Although banks stopped lending during the financial crisis, private-credit firms did not yet possess today's enormous pools of deployable capital. The industry had opportunities, but its limited scale constrained its ability to finance the private-equity dry powder waiting on the sidelines.

Only a handful of private-credit firms operated at scale
Private equity held substantial dry powder
Private debt liquidity remained limited
Today's financing capacity is fundamentally different

“The amount of liquidity or dry powder in our world was much more limited.”
Ken Kencel · 14:37

“a very different dynamic than we saw back in two thousand and seven, two eight, two thousand and nine.”
Ken Kencel · 15:18

#gfc#dry powder#private equity

Myth Buster41:23

Modern Private Equity Is More Than Cost-Cutting and Flipping

Kencel argues that the old image of lightly capitalized buyouts followed by cost cuts no longer describes much of the market. Contemporary sponsors often contribute substantially more equity and pursue growth through acquisitions, expansion, and sustained lender partnerships.

Older deals could use roughly 10% equity
Modern sponsors increasingly focus on operational growth
Bolt-on acquisitions and geographic expansion require continuing financing
Lenders can become long-term strategic partners

“That's not the business today.”
Ken Kencel · 41:49

“the model today is a growth model”
Ken Kencel · 42:11

#private equity#growth#buyouts

Explainer· 4

Explainer10:18

How Banks Created the Opening for Private Credit

Bank consolidation and the removal of Glass-Steagall-era restrictions pushed banks toward investment banking and loan distribution. Rather than retaining middle-market loans, banks increasingly arranged and moved them, leaving private capital managers to fill the financing gap.

Consolidation expanded banks' investment-banking ambitions
Distribution offered higher-margin economics than holding loans
Middle-market borrowers became increasingly underserved
Direct lenders raised institutional capital to fill the void

“banks became much more in the moving business, if you will, as opposed to being in the storage business.”
Ken Kencel · 11:17

#banking#private credit#middle market

Explainer21:28

Why Modern Private Credit Can Disperse Risk Better Than Banks

Kencel contrasts banks holding a large loan on one balance sheet with private-credit managers distributing exposure among many institutional investors and vehicles. He argues that performance-based capital allocation and small position sizes can create a more diversified risk profile.

Banks historically retained concentrated middle-market loans
Private-credit managers compete for capital through performance
A single portfolio name can represent less than 0.5% of a fund
Loans may be spread across accounts, funds, and registered vehicles

“we compete for capital based on performance”
Ken Kencel · 22:27

“it represents less than one half of one percent of the portfolio.”
Ken Kencel · 23:19

#diversification#risk#institutional investors

Explainer24:38

How Private Credit Went From Allocation Orphan to $1.3 Trillion

Private credit once sat awkwardly between private equity and traditional fixed income, leaving institutions unsure where it belonged. Acceptance accelerated as investors recognized the potential for attractive risk-adjusted returns, and most institutions Kencel meets now plan to increase allocations.

Private debt AUM reached roughly $1.3 trillion
Institutions initially lacked an allocation bucket for it
Acceptance grew alongside demonstrated risk-adjusted returns
Private credit evolved into an asset-management business

“we don't really know where to put it right.”
Ken Kencel · 25:23

“Today, ninety percent of the investors we meet with have not only allocated to private credit, but there they have a plan to increase their…”
Ken Kencel · 26:00

#asset allocation#aum#institutional investing

Explainer34:28

How Rate Hikes Nearly Doubled Private-Loan Yields

Because Churchill's loans were floating-rate instruments, rising base rates and wider spreads lifted portfolio yields substantially. Loans that had yielded 6% to 7% moved toward 11% to 12%, but the change also required renewed scrutiny of each borrower's ability to service the higher cost.

Private loans commonly float over SOFR or a similar base rate
Base rates rose by roughly 450 basis points
Credit spreads also widened
Higher lender returns create higher borrower debt-service burdens

“all of our loans are floating rate”
Ken Kencel · 34:39

“Loans today are yielding eleven to twelve percent.”
Ken Kencel · 34:55

#interest rates#sofr#floating rate

Story· 5

Story02:18

Why Drexel's Defining RJR Deal Initially Felt Like a Chore

Kencel recalls that RJR Nabisco had circulated as a potential transaction long before it became the emblematic deal portrayed in Barbarians at the Gate. Junior bankers had analyzed it so many times that they avoided the next assignment, showing how historic deals can look mundane in real time.

