Spotlight on Leander Christofides, Co-Chief Investment Officer, Global Special Situations, J.P. Morgan Asset Management
Global Thought Leader Spotlight
Leander Christofides, Co-Chief Investment Officer, Global Special Situations, J.P. Morgan Asset Management
In my role as the Co-Chief Investment Officer of the Global Special Situations (GSS) team at J.P. Morgan Asset Management, I am responsible for overseeing GSS's investments in distressed and special situations private credit assets. This involves identifying and managing investment opportunities in companies or assets that have unique financing needs, are experiencing financial difficulties, or are undergoing significant changes, such as a restructuring or turnaround.
The goal of the GSS team is to generate returns by investing in these complex and often high-risk scenarios. Some key areas of focus for us include:
Complex Financial Situations: Navigating and investing in situations that require specialised knowledge and expertise, such as bankruptcies or significant corporate changes.
Turnaround Opportunities: Identifying and investing in companies that have the potential for significant improvement in performance and value.
Distressed Assets: Investing in companies or assets that are experiencing financial difficulties, with the aim of turning them around or profiting from their recovery.
Restructuring: Engaging in financial restructuring of companies to improve their financial health and operational efficiency.
Risk Management: Carefully assessing and managing the risks associated with investing in high-risk scenarios to ensure favorable outcomes.
These areas require a deep understanding of financial markets, credit documents, strategic thinking, and the ability to manage complex transactions to achieve success.
Key themes driving risks and opportunities
In the special situations and distressed asset class, several key themes are driving both risks and opportunities, these include:
Convergence of private and public credit markets: As the private credit asset class has grown, direct lenders are now competing with the syndicated loan market on transactions. This competition is leading to lower spreads and weaker credit documents.
Uncovering hidden leverage and operating performance adjustments in private credit: The rise in EBITDA adjustments allows borrowers to mask leverage and pull forward hypothetical “synergies”.
Understanding what the true default and recovery rates are for private credit: As private credit lenders face more competition, they are lowering the interest they charge and weakening their credit documents. This is leading to more Liability Management Exercises (LMEs), defaults, and ultimately lower recoveries.
How to assess the problems private equity have in exiting companies: The delay in private equity exits has created a unique set of financing opportunities, as the subdued exit environment poses challenges for sponsors that require customised or bespoke financing solutions. This trend is expected to persist due to policy uncertainty in the US and a likely prolonged higher interest rate environment.
Implications for institutional investors
Investors can mitigate some of the aforementioned risks by focusing on managers that invest in:
Non-traditional opportunities: With limited supply of new credit issuance and tightly priced spreads, investors should seek differentiated deal flow to diversify their allocations.
Bespoke financings: Customised financings with a complexity premium are attractive as competition for deal flow is less prevalent, allowing for higher total lender returns.
Short duration investments: Transactions with a shorter duration profile increase the certainty of return of principal, particularly during periods of elevated volatility.
Asset backed investments: Investments collateralised by tangible assets should provide downside protection amid macroeconomic uncertainty.
Investors can capitalise on the issues private equity managers are facing by allocating to credit managers who can provide subordinated, mezzanine, or other flexible capital solutions. It is important to focus on managers that are not chasing crowded transactions so they can maintain high returns for low risk.
Leander will be presenting at Global Investment Institute’s upcoming Private Credit Investment Forum, taking place on Thursday, 8 May 2025 at the Grand Hyatt Melbourne, Victoria. To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Leander Christofides, Co-Chief Investment Officer, Global Special Situations, J.P. Morgan Asset Management
Leander is a Managing Director, founding member and Co-CIO of the Global Special Situations team. He joined J.P. Morgan in 1997 and was most recently the Head of EMEA Leverage and Distressed Trading segregated loan desk (based in London), having co-founded the team in 2003.
During his 15 years on the Special Situations Desk, Leander and Co-CIO, Brad Demong, developed a strong track record of generating consistent positive returns in special situations investing across multiple industries. Prior to this, Leander had various roles at J.P. Morgan including previous roles in Global TMT M&A Advisory (London) and Debt Capital Markets (London).
Leander holds a BSc in Business and Econometrics; from King's College London and the University of London.
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