E432: $24 Billion Investor on Private Credit, the Psychology of Winning & Fear of Failure
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What is the main topic discussed in this episode?
Monaro Capital has grown to $24 billion firm deploying $10 billion a year. But when you started in 2001, it was a completely different market. What made you want to enter private credit?
Excellent question. So my background is accounting and finance and law.
Why did Ted Koenig decide to launch a private‑credit firm in 2001?
I practiced law for about 14 years. I did M&A and bank financing law, mostly for private equity transactions. And what I noticed is that throughout my career, we worked with banks on transactions. Banks were relatively inflexible in terms of their financing because they had regulations and they had certain ways they had to do deals. The only two non-banks that existed at that time were GE Capital and Heller Financial. And they weren't regulated, so they could structure deals in all kinds of more creative ways and customize transactions for companies. But they were doing larger deals. There was nobody really doing lower middle market or smaller deals in a non-bank format. So I thought that as opposed to working 24-7 and billing hours as a lawyer, that I could take what I learned as a lawyer, take what I learned representing PE funds and banks and apply that to transactional finance and do it the way GE Capital and Heller Financial were doing it.
in a way that was more user-friendly for smaller companies, more Main Street America. And I started Monroe in 2001, and I managed to recruit three guys that were excellent bankers. One was a credit guy, one was an origination person, one was an underwriter that joined me in this new venture. They were each making $100,000 a year, and they had families, and they were a little reticent to do it, but I convinced them that we were going to be successful, and this was going to be the new form of finance as the future unfolded.
I'm so curious because not that much innovation is done in the financial markets. What made you so confident that you were on the cusp of a new asset class?
I didn't. I just was tired and burnt out being a lawyer and I wanted to build something. I'm an entrepreneur at heart and I'm a business builder. And I thought that if I could get a clean shot at building a banking product, a finance product. The good news is banking has been around forever. Transaction finance was being done by banks. And I was confident that if I could come in and do the same type of financing, but with less rules and providing more creativity, that we could build a business. Now, at the end of the day, I didn't know how big of a business we could build. I thought we could build a business, we could put a couple hundred million dollars, three, four hundred million dollars to work, and it would be a success.
So what happened is that I got into it, and I realized that there was a much bigger market here than I had anticipated, and that I had to realign my thinking into how to build a business as opposed to just do deals.
And your original goal was three, 400 million. Today, as I mentioned, you have 24 billion deployed. What gets you up every day to keep on building the business bigger and bigger?
Another good question. I think part of that is being an entrepreneur. And part of that is being afraid to fail. Every day I get up and I think about how we can grow the business, what we can do, what new areas we can get into. I was always a competitive person. ballplayer. I was a basketball guy. If I didn't do this, my first goal was to be a professional basketball player. That didn't quite work out the way I wanted. So I had to default into my next goal, which was accounting and finance. So it's the competitive spirit. It's about winning. It's not about dollars. It's not about numbers. I keep telling people that The way to be successful in whatever career that you want to pursue is not by being satisfied.
It's always by moving the goalposts out. Once you have an achievement, don't rest on your achievement. Don't rest on your laurels. Don't read the newspaper clippings. One of my favorite analogies is I'm a sports guy. I'm a big basketball guy. Michael Jordan was a Chicago guy. He played basketball in Chicago.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–0:17
2
Why did Ted Koenig decide to launch a private‑credit firm in 2001?
0:17–6:24
3
How did the 2008 financial crisis reshape financing and fuel private‑credit growth?
6:24–13:26
4
What makes Monroe Capital’s focus on the lower‑middle‑market a competitive advantage?
13:26–25:01
5
Why does Ted say the real risk in today’s market lies with private‑equity, not private‑credit?
25:01–41:50
6
Is private credit currently in a bubble, or is the hype overstated?
41:50–50:12
Speakers
1 identifiedMore from How I Invest with David Weisburd
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