Spotlight on Peter Szekely, Managing Partner, Tanarra Credit Partners
Global Thought Leader Spotlight
Peter Szekely, Managing Partner, Tanarra Credit Partners
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In my role as the Managing Partner at Tanarra Credit Partners (TCP) my primary responsibilities include managing TCP’s Asia Pacific business and investment activities. I also Chair our Investment Committee and sit on the Audit, Risk and Compliance Committee. Furthermore, I am actively involved in evaluating new credit strategies that TCP can expand into.
Key developments in APAC private credit
The key developments in the private credit asset class both in the present and over the medium to longer term can be distilled into 3 broad areas.
Firstly, focusing on the Australian market, we would expect higher for longer-rates. The market is broadly expecting one or even two rate cuts in the second half of 2024. We expect the RBA to reduce the cash rate once, given continuing, elevated inflation.
Although inflation has moderated from its post pandemic highs, we expect it will be difficult to get it firmly under control. Higher rates will maintain attractive returns for our asset class, but it also implies higher interest burdens on Australian corporates and households.
Secondly, we believe it is essential to heighten the need to focus on credit quality. This may seem intuitive but given the comparatively smaller scale of the Australian market, broad investment mandates can result in investment creep into higher risk assets. For example, it is common to observe Australian senior secured private credit to move beyond corporate risk to include funding capital for non-bank lenders.
Lastly, diversification into ‘developed’ Asia is one of the biggest opportunities in the near to medium term. The market is underserved, with most private credit activity to date in special situations or distressed related investments, emerging markets (i.e. India, China, Indonesia) and property development financings.
Asia represents over one-third of the global economy and has been the key engine driving growth in the global economy in recent times. Interestingly, the Asian markets are seeing a reduction in bank lending presently, similar to what was witnessed in Australia post GFC.
How can institutional investors mitigate risks and capitalise on these opportunities?
The expectation of higher for longer-rates in Australia, would ensure that the risk to return equation for private credit remains attractive. Given that the risk spread can be maintained, which has largely been the case historically in Australia. Furthermore, spreads are tightening in US markets. Thus, higher rates create risk in equity, property, and fixed income markets, enhancing the argument for a meaningful private credit allocation.
Both corporate and consumers shouldering higher debt burdens in an environment of slower growth prospects need to focus on credit quality. This leads the contention for investors to position their portfolio more conservatively through the inclusion of more defensive sectors and income products.
Diversification into ‘developed’ Asia is one of the biggest opportunities in the near to medium term. Asia covers a large geography more than 40 countries and accounts for about 60 percent of the world’s population. Legal risk and transparency remain critical concerns, but the financial landscape provides a wide range of opportunities from the more developed markets with strong investor protections through reliable legal frameworks to the frontier markets offering equity returns in credit format.
Peter will be presenting at Global Investment Institute’s upcoming Private Credit Investment Forum, taking place on Thursday, 2 May 2024 at the Grand Hyatt Melbourne, Victoria.
Register your interest in attending here or for more information email zlatan@globalii.com.au.
Peter Szekely, Managing Partner, Tanarra Capital Partners
Peter is a founding member of Tanarra Credit Partners (TCP) and sits on TCP’s board, investment committee and audit, risk and compliance committee. He is responsible for the business management and investment activities across TCP’s APAC regional footprint.
Peter brings over 25 years of debt market experience across both private and public debt markets, having previously led Morgan Stanley’s Asia-Pacific leveraged finance team, as well as Standard Chartered’s global high yield bond business. He worked with Michael Tierney at Credit Suisse, where he focused on high yield bond origination, before setting up the Hong Kong Leveraged Finance business.
Peter started his career at J.P.Morgan in New York and spent the first 8 years of his working career in credit functions, primarily loan syndications. He was most recently head of funds coverage for ANZ.
Peter holds a BA in Economics and Chinese from Middlebury College.
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