Andrew, private credit has received a lot of investor attention of late but you’ve invested in these markets for over 30 years. What experiences have most shaped your investment approach?

Andrew Beckman: The benefit of a long career is learning from what happens when things go right—and, just as importantly, when they don’t. Today, our Global Credit platform reflects the convergence of our team’s past experiences. We combine private equity-style underwriting, tactical flexibility, and a strong emphasis on structure and downside protection. Many on our team have backgrounds in distressed and special situations investing, which informs how we structure transactions from day one. The goal is not just to generate income, but to preserve capital and minimize downside through disciplined risk management.

Early on in my career, I worked in private equity, gaining a bottom-up understanding of businesses and capital structures from the owner’s perspective. I worked closely with credit investors on debt syndications and saw how credits behave under stress, helping steer distressed companies to resolution. That experience created a lasting respect for enterprise value and the reality that capital structures live or die on cash flow durability.

I then spent a significant portion of my career at Goldman Sachs in the Special Situations Group, investing proprietary capital across credit markets with a flexible mandate. That environment reinforced the importance of being tactical—leaning into areas with attractive risk-reward and stepping away when competition or structure has eroded returns or skewed risk. It also forced us to think deeply about downside scenarios; when you invest principal capital, mistakes are very visible.

From Goldman I transitioned to running a credit business at Magnetar, which added another dimension: Portfolio construction and risk management for outside investors. Every investment was evaluated not just on its standalone merits but on how it affected overall portfolio risk—its beta, correlation to other exposures, and downside in adverse environments.

What areas of the market do you believe investors are being appropriately compensated relative to potential risks—or not?

Andrew Beckman: We view today’s opportunity set across four segments: Public markets; large-cap private credit; and then sponsor-backed and non-sponsored credit in the lower and core middle market.

The broadly syndicated loan market and the large cap private credit direct lending space have increasingly converged. These markets are efficient, liquid and well covered—but that efficiency comes at a cost. Spreads have tightened, covenant protections have weakened, and leverage has drifted higher. In 2025, 90% of issuance in the syndicated markets was covenant lite. Looser covenants allow sponsors to pit lenders against each other in coercive transactions. That behavior is less prevalent in the upper end of the private credit markets, but those lenders are still competing against the syndicated markets when it comes to pricing, fees and terms. By contrast over 90% of our private credit deals in 2025 had at least one, and often, several maintenance covenants. While the upper end of the market is able to capture excess yield of approximately 100bps–125bps relative to the syndicated markets, in our view, focusing on the upper end alone overlooks market segments that are more advantageous for the lender.

The sponsor-backed lower and core middle market look very different. It’s highly fragmented, made up of businesses that are too small for the syndicated market or sponsors that are often overlooked by the largest private credit firms. These companies and sponsors are still fundamentally strong but capital is scarcer, competition is lower and, therefore, lenders retain negotiating leverage. We typically lend to companies with $25 to $75 million in EBITDA, occasionally up to $100 million; above that, you’re starting to compete with the large cap lenders.

In this area of the market, investors can earn higher spreads—often 50bps above the upper middle market—along with stronger structural protections such as maintenance covenants, lower leverage and more conservative loan to value (LTV) ratios. We’re often underwriting to LTVs that are 10% to 15% lower than the large cap market.

We also see compelling opportunities in non-sponsored private businesses typically owned by families, entrepreneurs or closely held groups that lack broad capital market access. Underwriting these deals requires more diligence and direct engagement with management—but that effort is compensated through higher pricing and tighter deal terms. We can typically earn an additional 50bps–100bps of spread premium above the lower and core middle market sponsor-backed space.

Across both sponsored and non-sponsored opportunities, the common thread is reduced competition. We are not earning a premium by stretching risk; we are earning it by operating where fewer lenders are willing or able to do the work. We think of it as a return on our invested time and a disciplined way to create alpha in private credit.

Can you expand a bit more on how you’re able to extract that type of yield premium? At face value, one might assume you’re inherently taking on more risk.

Andrew Beckman: Everything we do starts with the assumption that credit is asymmetric. Your upside is capped, but your downside is not. That reality forces discipline. Strong long-term returns in credit require relentless focus on downside protection and recovery outcomes.

The additional yield we target comes from access, structure and selectivity—not from higher leverage or weaker credits. In many transactions, we lend at materially lower leverage than large-cap private credit, focusing on senior positions, conservative loan-to-value ratios and covenant packages that allow early engagement if performance deteriorates. For example, we might lend at 3.5x EBITDA to a non-sponsored business while a comparable sponsor-backed borrower in the large-cap market might borrow closer to 5.5x.

Many of these businesses lack in-house capital markets professionals, so they value our effort to seek them out and serve as a true partner—more than they value squeezing out the last basis point of spread. But it’s not just about finding these businesses; it’s about being set up to do the work.

Smaller sponsors and non-sponsored businesses require more intensive diligence. You’re not handed polished industry reports or perfectly packaged financials. The customer relationship management (CRM) system might need upgrading. You need to dig in to understand customer makeup, retention and growth opportunities, spending days on-site and bringing in the right advisors—accountants, lawyers, engineers or consultants. That level of work creates a natural barrier to entry. With 30 professionals averaging over 16 years of experience, our team is built around deep sector expertise. Each industry specialist has more than a decade in their fields and leads screening, diligence and underwriting. They pressure‑test each opportunity against market reality. Many middle market lenders are staffed primarily with generalists underwriting health care one week and telecom the next.

Frankly, not everyone wants to put in the work required to source and diligence these businesses, or can. We think the extra work is worth it to deliver more upside and less downside across our strategies. We’re proud of the results we’ve delivered for our investors. For example, we’ve managed a strategy investing across private and public credit since 2018 that has outperformed the U.S. syndicated loan index by 249bps per year over that time with lower volatility.¹ We also manage an opportunistic strategy focused on capital structure solutions and idiosyncratic situations, which has delivered a net internal rate of return (IRR) of 15.81% and a 1.47x Multiple on Invested Capital (MOIC) since inception.² That performance has been built one investment at a time through a relentless focus on protecting our downside.

How do you find these opportunities? What does that hands‑on sourcing process look like in practice?

Andrew Beckman: Leveraging our team’s experience and firm-wide resources, we’ve built a diversified sourcing network across three verticals.

First, we leverage Future Standard’s relationships with over 300 leading middle market private equity firms, which have been built and cultivated over our 30-year history. We offer a full spectrum of debt and equity capital solutions to support sponsors at every stage of their growth.

Second, we have built long-standing relationships with hundreds of non-bank intermediaries, ranging from law firms and consultants to business brokers and financial advisors. Many are niche operators with unique access to off-market deal flow.

Finally, we have formed strategic sourcing partnerships with large commercial and investment banks, including a joint venture with J.P. Morgan. Our team joined a select group of alternative lenders funding middle market private credit opportunities sourced through its commercial and investment banking channels. J.P. Morgan initially committed $10 billion to the partnership, increasing it to $50 billion, and it has become a highly accretive source of deal flow.

Together, these channels form a broad, diversified sourcing network, with most opportunities originating outside the most competitive markets. A wide investment funnel is essential to generating strong risk-adjusted returns.