Stuart Haigh is a director and head of investments at Spire Capital, a global private markets firm that has invested over $2 billion on behalf of clients.
While living on campus at Sydney Uni, some friends and I were introduced to a company called Hutchison Telecommunications that offered mobile phones that switched to local call rates when the device was in the home.
We liked the concept so invested in the stock which went on to perform poorly. An important lesson was learnt regarding the importance of due diligence over simply backing what seemed like a good idea.
I always wanted to work with businesses. While finance is a key element, private market investing is fundamentally about businesses and requires the investor to buy well, own well and sell well.
The finance element is important for buying & selling and to sensibly leverage returns [but] effective ownership also involves supporting the management team with strategies to grow earnings. Successful private market firms work shoulder to shoulder with management teams so relationships and alignment matter. This is much more than finance and provides a lot of variety in the work we do.
On the investment side, we are an independent private markets specialist that looks to hand-pick investment funds and co-investments in line with global relative value, mega-themes and/or market dislocations. Being privately owned, we have a patient approach to growing the firm and focus on quality over quantity.
Finally, our investment offering is highly customised to Australian private investors and their advisors. This means creating Feeder Funds relevant to Australian taxpayers, wealth management platforms and local currency.
The Fund has been designed to capitalise on the ‘sea change’ in markets as outlined in Howard’s recent memo. The investment strategy combines Oaktree’s flagship ‘good business, bad balance sheet’ approach with a special situations strategy targeted at operational turnarounds.
Howard told Spire clients that he believes the outlook for bargain hunters is much improved. “Bargains generally result from investor disillusionment, and the potential for this – like the level of interest rates – is more in the investor’s favour than was the case in recent history.”
The cost of debt has significantly increased since the end of 2021 when central banks began aggressively raising interest rates. Many companies are finding it more difficult to not only service their current debt, but issue new debt. Spire and Oaktree think a growing number of companies will face liquidity shortfalls and potentially default.
Looking across the firm, Spire Capital has interests spanning the private markets including PE, VC, private debt, real estate and infrastructure. More specifically, we have co-investments in ‘infrastructure-adjacent’ companies including waste management, digital infrastructure (data centres) and US multifamily real estate. We have also backed key thematics like the energy transition and food security.
Some of those positions include data centre colocation business ColoHouse and materials manufacturer Aero Aggregates.
In working with Oaktree, we are seeing a large number of over-levered companies showing signs of stress. Interest Coverage Ratios (ICRs) continue to decrease as companies struggle with increasing interest costs combined with challenging economic conditions.
We think Oaktree is best placed globally to take advantage of discounts opening up in liquid credit and deal-terms improving in private credit.
The last decade showed a boom in debt issuance as companies took advantage of cheap and plentiful debt. With rapid-fire rate rises and slowing economic conditions, we think the next decade will be very different as the cost of capital recalibrates. Restructuring capabilities will be key as we expect many companies will (sadly) file for bankruptcy.
We like credit over equity with a bar-bell approach to debt meaning quality direct lending at one end and distressed debt at the other. For equity, we prefer the secondary market – e.g private equity secondaries – or to invest in compelling co-investments with infrastructure-like demand. For example, data centres, waste management, US multifamily real estate and testing, inspection and certification (TIC) businesses alongside highly active and aligned sponsors.
My mum told me ‘if you can’t change the situation, change your attitude toward it’.
This interview has been edited for length and clarity.