit side, being a credit analyst, et cetera. But really what I hadn’t learned is the business side of it. And that was a great, you know, formative time for me, which — which kind of led me into my next move with —
RITHOLTZ: Canadian Pension Plan.
JENKINS: Correct.
RITHOLTZ: Which just sounds very different than prior experience.
JENKINS: Yeah, very different, but — but similar and that, you know, my former boss used to joke when he hired me, that basically, I was joining a $100 billion startup. Because the Canada Pension Plan Investment Board, in fact, is — manages what you would think of as in the U.S. terms, excess contributions to Social Security, if there was such a thing, which there isn’t. But — but that’s effectively what you’re doing. You’re managing those excess contributions to the Canada Pension Plan.
And for me, it gave me the ability to take all the knowledge I learned on the credit side, the business building opportunities, and transform that into a private credit — direct private credit investment platform for CPPIB. And later, you know, as I progressed there, stayed there, I guess I ended up running private investments, which included private equity, infrastructure credit, energy credit and some other assets. But generally, I’m practitioner in the credit side.
RITHOLTZ: So when I was doing my research into your background, you have family members who are investment — investors and pensioners into the Canadian Pension Plan. How did that police, teachers, pensioners, things like that —
JENKINS: Yeah, yeah.
RITHOLTZ: Did that impact how you thought about doing your job?
JENKINS: For sure. For sure. I think that the — the — the greatest takeaway from me and I take that to my job today is like know who you work for. And for me, I have a 91-year-old mother and she would say to me every week when I talked to her, “How are we doing?” Because it’s her money, right?
RITHOLTZ: Right.
JENKINS: And so my — my — my mother, my brother is about 18 years older than me, so they take the Canadian Pension Plan right now as well, and my sister. So they’re all beneficiaries of that. And then — and on top of that, my brother and my other brother, they’re both were — one was a teacher, one was a policeman. So they also benefit from the Ontario Municipal Employees’ Retirement Plan and Ontario Teachers’ Pension Plan. So they’re all beneficiaries of these large pension plans in Canada.
And I think what it — what it really did is made it real, made it real for me in terms of the money that I was investing, the sacred trust, where literally 90 million people are giving you money to invest on their behalf is a sacred trust. And so I used to say to the team at CPPIB that that’s a special place to be, and it has a — a higher duty of care in my mind. Because think about if you lose $20 million, that’s like the entire City of Peterborough contributing to CPP for a year. So that really puts things in perspective. And I’ve taken that with me now, because now I work on behalf of many beneficiaries and fiduciaries across the globe. And I — and I still think it’s a sacred trust, and it’s a privilege to manage money.
RITHOLTZ: Quite — quite fascinating. Let’s talk a little bit about credit and fixed income side for your career. What — what led you to make that leap from — from a credit analyst and a fixed income analyst to actually managing credit portfolios?
JENKINS: Yeah. Barry, I — you know, when I think about just being in credit, generally, people ask me all the time, I — I look back to my — my –my not illustrious sporting career, which was, you know, soccer, hockey and I always played defense. So I never really played on the offense. I was always trying to keep the puck or the ball out of the net, and helping people do that.
And I think when you — you think about credit, what you’re looking to do is there’s a contract between me and you, and I give you some money. And at the end of that term of the contract, you give me the money back. That’s — that’s defense. I’m not looking for — we’re not looking for massive upside that you, you know, shoot the lights out on the equity side. And so it always seemed to be a very much a comfort zone for me that I could operate in an area where I could understand what was going to allow me to get my money back at the end of the day.
And all that training at Goldman had taught me, as a credit analyst, that’s what I was always thinking about is how will this obligor give us the money back at the end of the day, so that, you know, we’re in a good position, and we’re minimizing our credit risks. I think the other thing that Goldman really taught me was how to mitigate risk and downside, and really focus on the downside in a lot of situations.
And so coming at investing from that perspective, naturally led me to a better credit hat than it ever did equity. And in fact, I did run equity — private equity at — at CPPIB. I think I was OK at it, but I definitely majored in — in credit. So that’s the path I pursued. And I — it’s been — it’s been fruitful and I — I really find it fascinating. I know, I’m a credit geek, if you will.
RITHOLTZ: Yeah. No, I’m — I’m intrigued. I love the soccer-hockey metaphor. I have a friend who is fond of saying, “A bad year in fixed income is a bad afternoon in equity.”
JENKINS: Yeah.
RITHOLTZ: And it — and it’s really kind of true.
JENKINS: Yeah.
RITHOLTZ: What’s the worst year high quality fixed income has? Not — not that bad because of that return on – of capital.
JENKINS: Yeah. And I — you know, I think for anybody who manages a portfolio, and getting back to that, you know, managing large portfolios at a place like CPPIB, as you recognized, we’re just like one exposure in somebody’s broad portfolio.
RITHOLTZ: Right.
JENKINS: So you got to think about what you’re meant to deliver into that portfolio. And that is a very stable, persistent return three cycles. And that, to me, what credit encapsulates from an investor’s standpoint.
RITHOLTZ: So — so let’s talk about some of those different silos of capital. You – you have a couple of different credit segments, liquid credit, illiquid credit, real estate assets. Am I missing any or …
JENKINS: No, that’s it.
RITHOLTZ: Those things which cover the Big 3?
JENKINS: Yeah.
RITHOLTZ: So break those down for us, if you would.
JENKINS: Yeah. The — so what we wanted to do, and from my experience on the other side and experience at these other organizations, was explaining credit, which isn’t really a monolithic asset class. Like it has a range of exposures and a range of expected outcomes, you know, through time, that we really wanted to be able to deliver to investors that range of risk-return outcomes, right?
And so if you think about, you know, non-investment grade credit, you go from leveraged liquid loans, CLOs, which is the liquid credit side of things, to direct lending, to opportunistic credit, to distress which is really private or illiquid credit because it doesn’t trade. And then there’s real asset credit, which involves assets like real estate, infrastructure, in our case, aircraft, aviation, where the underlying security and cash flows are determined on hard assets.
And all of those, from an investor’s perspective, allow you to put together a portfolio that is diverse away from just single name credit. And I think that’s what people, like on the institutional side, I know that from experience, that’s what we look to do in my portfolio in my former life, and that what people are doing today. So that was point one. We wanted to be relevant to our customer, if you want to call them that, the – the investor.
