Spotlight on Kevin Marchetti, Co-Head of Direct Lending & Chief Credit Officer, Man Varagon
Global Thought Leader Spotlight
Kevin Marchetti, Co-Head of Direct Lending and Chief Credit Officer, Man Varagon
In my role as the Co-Head of Direct Lending and Chief Credit Officer at Man Varagon, I am responsible for Leading the Underwriting and Portfolio Management teams, leveraging my extensive experience in risk management and middle market lending. I also serve on the Investment Committee, responsible for final approval of new and additional investments in the portfolio.
Man Varagon’s Underwriting team is responsible for investment due diligence, which follows a bottom-up investing approach to properly understand an investment’s merits, risks, and fundamental values. In addition, our Portfolio Management team monitors and manages the portfolio daily, producing objective analysis for our quarterly portfolio and valuation reviews. We are responsible for delivering low defaults and low losses across cycles to our investors.
Key themes driving risks and opportunities
The nature of today’s market and economy has shown some signs of potential stresses in credit portfolios. Up until March 2020, we saw a prolonged period of benign credit environment – near zero rates, near zero defaults. In the past five years since COVID hit, followed by the post-COVID boom, we have seen increased inflationary pressures, compounded by the rapid rise in interest rates, which then led to a cooling in demand, while inflation remained elevated.
The macro environment and rapid growth of private credit are both a gift and a curse for the asset class. Investors continue to allocate heavily to private credit as they seek diversification, attractive risk-adjusted yields, and low correlation with public market volatility.
Today, tariffs and changes in government policy translate into higher uncertainty. Along with continued inflationary pressures and higher for longer interest rate environment, they form distinct challenges as higher wages, higher uncertainty, and higher interest burden put pressure on US corporate borrowers.
Furthermore, higher volatility in the market means a lot of M&A deals are being held on the sideline, with higher volatility and uncertainty being cited as the reason. This portends continued lower deal activity in the market and has led spreads lower, particularly for lenders who have raised mega funds and are pressured to deploy a large amount of capital in a low deal volume environment.
We believe that today it is particularly important for investors to focus on income, risk management, and capital preservation.
Implications for institutional investors
Move from “satellite” to “core”: Institutional adoption of private credit is robust, signalling an enduring commitment to integrating private credit as a core allocation. However, recent market dynamics and volatility has focused investors on the importance of diversification and risk management. Investors should be (and many are) looking at the role that a well-managed private credit portfolio can play in their overall asset allocation.
Credit first: Furthermore, Man Varagon believes that the end of the easy money policy by the global central bank will create bifurcation in asset manager performance. We call this a “credit picker’s market”, which should provide an advantage for experienced credit managers to differentiate themselves by their performance.
Institutional size and scale: When it comes to fundraising, proper structuring is vital to provide institutional investors with the right access points to private credit investment opportunities. This translates into managers’ need for resources, talent, and an appropriate fundraising pace. Scale matters – GPs need to be large enough to have institutional quality resources, however GPs must be disciplined to match their fund size with the size of the opportunity set.
While institutional investors understand the inherent benefits of including private credit in their portfolios, given the aforementioned recent and current market dynamics, they should seek to understand asset managers’ ability to provide transparency while also delivering alpha as a repeatable, scalable tool in a variety of forms.
Kevin 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.
Kevin Marchetti, Co-Head of Direct Lending and Chief Credit Officer, Man Varagon
Kevin is a Co-Head of Direct Lending and Chief Credit Officer of Man Varagon. He has extensive experience in risk management and middle market leveraged finance across a range of industries and strategies.
Prior to joining Varagon in 2014, Kevin was a Senior Vice President at GE Antares Capital. He has also held senior risk positions at CIT Group and TD Bank.
Kevin holds a BA from Springfield College and an MBA from the University of North Carolina at Charlotte.
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