Coronavirus and Credit: When the Music Stops

Published on
March 12th, 2020
Duration
38 minutes

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28

Coronavirus and Credit: When the Music Stops

The Expert View ·
Featuring Daniel Zwirn

Published on: March 12th, 2020 • Duration: 38 minutes

As the coronavirus continues to wreak havoc on the markets – or so it seems – the price-action has been particularly dramatic in the energy sector. The carnage in equities has been on display to anyone paying attention, but today we're focusing on the more opaque, but much larger, market of fixed income. Dan Zwirn, CEO and CIO of Arena Investors, is a major player in the credit space. Back by popular demand, he returns to discuss the ongoing rout in high-yield energy bonds. Zwirn analyzes the risks and opportunities he sees in leveraged loans, CLOs, private lending, and other assets within the credit universe. He also shares how he generates put optionality to hedge downside risk, while still getting paid. This interview was filmed on March 9, 2020 in New York, during one of the largest selloffs in history. To learn more about Dan Zwirn's thinking on the credit markets, check out his research report here: https://rvtv.io/2IFeX7n

Comments

Transcript

  • ST
    Simon T.
    24 March 2020 @ 09:10
    1 0
    Guy is smart but no clear guidance - seems deliberately - as a customer I would walk out of the meeting more confused
  • WG
    Wade G.
    19 March 2020 @ 23:31
    0 0
    Brilliant. Thanks.
  • MC
    Matt C.
    14 March 2020 @ 00:49
    1 0
    In the title there is a link to a res Pearce report he wrote, but the link isn’t live. Can you add it to this thread? Excellent interview.
    • MP
      Manos P.
      16 March 2020 @ 04:54
      0 0
      https://eprints.pm-research.com/17511/21697/index.html?27788
  • BG
    Brian G.
    15 March 2020 @ 22:59
    3 1
    He probably knows ten times what I do on any economic subject. But he can't convey it clearly.
  • SW
    Suzanne W.
    15 March 2020 @ 14:27
    2 0
    Super interesting interview!
  • RM
    Robert M.
    13 March 2020 @ 01:33
    9 0
    Excellent interview and a refreshing break from the talking heads at CNBC this week. Nice to listen to someone that shares their investment approach in an open and honest way without the agenda of pitching the market. His insights on where we are in the current market were good takeaways for those looking to put cash to work in the near future.
  • CT
    Chris T.
    12 March 2020 @ 15:08
    1 0
    the opening scene... "in post 2008, few are able to hedge against." Certainly not the case in Europe. Can still easily trade 1bn in Credit Indexes and 50m clips in single names. Typing this on the day eurostoxx is down 10%. And the above still stands and Europe is a far less liquid market than US credit markets .
    • JF
      Jack F. | Real Vision
      12 March 2020 @ 23:54
      10 0
      Interesting comment, Chris. Thanks for sharing your perspective. Before our interview, Dan mentioned to me that credit default swaps (CDS) are fraught with counterparty risk, and for this reason he preferred put optionality to raw short exposure. I've also read that CDS is more expensive than it was before 2008. It was these two factors that I was referencing with my comment. That being said, I know I rushed over the details in my little opening speech. The goal of the preamble is to set the stage for contributors' analysis and connect it to the newsflow and the themes that matter most for Real Vision members - not to provide my own analysis. Dan really is the best in the biz, and one of the things I love most about Real Vision is that guests like Dan, who are thinking about the markets at the highest level, want to come on our platform because they too see the value of the Real Vision network. I found Dan's analysis fascinating, and I hope you do too.

Chapters

  1. 00:01:13
    Could coronavirus be a catalyst for the end of the credit cycle?
  2. 00:03:27
    How do you generate put optionality?
  3. 00:06:56
    Bond market liquidity: how hard is it to get a bid?
  4. 00:08:53
    What does the Asset-Liability Mismatch mean in today's market?
  5. 00:11:02
    Is shorting credit ETFs a viable way to hedge?
  6. 00:12:24
    Is there a "new regime" for leveraged loans?
  7. 00:13:10
    What do you make of the credit writedowns in the energy sector?
  8. 00:19:23
    What about leveraged loans and high yield bonds?
  9. 00:21:07
    What's the significance of the recent rally in Treasurys?
  10. 00:24:15
    What about CLOs?
  11. 00:26:19
    How likely is a downgrade of BBB-rated bonds?
  12. 00:27:57
    How appropriately priced is credit risk?
  13. 00:32:09
    What risks do you see in the world of direct lending?
  14. 00:36:17
    Do you see opportunity in all of this chaos?

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yuskois the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets. Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office.Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation. Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.
myusko@morgancreekcap.com

Anthony Scaramucci

SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.
AScaramucci@skybridge.com

Michael Saylor

MicroStrategy, Co-Founder

Mr. Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc. (MSTR). Since co-founding the company at the age of 24, Mr. Saylor has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authoredThe Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot onThe NewYork TimesBest Sellers list. Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.
saylor@microstrategy.com

Alex Saunders

Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.
alex@nuggetsnews.com.au

James Putra

TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offeringwhichutilizesa true online brokerage model that self-directed investors and traders have come to expect for equities, futures,and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovativeways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring.James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy. Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channelwatched by over 80,000 people.In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years. He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences. Other stop-off points on the way were NatWest Markets and HSBC, although hebegan his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full timejournalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of humaninterest recordings, documentaries and films Peter has recently launched theDefiancepodcast andDefianceTV.
hello@whatbitcoindid.com

Caitlin Long

Avanti Financial Group, Founder & CEO

22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).
caitlin@avantibank.com

Hunter Horsley

Bitwise Asset Management, CEO

Hunter Horsley is Chief Executive Officer of Bitwise Asset Management. Prior to Bitwise, he was a product manager at Facebook, working on advertiser products including the multibillion-dollar sponsored content ecosystem and ad breaks in videos. Before Facebook, Horlsey was a product manager at Instagram, responsible for multiple advertising products generating several hundred million dollars of revenue. He is a graduate of the Wharton School at the University of Pennsylvania, with a B.S. in economics. Recently, Horsley was named a member of Forbes’ 2019 “30 Under 30” list.
hunter@bitwiseinvestments.com

Luke Gromen

Forest For The Trees, Founder & President

Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst.He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clientsand former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America.FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients.Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14.At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”)for the firm’s clients.Prior to that,Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006.While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in whichhe aggregated and combined proprietary research from Midwest with inputs from other sources.Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University.He earned the CFA designation in 2003.
Luke@fftt-llc.com

Meltem Demirors

CoinShares, Chief Strategy Officer

Meltem Demirors is Chief Strategy Officer of CoinShares, an investment firm that manages billions in assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem. Meltemoversees the firm’s managed strategies group and its New York office and leads corporate development. Previously, she was part of the founding team of Digital Currency Group. As a veteran investor in the digital currency space, she has invested in over 250 companies in the ecosystem. Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.
md@coinshares.com