Number two, we got to be relevant to the user capital, right? Like it’s – by having a platform approach, which really kind of covers that span, that broad span, we can be relevant to almost any borrower in the world for whatever they want to do, right? So they may have some real estate. They may have ongoing cash flow loans. But you can put them together and you can deliver an opportunity.
Why is that important? Because it allows us to have the widest funnel, from an origination standpoint, that we can and leverage that Carlyle network, where we’re operating on a global basis. So that’s — that’s really those three verticals really feed into what we try to accomplish from a platform perspective.
RITHOLTZ: So I understand real estate, obviously, is going to be collateral in that space. When you talk about hard assets in aviation, you’re referring to the actual aircraft?
JENKINS: Yeah, the actual aircraft. I mean, the actual metal in the sky only has value, to the extent you have a contract to lease it out. So it’s not — it’s not just enough to have the airplanes. What’s as important is to have the relationships with the 110-plus airlines that we do on a global basis in some 80-plus countries around the world, so we have that diversity, and maintaining that long term contract. So it’s through this period of time, which a lot of people say, “Geez, it must have been a really tough time in — in global aircraft” —
RITHOLTZ: Sure.
JENKINS: — which it has been. You know, we’ve been able to take advantage of restructuring and terming out our long-term leases, which is good, it gives us lots of optionality, but also take in more aircraft. So we’ve now actually risen from being — I think it’s the 15th largest lessor in the world to the 6th largest lessor in the world, as long as we close on Manchester, which was announced just before Christmas. So — so we really leaned into something where the metal in the sky is relevant, but as relevant is are the long term contracts that you have with the — with the airlines.
RITHOLTZ: And so essentially, you’re making a bet that we will eventually return to normal? Travel will recover and — and people will move out the country as they — or the world as they — as they were pre-pandemic.
JENKINS: Yeah, at a macro level, absolutely. I think that’s true. I think the — the other thing I would layer into that is there has been a shift in terms of the older aircraft that had been retired. So the — the actual inventory has shrunk. And then the actual OEMs, Airbus and Boeing have actually shrunk the number of planes they’re producing. So there is — there’s another technical factor going that you’re having old aircraft retired because they’re not economical to fly. And you have the OEM slowing down. So it actually makes our midlife aircraft much more valuable, if you’re trying to have a very economical asset in the sky to fly from. Yeah.
RITHOLTZ: It makes sense. You constrain supply with the same demand —
JENKINS: Yeah.
RITHOLTZ: — prices are going to go up.
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RITHOLTZ: So — so let’s focus within the illiquid credit —
JENKINS: Yeah.
RITHOLTZ: — silo. Tell us a little bit about private credit, because when I hear that phrase, I tend to think of merchant banking and the sort of mid-level bank services that Wall Street has sort of grown out of and only focuses on the largest companies. But there is a lot of, you know, really substantial amount of firms and activity in that space. It just doesn’t seem to scale to public Wall Street activity.
JENKINS: Yeah. A little bit of history, I guess, is probably worthwhile. If you went back to ’08, ‘09 which, you know, I was fortunate enough to — to be in the credit market center to — to work through that, which was very, very interesting. What you found is the banks had already started to retrench from the lending market. I mean, that in fact, it started well before, ’08, ’09 and then late ‘90s, more or less. And the institutional market, specifically on the loan side, started to increase.
And if you went from ’08, ‘09 to, call it, 2020, if you saw the amount of credit inventory that banks were carrying till today, that’s down 80%, you know. And I’ll put it in simple terms, they’re no longer — they no longer hold inventory, they’re shippers at risk, right? And in that void, if you will, you have a couple other things happening.
One, you’ve got a 30-year decline in absolute interest rates, which we’ve all observed. And you’ve seen a rotation, as a result of that, of these larger institutional funds that have to make returns that are in the high single digits, rotate into illiquid assets. The first phase of that, that was in private equity. People looked and said, “I can pick up 500 extra basis points, on average, if I go into private equity,” plus or minus a 100 here or there. I don’t want to be exact on that, but just approximate. And they made that rotation that happened, coming out of ’08, ‘09. And we’ve seen that progression.
The next wave is people who are in fixed income, who are picking up to 3% in corporate bonds, and rotating to the extent they can allow themselves to be more illiquid, picking up 100 to 150 basis points by going into privates. Now, it’s not obviously without risk because you want liquidity. But I think ‘08, ‘09 showed us that you may be overpaying for liquidity. Because I lived through that period of time and what you could sell was the best high quality liquid names. And anything that wasn’t high quality wasn’t all that liquid. So the risk premium you’re paying for that was pretty substantial for — for liquidity.
So what we — what we have today is a private credit market that’s grown from $300 billion and it’s overtripled to $1.1 trillion today. Total alternative assets today, as of the end of last year, $8.9 trillion in a market where the combined fixed income and equity markets are $229 trillion. So alternatives, as a whole, are pretty small in somebody’s portfolio.
RITHOLTZ: Right, right.
JENKINS: Private credit is — it’s a 1 to 9 ratio in terms of total alternatives. On a path where we’ve tripled in size, overtripled in size since ’08, ’09, and what we see, because all of those dynamics, the banks retrenching, the — the rotation into alternatives, is a 10% to 12% CAGR over the next five years. So it’s — there’s — you know, we don’t hear about it because it’s relatively small, but it’s — it’s a part of somebody’s portfolio, and it’s becoming increasingly more important.
RITHOLTZ: So you mentioned the 3- plus year bull market in fixed income, with rates falling from the early ‘80s and Paul Volcker 15%, 20% down to close to zero. What was the – the bottom of the 10-year? About 1 something, 1, 2? 1, 1? It appears that that 35-year market is coming to an end, and we’re looking at a combination of both rising inflation and higher rates. How – what sort of challenges does that present to you working in credit markets where, hey, maybe rates are going up, maybe inflation is — is going to impact our — our real adjusted returns. How do you figure that into your calculus?
JENKINS: Yeah. Well, the early — early returns are — if you look at high yield, it’s down 4% year-to-date. That’s relative to the S&P 500, down 8.5% year-to-date.
