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The age-old debate: work from home, or make it a requirement that employees attend the office. Okay, maybe it’s more a debate that’s opened up in the last few years, but the point stands that where you work has become a divisive issue.

Empowering and trusting employees is beneficial to morale, but on the other hand a little ‘magic’ is lost when teams do not interact with each other in the same physical location. Many companies find the answer is somewhere in the middle with hybrid working solutions. But what happens when a new global financial hub emerges — do companies need to be present, or is it sufficient to instead rack up the air miles?

This was among the topics debated at Deal Catalyst’s global private credit conference staged in Abu Dhabi this week. Abu Dhabi Global Markets (ADGM) has set its sights on turning the region into a “world-class, innovative financial centre”. According to one of the speakers at the event, some 128 fund managers have registered with ADGM, and a scan of the register shows Apollo, Axa Investment Managers, PGIM and Tikehau Capital among them (incidentally, Apollo founder Leon Black has also opened operations for his family office, Elysium, in ADGM).

Personal relationships matter in credit, and it definitely matters in the Middle East.

“It’s not enough to pack in six meetings, say khalas [enough] and expect a cheque to be signed — that simply does not work here,” said one of the speakers at the event.

The suitcase banker is not welcome. In fact, advisors told 9fin one of the key things they highlight to LPs is not simply the asset manager ‘brand’, but key individuals working at the firm.

“Alignment of interest is important and that means looking into staff — how long have they worked there, how much churn has there been, and what the governance is like,” said an advisor.

In fact one speaker went as far as to say that, in the US, numbers matter. But, in the Middle East, just as important is the personal touch and building lasting relationships.

Another speaker claimed trust is central to doing business and there is no way to artificially speed up the process by which this is earned. You will be hosted well as the people are famed for their hospitality, they said, but don’t expect an investment to follow directly on the back of this.

To think opening an office in the Middle East is a quick solution would be a mistake. In fact, some speakers at the event thought having an office simply “doesn’t hurt your chances” as opposed to giving fund managers a definitive edge.

One conference attendee who travels to the UAE regularly from London said his clients mention they see him more frequently than some of the locals. “Sometimes convenience breeds complacency,” he added.

So it’s less about being physically present and more about quality of time spent in the region. Less transactional business, more long-term relationship building.

Well, private credit fund managers, you should be in a good spot!

You’re spending time on the deal, spending time with the management team and trying to really understand the business. And you’re not doing this just to put money to work (though this might have something to do with it). Rather the main rationale is you will be a lender to the company for a few years, and if things go well you might even stay on as lender through ownership changes.

And bonus — longstanding business relationships are not at risk of being refinanced away whenever margins compress!

Beauty is in the eye of the beholder

Elsewhere at the conference, speakers gave a somewhat hopeful appraisal of what’s to come in 2025. In direct lending the view is that the M&A valuation gap is narrowing, which bodes for well for private credit financing opportunities. And deal quality is improving.

“We’re starting to see good deals, rather than the ugly ones kept in the back of the cupboard,” said one direct lender, although a less optimistic lender countered: “I’m still seeing the ugly ones.”

Private credit fund managers felt they could cope with tighter margins and losing out to the broadly syndicated loan market as yields are still in the high single digits. But there were concerns over the large amounts of capital raised from private wealth channels for private credit and where that is being put to work.

“Billions have been raised, but fund managers have found the best way of putting this to work is investing in BSL loans,” said one panellist.

With private credit being such a broad label, conference discussions turned to what else might fill out space in an LP’s alternatives bucket. SRTs (read 9fin’s coverage of this market here) was brought up as one of the up-and-coming strategies. The pull factor being that these are performing/core assets that can add diversity to portfolios.

Speakers on a CLO panel advocated for how strong the market has performed (CLO funds returned 17.84% last year, according to 9fin data). But one speaker warned against the danger of CLO resets (which extend the lives of CLOs) as the longer a transaction runs the weaker the portfolio credit quality becomes.

“It’s like a bus travelling into the city,” he said. “On the first stop it’s clean and there’s hardly anyone there. A few stops later and the school kids enter and it’s chaos.”

Of course private credit CLOs entered the discussion and two panellists reminisced that these look somewhat like the balance sheet CLOs that used to be raised before the financial crisis.

Rather than a regular (or arbitrage) CLO, where the manager's goal is to buy assets from a range of banks and lock in cheap liabilities in comparison to the assets, a balance sheet CLO in years gone by would involve banks securitising originated assets sitting on their balance sheet.

Private credit pipeline

This week we reported on Trackunit — one of the most sought after assets in the market. This was acquired by Goldman Sachs, which is investing in the company for a second time having owned a majority stake from 2015 to 2021.

Private credit across Europe and the US will likely play a role in financing this transaction.

We also reported that Vitabiotics, led by CEO Tej Lalvani of Dragons’ Den-fame, was up for sale again after a resolution over who was cashing out — see here.

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You can read our weekly updated pipeline of new and in-market deals here. And if you’re a fan of this newsletter but aren’t yet a subscriber, email subscriptions@9fin.com for a trial.