RJR had been considered by multiple firms for a long time
Repeated analysis reduced its novelty for junior staff
Its eventual historical significance was not obvious at the time

“it was a bit of a tar bag be back then.”
Ken Kencel · 02:59

“People were running, people were running away from working on it.”
Barry Ritholtz · 03:27

#drexel#rjr nabisco#leveraged buyouts

Story27:19

The Arcmont Deal That Gave Churchill a European Counterpart

Churchill recognized that its US-focused platform lacked access to Europe's developing direct-lending market. Arcmont offered a culturally and strategically similar European business, enabling the combined Nuveen Private Capital platform to finance cross-border transactions and offer global mandates.

Europe's bank retrenchment lagged the US by roughly five to ten years
Arcmont resembled Churchill in strategy and entrepreneurial history
The combination formed a $67 billion parent platform
Investors could access integrated US and European private capital

“we didn't have Europe right.”
Ken Kencel · 28:26

“we now have a global private credit manager that can provide financing to cross border transactions”
Ken Kencel · 30:44

#europe#arcmont#global expansion

Story57:01

The Guardian Who Changed Ken Kencel's Life

After being adopted and losing both adoptive parents at a young age, Kencel was raised by an uncle who had not graduated from high school and worked at Bethlehem Steel. His uncle's humility and emphasis on improving other people's lives became a lasting influence on Kencel's values.

Kencel was left at the hospital and later adopted
Both adoptive parents died while he was young
His uncle became his guardian after a lengthy process
His guardian emphasized humility and service to others

“But he changed everything in my life.”
Ken Kencel · 58:12

“it's not about you, it's about how you can influence and change other people's lives.”
Ken Kencel · 58:19

#adoption#mentorship#buffalo

Story1:04:20

Why a CEO Has to Leave His Authority at the Bandroom Door

Kencel plays guitar and sings in Suburban Chaos, a yacht-rock and disco cover band. Unlike a company with formal authority, the band operates democratically, requiring him to put aside CEO habits and negotiate repertoire and performance decisions with peers.

Kencel has played guitar since childhood
The band's style mixes yacht rock, disco, and classic rock
Musical decisions are democratic rather than hierarchical
Music provides a restorative identity outside work

“I have to put all of my CEO you know, tendencies, you know it, you know, leave them at the door.”
Ken Kencel · 1:08:56

“music is my happy place”
Ken Kencel · 1:09:45

#music#leadership#creativity

Story1:10:15

The Ancestry Search That Revealed Nine Siblings

Kencel grew up believing he was an only child, then used Ancestry to locate his birth family and discovered nine siblings. Watching Three Identical Strangers subsequently made its nature-versus-nurture questions intensely personal.

Kencel located his birth family through Ancestry
He discovered nine siblings after growing up as an only child
Most of the family remained in Buffalo
The experience deepened his response to Three Identical Strangers

“it turns out I have nine siblings.”
Ken Kencel · 1:10:31

“I found my family and ancestry.”
Ken Kencel · 1:10:53

#family#ancestry#nature versus nurture

Takeaway· 1

Takeaway1:19:34

The Career Lesson Kencel Wishes He Had Learned Earlier

Early in his finance career, Kencel believed the smartest analyst with the fastest financial model would win. Decades later, he sees technical competence as necessary but secondary to relationships, mentoring, motivation, and the people who build enduring organizations.

Young financiers often overvalue technical competition
Numbers remain necessary but are not sufficient
Relationships improve individual and organizational performance
Mentoring and motivation distinguish strong institutions

“it's all about the people, not the numbers”
Ken Kencel · 1:20:27

“it's really ultimately the people side, the relationship side”
Ken Kencel · 1:20:44

#career advice#relationships#finance

Frameworks in this episode

Barrier-Clearing Servant Leadership

Failure-to-Fix Learning Loop

LP-to-Lender Relationship Flywheel

Multi-Angle Hiring Diligence

People-Partners-Tenacity Growth Model

Quality-First Private Credit Screen

Insights & moments

⚡Myth Buster· 2

Why the GFC Wasn't Yet a Private-Credit Bonanza