RITHOLTZ: Right. It’s a hedge.
JENKINS: Leverage – exactly. Leveraged loans are flat. Now, why is that? Because they’re floating rate zero — like 0.5 duration versus a longer duration fixed income bond. So right now, it’s pretty clear that the move in interest rates is impacting valuations, right? It’s not – there’s not been a fundamental shift in credit yet, although default rates — you’d imply with spreads right now, the default rates went from the end of year 1.1 to maybe 1.25.
RITHOLTZ: Still very low.
JENKINS: Very low still. So I think the early returns are really indicative of interest rate moves which, by the way, we should have expected.
RITHOLTZ: Yeah.
JENKINS: I mean, I don’t know how long people thought the punchbowl was going to stay there, but we couldn’t believe we’re going to stay at that — that level forever. So none of this is unexpected. I think the shock of the moves is always — I find in the market unexpected by people, but it should have been expected. So if you think about investing, if you think about it from a return perspective, you’ve got that hedge, if you want to call it, against rising rates.
What we’re not seeing yet, but this is what we — I think we get paid for is the credit impact of a slowing economy, with rising rates and inflation. And that — you know, that’s where I think we’ve moved from 2021, which was, I would say, arguably a macro-focused trade, if you want to call it that, even though we’re long term investors, to very much focusing on the micro, which is security selection and portfolio construction. Because the one thing I’ve learned in 31 years is the only thing that has protected us ever coming out of like a massive disruption in the marketplace is a high quality diversified portfolio. So that’s how we’re focused today.
Inflation isn’t — is not so much where we think rates go in terms of how I think about it, it’s how does it impact the companies that we are lending to? So for instance, we have a company recently, they call it like a staple food provider, white label it, and the biggest cost to them is the inputs of the food.
RITHOLTZ: Sure.
JENKINS: Obviously, it gone up dramatically. Where our concern was — was — were they able to pass that on to the distributor, large distributors you could think of — of food in — in the United States? And the answer is they were. Okay. So that’s a good thing. What we’re trying to do is look at portfolios, where that ability to pass on costs or absorb costs is greater than things that are more sensitive to it, because we know that’s going to hurt margins and EBITDA growth. And that’s — that’s what we’re focused on right now as we think about inflation, not so much how it affects interest rates.
RITHOLTZ: So that’s interesting, you’re — you’re using that as a single example. Because when I was learning about what you do at Carlyle, you know, sometimes I look at a particular manager, and they’re all about the selection. Other times, and I’m going to throw this to you, it’s more about creating a platform that they can operate off of as opposed to being so focused on the granular single company selection. Tell us a little bit about the platform that you helped develop at Carlyle.
JENKINS: Yeah. A platform approach is really informed by my time at CPPIB. And what I learned there were they were agnostic to product in silos. They were simply seeking out the best adjusted — risk-adjusted returns. And if you looked at the old days of ’08, ’09, things were very siloed, high yield, leveraged loans, distress, maybe special SIPs. But they were very specialized.
And what we learned, or I learned, at least, with my team at CPPIB, is by having a broad platform that could connect to the information flows coming in from the public market side, coming in from the private equity side, you know, coming in from our infrastructure and real estate, helped inform opportunities and allowed us to move three cycles to where those opportunities were.
So for example, today at Carlyle, what we were able to do is, as we were going into 2020, we’re obviously working across the platform in direct lending and opportunistic credit, not really need to distress, doing really regular way performing deals. And when the market dislocated in April — March and April, it felt like ’08, ’09 again, and we were able to go immediately to the secondary market and deploying the leveraged loan market, where things were trading off dramatically. So Charter Communications, trading at 72. I didn’t need to be a genius, when I looked at the market cap of Charter Communications —
RITHOLTZ: Right.
JENKINS: — trading at 72, recognized I’m probably going to get my money back, right? So if you don’t have a platform that allows you to pivot, you can’t take advantage of that. So what we’ve done deliberately is have this cross-platform approach, both in product set, expertise, but geographically, so that we can swing to where those opportunities are.
So for instance, in the past, I’d say, six months, we’ve seen a lot of opportunities coming out of Europe because the U.S. capital markets tend to heal themselves a lot quicker and stabilized quicker. Europe, because of the multiple different jurisdictions, tends to take a little bit longer. We’re looking into Asia, we see opportunities. They’re evolving. If you don’t have a broad platform that’s connected globally, it’s very hard to take advantage of those opportunities to swing your capital to where those opportunities are.
RITHOLTZ: Really, really quite interesting. Let’s talk a little bit about the state of credit today. You mentioned global credit generally has grown. You’ve grown your platform to $73 billion as of the end of 2021. That’s about 2X what it as four years ago, and it’s one of Carlyle fastest growing segments. Tell us a little bit about what you’re doing in terms of fundraising and — and how much of this is performance related.
JENKINS: Well, you can’t raise — what I’ve learned is you can’t raise money without performance. So one —
RITHOLTZ: Go figure.
JENKINS: One begets the other. I — I would say that what we’re — what we’re wanting to do is I think the — the thing that’s really important as we build the platform is a lot of people say, you know, why do you — why does scale matter? Well, scale matters because it allows you to take advantage of the best opportunities on a global basis. So we want to be scalable, so that we can do any transaction that we want to do globally, period. And that was the goal of getting to scale $70 billion, $80 billion, $90 billion. Like, you’re in a snap bracket where you can do any transaction you want and be very selective.
RITHOLTZ: Got it.
JENKINS: What that also leads to is that, you know, each successor fund, more people want to participate.
RITHOLTZ: Right.
JENKINS: So that is an ongoing growth trajectory that we just deal with. If you have poor performance, well, guess what, people don’t want to participate in your funds. So far, touchwood, in the six years that I’ve been involved, our performance has been, I think, very good. But the most important thing, and I — and I said this before, is that we’re there to deliver an expected exposure into somebody’s portfolio, consistent and persistent through time. And that is something you demonstrate over time.
