As the global economy adjusts to a new normal driven by an isolationist American administration and a European market increasingly wary of Russian intrusions, investors know there is value to be found amongst the recalibrations.
Much of this value will be found in private markets, as seasoned fund managers like Arif Bhalwani know well. Bhalwani founded the alternative lending firm Third Eye Capital over 20 years ago in Toronto, determined to create partnerships with companies facing distressed debt or special situations.
The private credit industry has boomed in recent years, in part because of higher interest rates that tightened the purse strings of traditional banks.
“More and more companies are considered unfinanceable, particularly in Canada, where the Big 6 banks dominate the lending market,” says Bhalwani. “At Third Eye Capital, we specialize in solving complex financing problems for small and medium-sized enterprises (SMEs). Our team is highly skilled at identifying value that doesn’t show up on a balance sheet. For investors, we provide the level of due diligence that is absolutely necessary in private markets.”
The asset class is favored by investment advisors, with a recent survey showing that 80% plan to increase allocations in the coming year. But where there’s great value, there is usually great risk, and private markets are no different.
There is a unique set of rules and nuances to the types of investment vehicles that private markets offer. Most investors are not familiar with the asset class, as it is still relatively new and always evolving. More than any other class, perhaps, there is a need for the guidance of an investment professional to handle risk management.
But with the right due diligence, few classes are more rewarding for investors, especially when backed by the wisdom of experienced fund managers.
“At Third Eye Capital, we’ve made over $5 billion in investments across all sectors of the economy, including energy, health, and technology,” says Bhalwani. “We’ve all been entrepreneurs ourselves, and we know what it takes to grow a business successfully. We apply our sector-specific expertise to accomplish incredible turnarounds and build meaningful partnerships with management companies.”
In an environment where financing challenges continue to balloon, the ability to carve out creative solutions based on proven methods of restructuring is invaluable. It requires a holistic view of struggling companies to find a path to solvency, factoring in everything from the evolution of that particular market and industry to the integrity of management to the fundamentals of the operation.
“In business, a company’s performance is rarely linear,” says Bhalwani. “We look for the opportunities amidst the complexities, and we’re willing to look where risk-averse banks cannot or will not. That’s the value we provide.”
With the number of struggling companies steadily increasing and with a widely predicted recession looming, the kinds of skills that Bhalwani and Third Eye Capital possess will be urgently needed to prop up a wobbling economy. For investors looking to diversify beyond traditional fixed-income portfolios that may become less and less secure, the private credit class will offer plenty of opportunities for potential growth. When proper due diligence is applied and the right partnerships are formed with investment managers, private markets will surely shore up the net worth of many investors in 2025.
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