ARENA PowerRead

Future Returns: Playing Offense in Credit Markets

Adapted from BARRON'S PENTA

October 20, 2020

  • Arena Investors, a $1.6 billion asset manager that makes credit investments around the globe, creates attractive risk-versus-return profiles by structuring investments that don’t depend on macro-level economic or political changes and that wouldn’t be harmed by a 2008-style financial crisis.
  • Arena CEO Dan Zwirn calls this customized approach “playing offense”—and it means that there is never a “good” or “bad” time to find opportunities. “We are able to go and do what makes sense, across asset types, geographies, instruments, private, public—whatever,” Zwirn says.
  • While risks directly caused by the COVID 19 crisis are a continuing challenge, a related risk—the huge influx of stimulus made in response to COVID plus the preceding 12 years of post-2008 stimulus—means that rates will remain low and that deals made now must include the likelihood of “a fundamental reassessment of value.”
  • Among the opportunities fitting that description today, Zwirn says, are loan origination for the U.S. onshore oil-and-gas industry and supporting the purchase and conversion of distressed hotel properties.
  • Meanwhile, says Zwirn, potential opportunities that Arena is monitoring include certain assets in the aviation sector, small business lending, and retail. Low rates have kept certain senior securitized aviation bonds, for example, from reaching an attractive risk/reward profile, but given the highly troubled status of the underlying businesses, Arena expects prices to become much more attractive and will be ready when they do.