And so far, I think, with the team that’s there, which is excellent, by the way, they have been delivering those returns over the past six years even through the pandemic, which is really important. I think the next 12 to 24 months, you know, we’re going to — we’re going to have some challenges. Everybody is going to have challenges and — but I think the portfolios are well positioned for that. But what it also means is — when we talk to our investors, is they need to invest capital. Like, that doesn’t stop just because the markets are volatile and people are rotating more into private credit, as you and I discussed earlier. And so we’re seeing that growth. So we’re trying to balance our growth versus what the opportunity set is.
And the one thing I had learned from my prior life is that, you know, there is a certain growth trajectory that if you get beyond that, and I almost had infinite capital at my prior job, but you don’t have infinite opportunities. And so you have to continually build the team and the platform that allows you to scale into the opportunity set to be able to prosecute. If you can’t prosecute it, then you may end up in a not a good place for your investors. And so we’re very thoughtful about that. But the programs that we built out have scaled mostly because we’ve been able to do those larger size transactions and control them on the front end. And I think, you know, we’ll continue to — to leverage into those programs where we’ve been very successful.
RITHOLTZ: So — so you raise a really interesting point, which is, there is only so far this can potentially scale. You’re talking $70 billion, $80 billion, $90 billion. I’m assuming that this can scale up some multiple of that. How large can private credit grow? Even though it’s such a relatively tiny portion of overall investable assets, where’s the ceiling?
JENKINS: Well, I don’t – I don’t know if I can predict the ceiling. But I can tell you that our forecasts and belief is that it’s growing at, at least, 10% to 12% CAGR per year from a $1.1 trillion base today.
RITHOLTZ: Right. I know it sounds ridiculous to say from that relatively small base of just a trillion dollars —
JENKINS: Yeah.
RITHOLTZ: — but in the grand scheme of thing —
JENKINS: But if you think of the —
RITHOLTZ: It’s half a percent of global assets.
JENKINS: And — but if you think about it, it’s very small part of a global asset. You’re absolutely right. But if you think about the participants, even the largest participants aren’t greater than $150 billion to $200 billion. I mean, that sounds like a lot, I know. But in the context of that, there’s not like a clustering at the very top yet. So I think, you know, we’re going to grow with, at least, the market. Obviously, you know, stakeholders would like us to grow beyond that. I think if we do that in a very thoughtful, deliberate way, that’s fine.
The other thing we pursued, which is slightly different than maybe some of our peers, is we do have that three pillar approach across multiple strategies. So any of those strategies in and of themselves, can scale to $10 billion or $20 billion. But if you, you know, took that in — in — in totality across the platform, that adds up to a lot of money to manage, right?
RITHOLTZ: Yeah.
JENKINS: And so what we’ve really purposely tried to do is say where are those veins that we think will expand infrastructure, real estate credit, aviation, you know, corporate credit as a whole, obviously, liquid credit, you know. You know, today, if you look at the leveraged loan market, it’s $1.5 trillion. It — it was less — much less three to four times what it was in 2008, 2009. So, you know, we’re trying to stay in those large markets where there’s scale, and we can scale along with it.
RITHOLTZ: So I’m going to circle back to infrastructure and leveraged loans. I want to refer to something that you guys said on your fourth quarter conference call, which was, “As a firm, we expect to see global credit have a breakout year in 2022.” Given all the turmoil we’ve seen and potentially rising rate environment in the face of inflation, why should we expect 2022 to be a breakout year for global credit?
JENKINS: Well, twofold. One is, I think, you know, that operating platform I talked about is in place. And so once you — you put the operating structure in place from an investment origination perspective, I mean, it really does allow you to scale and be much more efficient. So that’s — that’s point one.
We have multiple avenues where we raise capital. We’ve got sea (CTAC), which is a — which is a retail product that goes — cuts across our entire platform. And that is very attractive for investors, where they’re getting, you know, a very current cash dividend in high-single digits. And that feeds into our business. But then you’ve got these new verticals that you and I’ve talked about on the real asset side, which are growing probably faster than I would have thought, because people find that extremely interesting from a portfolio construction perspective.
But then lastly, on the opportunity side, the volatility is a good thing for us. Because as you and I talked about earlier, our ability to swing across the platform take advantage of opportunities. Volatilities actually create vast opportunity that was difficult, I would say, pre pandemic. And pre pandemic, we were in a, you know, pretty well priced market, we thought, where it was — it was tough — tough sledding for opportunities and very competitive.
And now, companies that would typically have access to the capital markets, who may have more complicated story, you get one speed bump in the market and some negative sentiment, they’re still good companies in the long term. We’re allowed — you know, we — we’re allowed to kind of go in and do the work on a more complex situation, and do that work that the capital markets won’t do, because they don’t have access to that information. And it creates opportunity for us. And then — so we’re, I don’t wanna say excited, but we’ve been looking for some volatility in the marketplace for quite some time, and we’re starting to see it.
RITHOLTZ: So I was kind of impressed with how selective you are in terms of origination. It’s really close on relatively few, something like 5% of the companies you put through their paces. Tell us a little bit about that process. And is it just to target rich environment and you’re taking the cream off the top, or why so few actual closes —
JENKINS: Yeah.
RITHOLTZ: — given — given, you know, how many opportunities you see worldwide?
JENKINS: Well, it’s — it’s like anything, right? We want to have — from the top level, the platform just really opens up a very broad funnel for opportunities. And then as a result of that, when you’re in the market, your scales, you’re known in the market, you get a lot of opportunities, and they’re coming in, you know, I say left, right and center, but it feels like that sometimes.
What we’re looking to do is to pull together the most high quality, diverse portfolios that we can, that we believe will weather through, you know, three cycles. And so as a result of that, you know, we do have to be very selective as to what we’re going to put in there. And we also have to be thoughtful about this exposures, right? When you think about portfolio construction, there’s kind of three things, right?
There’s security selection. You know, you’re picking that asset you’re going to put in there and that’s the micro. There’s portfolio construction, making sure you have a well-balanced portfolio, that’s not highly correlated, because that’s not the exposure our investors are looking for. And then you — you tilt those exposures, depending on some conviction you may have.
I think in this environment, the first two are really the most important. Tilts can — can wipe out the first two very easily. So we tend not to — to have tilts. We tend to have well-balanced portfolios that we believe will weather through volatility in the market, which we think we’re going to see more of in the next 12 to 24 months.
