Discipline is private credit's favorite word. The cycle is about to reveal who meant it.
The Race We Didn’t Run
In private credit, discipline is a word everyone uses. The cycle is about to reveal who meant it.
For nearly two decades, private credit competed by lowering its standards a race to the bottom that Howard Marks named back in 2007. Avante chose to sit that race out. As the tide goes out and outcomes finally disperse, the market is sorting the disciplined managers from the rest. Here are the highlights.
A race to the bottom, named in 2007
When capital is plentiful, providers compete by lowering standards and accepting worse terms for growth. Nearly two decades and roughly eightfold AUM growth later, that is exactly what played out.
Capital flooded in; standards flooded out
Some $2.3 trillion in private credit AUM, $520 billion of dry powder on a clock, plus evergreen and retail vehicles and heavy consolidation all pressure to put money to work fast. Documentation was the first thing to give: roughly one in three larger deals now launches with no financial maintenance covenant.
The line we held — four pillars
The same underwriting every vintage across $1.2B and 72 investments since 2009: the lower middle market, defensive yet growing businesses, conservative structure, and real alignment — a seat at the table, not a spot in a syndicate.
Earned, not engineered
Returns built the old-fashioned way — by turning small, underinvested companies into larger, more durable ones rather than manufactured through leverage and financial engineering.
Why it matters now
Dispersion has arrived. The market is separating the disciplined from the rest, and that sorting doesn’t worry us. It describes us.
By the numbers: 17 years in the lower middle market · $1.2B deployed across 72 investments · Zero realized cash loan losses · 96% of deals with financial covenants
“A covenant isn’t a covenant if it can’t be breached.”
The race we didn’t run is the reason we’re ready for this one.
The information contained herein is for informational purposes only and should not be construed as investment advice. The views expressed are those of the author as of the date of publication and are subject to change without notice. Past performance is not indicative of future results.
For informational purposes only. This material reflects Avante’s subjective judgements, beliefs and opinions, which are subject to change. It is not an offer to sell or a solicitation of an offer to buy any security or interest in any fund. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. Market figures per PitchBook and Preqin; Howard Marks reference from “The Race to the Bottom,” Oaktree Capital Management (Feb. 2007).
