This week, we speak with Armen Panossian, managing director and head of performing credit at Oaktree Capital Management, which has $179 billion in assets under management. He oversees the firm’s liquid and private credit strategies, and also serves as a portfolio manager within Oaktree’s global private debt and global credit strategies. He previously worked for Pequot Capital Management, where he worked on distressed debt strategy. Panossian holds an MS degree in health services research from Stanford Medical School; a JD degree from Harvard Law School; and an MBA from Harvard Business School. He serves on the advisory board of the Stanford Institute for Economic Policy Research.
We discuss what it was like during the great financial crisis when Oaktree had set up a distressed bond fund — they were purchasing 100 million dollars of bonds per day, often the only bidder at the time, and typically watching the purchases go underwater immediately by 10-20%. The fund soon after recovered, and generated wild outperformance over its lifespan.
Panossian explains how the current environment has been the most exciting set of bond opportunities since the GFC. The sudden increase in rates — 500 basis points in 18 months — against the inflationary backdrop sent Bonds down 16%, with huge price moves due to the sudden shift in the yield curve. Collateralized Loan Obligations with floating rates did well, but the rest of the sector just froze as buyers disappeared, and prices began to fall. It was a huge price decline where syndicators got stuck, very reminiscent of the 2008-09 era for banks. Private direct non-bank lenders stepped into the void, creating both risks and opportunities.
A list of his favorite books is here; A transcript of our conversation is available here Tuesday.
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Be sure to check out our Masters in Business next week with Gary Cohn, Assistant to the President for Economic Policy and Director of the National Economic Council from 2017-2018; he was President and Chief Operating Officer of The Goldman Sachs Group from 2006-2016. Currently, he is Vice Chairman of IBM.
Armen Panossian’s current reading:
Genghis Khan and the Making of the Modern World by Jack Weatherford
On My Country and the World by Mikhail Gorbachev