RITHOLTZ: Really, really, really interesting. So — so let’s talk about Carlyle in general. You guys have been on a torrid asset-raising pace. You’ve been breaking categories, as has private credit also. So you’re in the right place at the right time. Why is it so hot right now? Is it just as simple as there is no alternative yields so low on the fixed income side, and you guys can deliver consistent returns without a whole lot of risk and volatility?
JENKINS: Well, again, step back and think about it from the average institutional investor and what they’re trying to achieve. And you know, it will — it will vary, but let’s use this as a starting point. Let’s — let’s assume that, on average, most institutional investor over the long term is trying to achieve 7% for their beneficiaries. In a, call it, you know, a negative real rate environment with — you know, equity returns have been, I think, 15% over that since ’09.
RITHOLTZ: Sure.
JENKINS: Roughly, if you get —
RITHOLTZ: 13 plus last year. Absolutely.
JENKINS: Yeah, 13 plus, something like that. Well, where — where is your long-term forecast for equity? I mean, a lot of people would probably tell you public equity long-term forecast is probably in the 6% to 7% range, maybe lower, I don’t know. You do the math on that over a 10-year horizon, it’s very hard to get 7%.
RITHOLTZ: Well, you take 6%, 5% from public equity, and you add in 2% from fixed income and you blend it at 7%.
JENKINS: And you blend it.
RITHOLTZ: That’s the secret. Yeah. You can’t average them. You got to add.
JENKINS: You got to add them.
RITHOLTZ: And that’s how you get to see that.
JENKINS: See that? They didn’t teach that math in Canada. Maybe — that’s maybe how our education system was different.
RITHOLTZ: That’s — that’s the —
JENKINS: Yeah.
RITHOLTZ: That’s the problem with expected returns is we’ve been hearing forecasted lower expected rate. Hey, markets are high. Valuations are high. We’ve had to — we’ve — long term returns are 8%. We’ve been 13%. That was before last year is nearly 28% on the equity side. So you should ratchet down your expectations. After you hear that so long, people sort of stopped paying attention to it. This is probably the year where they should be paying attention.
JENKINS: Yeah. And I — and I think here’s the — here’s the good thing. I – I think about the institutional investor really large, is that they — they generally are pretty thoughtful and long-term thinkers. I mean, I think that, you know, sometimes us, on the manager side, think we have all the answers. But I would say they’re pretty smart people that are managing broad diversified portfolios. And I — and I believe what they recognize as — as a fiduciary, you can’t — you know, hope isn’t a strategy. You know, I hope I keep getting the same returns and public equities. That’s a great — that’s a great thought. But I don’t know if that delivers.
And so what people have been doing is there is a trend — demonstrable trend of — of putting some of your cash, if you can be illiquid, into alternatives, private equity, real estate, credit, infrastructure. And that trend is just going to continue as we continue to be in this lower rate environment. I know rates are going up, but like, historically, they’re still very low.
RITHOLTZ: Right. They – they could go up, you know, four or five increases and you’re still historically low with that.
JENKINS: Yeah. I mean, do you remember when LIBOR was like 6%?
RITHOLTZ: Yeah.
JENKINS: I do. I — I remember when my parents had a mortgage that was 18%. So —
RITHOLTZ: I — I — I remember when my father-in-law’s New York City general obligation bonds from the ‘70s that were yielding 18%. 19% came up. And then he said, “What can you get me?” Like, I can get you a 6% — 4% munis or 6%, you know, longer term bonds. He’s like, “6%? Who the hell wants 6%?”
JENKINS: Yeah.
RITHOLTZ: And that was, I don’t know, 20 years ago.
JENKINS: Right.
RITHOLTZ: So —
JENKINS: And you would – you’d kill for that.
RITHOLTZ: Right, right. Now, 6%, oh, my goodness, how do I get 6%?
JENKINS: Yeah, yeah. I remember I — it’s off topic, but I remember I was — I was talking to a guy who asked me and said, “You know, I’m looking at these Ontario zero-coupons at like 11%. What do you think?” I said I think they’re going to go higher, I would find them.
RITHOLTZ: That didn’t work out.
JENKINS: Yeah, it didn’t work out well. He didn’t buy and he’s mad at me to this day. So anyway, but — but, you know, you go back to this and you — and you say to yourself, why is it — these really smart institutional investors, right? They’re not — you know, they — they are smart people who are investing money on behalf of a lot of people, rotating into alternatives. And the singular reason is, is because they’re looking for a pick up in a liquidity that they’re getting from being in that asset class.
And in my prior employer CPPIB, they recognized because of the long life of the asset base for them, which is they look 75 years forward.
RITHOLTZ: Right.
JENKINS: You could be a 100% in equities, if you want it to be. Now, the volatility of that, I don’t think stakeholders could handle. But today, their — their allocation is 85% equities. So if you can layer on top of that alternatives, which give you a premium, and you can bear – weather the volatility, then actually you’re probably going to return more for your beneficiaries than if you just stayed in public assets.
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RITHOLTZ: But I — I think a lot of investors forget the illiquidity premium is there for a reason. And if you don’t have a need for that liquidity, you’re effectively getting a discount in public fixed income markets. So if you don’t need that liquidity, why not take the additional 100 to 200 basis points in returns?
JENKINS: Correct. And I think that’s — that’s — that is what you’re seeing. And that’s what’s driving it right now. I mean, the — the conversations we have with institutional investors, with consultants today is very much in that vein, which is you can afford to have this much of illiquidity in your portfolio. You should tuck that away, and you should pick up that illiquidity premium. And that – and there’s other — you know, all the academic studies said there’s illiquidity, there’s complexity, and there’s a lot of other things in there. But, you know, when you can pick up 100 to 500 basis points, which is kind of the range, that’s pretty attractive.
RITHOLTZ: Especially relative to under 200 basis points on — on a 10-year. So — so back to the question on scale, where does this tap — tap out? Are we still very early days in the growth of all these different types of — of private credit transactions?
JENKINS: The way I maybe think about it in terms of growth is there’s — there’s over $1.3 trillion of dry powder in private equity today. And it’s probably much higher than that, and there’s a lot of people out there raising money. If you think about how much financing that will drive, that drives at least another —
RITHOLTZ: Multiple of it, right?
JENKINS: Right. Two to three times.
