Built for This Market. Built to Last.
Reflections on discipline, durability, and the realities of private credit.
This week’s blog is inspired by a recent commentary from Michael Gatto of Silver Point, who issued a sharp but fair warning to the private credit world:
“When the cycle turns, it’s game over for managers who traded diligence for deployment.”
It stuck with us, not because it was shocking, but because it was accurate. The private credit boom is undeniable. With over $2 trillion committed globally, the asset class has officially gone mainstream. As capital continues to pour in, so does the pressure to put it to work.
The question is: what kind of portfolios are being built?
Growth Alone Isn’t a Strategy
In every credit cycle, there’s a temptation to prioritize volume over value. But in private credit, that trade-off has consequences.
Some platforms are built for AUM. That may work when capital is cheap, default rates are low, and markets are forgiving. But when conditions tighten? That’s when structure matters more than speed.
At Garrington, we’ve never set out to be the loudest or the largest. Instead, we’ve focused on doing the work:
- We originate directly. We don’t outsource the diligence or rent someone else’s underwriting.
- We lend against tangible assets. If it can’t be valued, monitored, or monetized, we will not lend against it.
- We stay close to our borrowers. Monitoring isn’t a quarterly report. It’s part of the rhythm of how we manage capital.
- We never chase trends. Our mantra rings true, “We take what the market gives us”.
Let’s Talk PIK
Payment-in-kind (PIK) loans, where borrowers pay interest with more debt instead of cash, have become a hallmark of certain credit portfolios.
They can boost paper returns and keep capital moving. However, they also depend on ideal conditions, including refinancing windows, smooth exits, and uninterrupted growth. When those assumptions break, PIK-heavy portfolios often follow.
To quote Gatto again—because frankly, he nailed it:
“It’s game over for managers who traded diligence for deployment.”
At Garrington, we avoid PIK wherever possible. That said, we’ll consider it very selectively—when the borrower has meaningful asset coverage, the structure is tightly controlled, and there’s a clearly defined path back to cash payments.
But in general? We focus on receiving monthly cash payments and providing asset secured loans. It may not make headlines, but it builds portfolios that can stand the test of time.
The Influx Isn’t the Problem. The Infrastructure Is
We don’t believe the wave of capital into private credit is a bad thing. It reflects a broader recognition of the asset class, and for good reason.
However, it will likely reveal who has built a real credit business and who is just riding the momentum.
This isn’t about throwing stones. Every manager has their own strategy. Ours happens to be one that focuses on structure, downside protection, and long-term repeatability, not short-term optics.
Final Thought
This isn’t a sales pitch. We’re not here to claim superiority or suggest there’s one right way to manage private credit. But we do believe this:
In markets like this, you can’t fake discipline.
As the asset class evolves and the spotlight grows brighter, we welcome the conversation, on risk, resilience, and what truly matters when the music slows down.
Thanks again to Michael Gatto for calling it out plainly.
Built for this market. Built to last.
