This week we continue our conversation with Eric Green and Mark O’Keeffe of Muzinich and Co. Muzinich is a global institutional asset manager specializing in corporate credit; headquartered in New York, the firm has offices in London, Manchester, Paris, Frankfurt, Zurich, Milan and Madrid. Second of two parts – View part one 

The Lead Left: Tell us about the outlook in Europe, where I know you all have been very active.

Mark O’Keeffe: We raise money locally for local investments. It’s not a relationship value play. We have a deep investor base. Investing is probably most difficult in Italy. We raised the first private debt fund ever there, so we’re a bit of a pioneer. But every strategy has to be reviewed in the context of the local economy.

There are some pretty aggressive institutions out there. Italy as a market has a number of “firm-owned” companies. In those cases we play the role of both investment banker and lender. In general, these smaller companies are less sophisticated about credit.

Eric Green: The public markets is an allocation business. You have global funds that have tactical capital, assessing relative currency moves, etc. The private debt business is about individual companies. In that sense, the UK is similar to the US. On the continent, it’s not like the US. The legal regimes are different, for one thing.

And the scope of private equity is also very different. You need to be investing in family owned businesses. There are a few sponsors such as TA and Summit who are actively investing in Europe. But leverage is more conservative. In Italy, for example, we’re a sole lender in one deal at only 3x! Absolute returns are lower, but so is leverage. Plus there are a lot of good manufacturing companies in Italy and Spain; it’s not like the US.