RITHOLTZ: Yeah.
JENKINS: You know, $2.6 trillion plus of just financing there alone. And that’s just in the buyout market, that doesn’t include any corporate activity. That doesn’t include, you know, other special situations that, you know, just don’t even account for in that number. So I think the growth is really driven by the fact that — the third thing that we didn’t talk about is the number of public companies today is about half of what it was over 10 years ago. There’s more companies staying private for longer.
RITHOLTZ: Right.
JENKINS: I don’t know if the whole SPAC thing is going to change that a bit, although the run on that has not been great. But I would say people are staying private for longer. And as a result of that, the need for our capital is greater than it probably was 10 or 15 years ago. So I — I — I think the tailwinds are there for, you know, the next five plus years, for sure.
RITHOLTZ: So — so let’s drill down to different types of — of credit. And you mentioned infrastructure investments as a sizable piece of the portfolio. Let’s talk a little bit about infrastructure. What areas are you investing? Walk — walk us through the typical credit investment in infrastructure.
RITHOLTZ: Yeah. Well, the infrastructure as a — as a strategy kind of came to me, really, from my experience at CPPIB, where when I was running the infrastructure equity business, I looked at where the credit financing was coming from, even though we’re putting equity in. And a lot of the deals where we would put 20% to 25% equity in, required massive amounts of credit.
Now, banks generally would provide a lot of that. U.S. banks don’t provide anything to infrastructure, very little. They just — it’s just not something because of the long-term nature of it. Canadian banks do a decent amount. But guess what, there’s not that many Canadian banks.
RITHOLTZ: Right.
JENKINS: And then the Europeans, but then with some of the financial regulations that limited how long that duration could be. So my thought was always going to be that the capital markets will become a more relevant part of infrastructure finance. And that was kind of the thesis. So when I came to Carlyle, what I started with on Day 1 is I want to find a team that could help build out that business.
And we found a very experienced individual who had worked at a number of places on the infrastructure side, most recently BlackRock, and had been very successful and built up a very, very large portfolio. So we hired him, and we’ve been building out this business. And I can see this being a very substantial part of our overall portfolio going forward, 10%, 15% of our overall portfolio. And there’s such a great need for it.
So when you think about what does that mean, specifically? I mean, they’re really, I would say assets that have an underlying rate or regulatory charge that allows you to have more confidence in the stability of the return on that asset than you would in a normal corporate asset. And as a result of that, they can also be longer duration. And a lot of insurance companies, for instance, who are trying to match duration, look at these assets and see them as being very valuable and a diversifier in your overall corporate portfolio.
RITHOLTZ: And when we talk about infrastructure assets, are we talking about ports and rails and highways or —
JENKINS: Highways, rails.
RITHOLTZ: Bridges?
JENKINS: Energy transportation.
RITHOLTZ: Pipelines?
JENKINS: Pipelines. Yeah. It could be transmission lines. It could be toll roads. I mean, it has various natures. But anything where there is an overriding charge to use that asset, that is — is –is disassociated with the pricier volume that’s going through it.
RITHOLTZ: Makes sense. We talked about aviation as a hard asset, but we really didn’t get into real assets. Let – let’s talk a little bit about real estate —
JENKINS: Yeah.
RITHOLTZ: — and what you’re seeing in that space.
JENKINS: Yeah. I think in real estate right now, what is really, really interesting to us is — and it was, you know, as a result of some of the dislocation we’re seeing, is really in the opportunistic real estate space. So where we’re providing, you know, mezzanine and sort of completion capital, if you will. You know, the banks are very efficient further up the capital stack, and can provide that. But it’s really that completion capital. And we’re seeing that in very unique and interesting assets.
I think the iStar asset that we just announced several weeks ago, is interesting to us, because of the triple net lease component really is underlying credit. And it’s a very diversified portfolio between commercial office and entertainment.
RITHOLTZ: And I — I read those about $3 billion?
JENKINS: Yeah, $3 billion. And it’s a business we want to grow. So there’s a team there that’s well known to us, an asset base that’s well known to us. Roger Cozzi who we hired, actually used to work at iStar and helped develop that original portfolio. So we’re — we’re quite excited about that, and our ability to grow that over time. And as — as, — as everything we try to grow into, we want it to be a $10 billion plus type business, because that gives us a scale advantage.
RITHOLTZ: And we haven’t really talked about distressed assets, which I would imagine having worked your way through ’08, ’09 must have been another target rich environment.
JENKINS: Yeah. I think distressed has — has gone through an evolution. I believe, if you think about distressed 20 years ago, there’s fear of people doing it. I think that the — the efficiency was — it was a less efficient market. Fewer participants made less efficient. So there, you know, bigger outsize excess returns to make. I think today, given there’s a larger number of participants with a lot of cash, it makes it less efficient. And it makes it less scalable, quite frankly.
There’s a lot of crowding around the larger opportunities so — and everybody piles into them. And then if you look at the smaller opportunities, they’re just really hard. I liken it to a private equity light. I mean, really, if you did true distressed for control, where you’re going to take over a company, you really have to have a post-acquisition value creation plan, which is really private equity. You’ve got to, you know, run the board. You got to, you know, oversee the management team. And you got to create value.
And that – and look, I think our private equity guys do that really, really well. I think credit people are okay at it. But I think we’re probably more interested in what we’ve been doing lately, which I would call structured equity, minority equity opportunities, which give you kind of that higher return, something that I wouldn’t call opportunistic, where we’re in that mid — mid teen type range, but higher — higher return perhaps with some, you know, higher risk, of course. But we’re working with really good companies, and really good management teams, where we have really good governance structures, but we don’t have control.
RITHOLTZ: So — so what does structured equity actually mean? Is this sort of hybrid of equity and fixed income?
JENKINS: Yeah. It could be a minority interest position. We’ve got one where we have a — we have a minority interest position, where we have some downside protection in terms of excess collateral and the shares. So that, to me, is — you know, we’ve limited a bit of our upside, but we’ve also taken a big cushion on the downside. It could be perfect equity, that’s deeper into the capital structure than we normally would do because of some views that we have on the company.
RITHOLTZ: When you say deeper, you mean lower in the hierarchy of a —
JENKINS: Yeah, yeah, yeah.
RITHOLTZ: — who gets paid and bankrupt?
JENKINS: Correct, correct. You know, like through — through the capital structure, where we’ve created at a much lower area in the capital structure. The other thing I would — I would say what makes us — gives us an advantage there to — to a great degree, is being integrated with Carlyle as a global platform. And I think that’s the one thing that really turns the wheel for our platform today is that connectivity with Carlyle who has been in business for over 30 years, owning companies, realizing on them, on a global basis, boots on the ground, not only in the U.S., Europe, but Asia in particular, which is a great growth area I think for us.
And having that experience and — experience with management teams, countries and companies, you know, it’s — it’s unbelievable how much origination it helps us with. But also when we’re making an investment, the different points of intersection that we can get from our colleagues in the private equity side, it’s — I can’t even put a price on that.
RITHOLTZ: The — the complementary nature of marrying global credit to private equity seems to be, hey, how come we didn’t do this before? It really seems to have worked out nicely for you guys.
JENKINS: Yeah. There were — we’re — like think of us as solution providers, right? Like, I mean, if you’re a management team, you’re — and you’re looking to expand, you either sell control equity, or you’d look for some sort of structured solution. You come to Carlyle, you can go to our buyer group who does control equity, or you can come to our group and we will do some sort of structured solution that will help you achieve your growth objectives. As a combination, that’s a powerful outcome, because you get all the benefits of both those groups in one package to help those teams grow.
RITHOLTZ: Right, right. Really, if — if — no matter what your needs are — and I don’t want to sound like I’m doing a commercial for you guys.
JENKINS: No, not at all.
RITHOLTZ: But —
JENKINS: But you can if you want, though.
RITHOLTZ: But it seem — but it seems like there — it’s kind of amazing to think back 10, 20 years ago, when in a lot of private equity shops, nobody was thinking in terms of credit. And really, it makes — in hindsight, it makes perfect sense to marry. You know, it’s like marrying fixed income and equity together. It makes a lot of sense.
JENKINS: Yeah. And I think, look, culturally, as an organization, I mean, we didn’t talk about this, but culture matters a lot. And culture matters a lot to me. I mean, I left a great organization with a great culture. And I’m at — you know, I’m at the beginning of my career, so I needed to go to a place where I thought the culture is going to fit for me. And Carlyle is very collaborative, very supportive environment, is known as a good partner in the marketplace. And that’s — that’s worth a lot. So when you’re talking to a management team, you bring that with you. And they know if they’re dealing with Carlyle Global Credit or Carlyle Private Equity. They’re getting that same partnership approach. And that’s extremely valuable, especially when you’re in competition for assets.
RITHOLTZ: So — so let’s talk a little bit about that for a second. And I’m not asking you to name names, but who are your — your clients? What sort of entities are Carlyle’s clients? Who – who do we think of? Are they — are they pension funds? Are they —
JENKINS: Of course, yeah, I mean, at 10,000 —
RITHOLTZ: Endowments. What — what sorts — what — what sort of entities are Carlyle’s clients?
JENKINS: Sure. I would say that, you know, we have all the traditional institutional investors that anybody else is going to have. You’re going to have your traditional state pension plans. You’re going to have your, you know, non-Canadian — or sorry, non-U.S. pension plans, whether that’d be in Canada or Europe or Australia. You’re going to have sovereign wealth funds, which are a big component of that. And you’re going to have insurance companies. I mean, those would be the major institutional side. Then we’ve got high net worth.
RITHOLTZ: Really?
JENKINS: Yeah. High net worth is a — for us in credit, in particular, that’s a growing piece of our business.
RITHOLTZ: How do you define high net worth? Because every entity has a different line, 50, 25, a 100.
JENKINS: Yeah. I mean, I don’t so much define it as to how much they have, but it’s how big of a ticket. And for — for now, we go all the way down to where I think we can take tickets and that’s as low as $10,000. So —
RITHOLTZ: Really?
JENKINS: Yeah, yeah.
RITHOLTZ: So I know I only have you for a — a limited amount of time. Let’s jump to our favorite questions —
JENKINS: Okay.
RITHOLTZ: — that we ask all of our guests.
JENKINS: All right.
RITHOLTZ: Starting with let’s talk about what — what you’re doing to keep yourself entertained during lockdown. What were you watching, streaming, listening to?
JENKINS: Streaming? OK. Well, the two things that I – one I finished and one I’m still watching. One is called — it’s called “The Bureau” or “Le Bureau, Eric Rochant, which is — it’s subtitles, but it’s French. And it’s really about the French Intelligence Agency and their operations in the Middle East and Northern Africa. And it’s fascinating because of, you know, really what you do is you have these relatively normal people leading these clandestine lives to affect change and all the complications that go with it. And it’s — you know, it’s complicated, but it’s subtle. It’s — it’s really worth watching. It’s probably the best thing I have watched in a long time.
RITHOLTZ: Really?
JENKINS: Really.
RITHOLTZ: Wow.
JENKINS: Five seasons — five seasons, it’s fantastic. The one — the — and the other one, and listen, I’m — even though I’m Canadian and I did take French for 12 years, I’m really not proficient at it. So I do read — I watch these with subtitles, “Call My Agent.”
RITHOLTZ: Love it, love it.
JENKINS: Fantastic.
RITHOLTZ: And —
JENKINS: Hilarious.
RITHOLTZ: So — so every time I discuss “Call My Agent” with friends, I always have to tell them in France, it’s called 10%, not called “Call My Agent.” And all of the actors — playing actors are actually —
JENKINS: They’re real.
RITHOLTZ: — very famous French actors.
JENKINS: They are, yeah.
RITHOLTZ: That if you’re an American, you may or may not recognize them. But that was such a great show. I really enjoyed it.
JENKINS: Yeah. I — I — I’m not done it yet, but I — I quite enjoy it. It’s my fun place to go.
RITHOLTZ: So — I’m going to check out “The Bureau” and you’re already onto — onto “Call My Agent.” Let’s talk about mentors who helped to shape your career.
JENKINS: Yeah. I — I would call them mentor-facilitators, if you will, which were people who not so much mentored me but pushed me in certain directions. And I’d say the one — there’s probably three of them. The one who I initially think of is a guy, Tim Hodgson, and him and I worked — Tim and I worked at Goldman Sachs. He was the CEO of Goldman Sachs Canada for a while. He’s – he’s now the chair of Ontario — it’s Hydro One, I believe called, the utility up in Canada.
Now, he’s also on the board of PSP, which is the — the sister pension plan to CPPIB. So he — you know, he’s a great guy. And he really pushed me to do different things. He actually is the person who encouraged me to go to CPPIB. But I think the biggest thing he did for me is give me perspective. And I think that’s — especially when you’re younger, I think you need that. And perspective and some empathy, i.e. if you put yourself in somebody else’s shoes and replay back what you said to that person, or how you act in that situation. And that had a profound impact on how I operate today. And I — I give Tim a lot of credit for things that I’ve been able to do in my career.
The other one — the other two people are really David Denison, who’s a former CEO at CPPIB, and Mark Wiseman, who — who became the — the CEO CPPIB. And they — they stood behind me at a time when I started a private credit business during the financial crisis of ‘08, ‘09. They bought into that long term strategy that I had, not dissimilar to the platform approach we have here today at Carlyle. And at that time where we’re going through the deepest — what we thought was the deepest, darkest crisis we’ve ever seen, they got behind me and rally board support to get that program going. And really gave me the laneway to do what was — what turned out to be a very successful program for CPPIB.
And then, finally, I would say, you know, my current boss, Chul-Seung Lee, he kind of found me at a time where I was really considering starting my own fund. And — and somehow found me just before I had left to start my own fund and convinced me to come to Carlyle, and really gave me again the laneway, the opportunity to build what we’ve done so far. And we’ve got a lot more to do. But I — but I — I — you know, I think they’re facilitators in many respects. They’ve — they’ve listened to what I’ve had to say and give me some guidance. But — but more or less, have cleared the lanes to — to allow me to do what I think is the right thing to get the business going.
RITHOLTZ: Really, really quite interesting. Let’s talk about books. What are some of your favorites? What are you — what are you reading right now?
JENKINS: You know what, books are like music to me. I listen to everything, right? So I listen to rap. I listen to ‘90s rock. I listen to pop. I listen to jazz. I listen to classical and country and like, you can’t really pin me down. And books are kind of the same. I go through periods where I want to understand something. So some of the greats — I was just thinking about it before I came in here were — you know, as we moved to the U.S., I didn’t do a lot of U.S. history, so I read a lot about, you know, U.S. history.
So some of the ones that stand out “Team of Rivals.”
RITHOLTZ: Sure.
JENKINS: Doris Goodwin, fantastic. Ron Chernow has got some great books. I read Alexander Hamilton before it became like a play, and I thought how do you make a play out of that? But like fantastic book on somebody who was so prolific in a very short period of time and had such a large profound impact on America. I think that’s fascinating. Grant, I mean, you know, Chernow. another one there, where, you know, there’s a flawed man who — who had his moment in history, you know, fantastic.
And then, you know, just recently I read, “Ladies and Gentlemen, the Bronx Is Burning,” which is, you know, politics, sports, and sort of merging New York in 1977, where you had the Yankees, Reggie Jackson.
RITHOLTZ: Right.
JENKINS: You had the mayor race, and you had, you know, the blackouts of 1977 across all five boroughs. And it’s fascinating. So I really — I really enjoy those things. And then I — I love reading about people who — who are flawed but have achieved, you know, in history, great things, so Churchill, for instance. You know, I read the Robert Caro book recently, “The Power Broker,” which is like massive, but like, you know, power corrupts — absolute power corrupts absolutely.
And — and now, I’m in — I’m in the process of reading “Parting the Waters,” which is a Taylor Branch book on — on Martin Luther King, sort of in the early civil rights movement. So I — I — I like a lot of different things.
RITHOLTZ: Which Churchill book were you —
JENKINS: I think the best ones, if you want to read, if you just say I want to read one, the definitive ones are by Roy Jenkins, no relation to me. And then Andrew Roberts wrote one recently, and I think that one’s a pretty good one. It has some new material and really shows a flawed individual, for sure.
RITHOLTZ: As we all are, not all of us accomplished what — what folks like Churchill did. Let’s talk about advice. What would you tell a recent college grad who is interested in a career in either credit or investment management?
JENKINS: Yeah. I — you know, I — I get this question a lot from junior people. They ask, “What — what should I do?” And I think it applies to a lot of things, not just investment management. I think the biggest thing you can do is — is to be obsessively curious. Because if you’re unpassionate, if you’re not curious about things, like I don’t know how you’ll learn, frankly. And so be — early on, you have the ability to be curious in an uninhibited way because nobody expects you to know anything.
I mean, you might be brilliant. You might have come out of great school. But nobody really expects you to know much. And so that’s a great time to be curious about what you’re interested in, right? So if it’s finance, be curious about that. If it’s investing, be curious about that and ask a lot of questions. Because that ultimately is what’s going to drive you through.
RITHOLTZ: And our final question, what do you know about the world of credit and investing today that you wish you knew 25, 30 years ago or so when you were first starting out?
JENKINS: Yeah. You know, I’d say the biggest thing that I’ve — I’ve come to realize is that change is constant. Change is constant. And I think in investing, we sometimes fall back on history. We fall back on what we know. But change is constant. Some people say it’s circular, but I think it’s — it evolves as opposed to circular. And I think that change has increased dramatically in the 30 years that I’ve been involved in finance and investing. And if I have thought about that, I think from an investing standpoint, it would some — in some ways, it has influenced how I think about investing today, compared to 30 years ago, for sure,
RITHOLTZ: Quite fascinating. Thanks, Mark, for being so generous with your time. We have been speaking with Mark Jenkins, Managing Director and Head of Global Credit at Carlyle Group. If you enjoy this conversation, well, be sure and check out any of the previous, I don’t know, 396 we’ve had over the past eight years. You can find those at iTunes, Spotify, wherever you purchase your favorite podcasts.
We love your comments, feedback and suggestions. Write to us at mibpodcast@bloomberg.net. Sign up for my daily reads at ritholtz.com. Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Sean Russo is my researcher. Paris Wald is my producer. Atika Valbrun is our project manager. Mark Siniscalchi is my audio engineer.
I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.
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