The Voices of Private Credit: Matthew Clark, KPMG

Q: Please introduce yourself, your role at KPMG, and your background.

My name is Matthew Clark and I am the Alternative Investments lead for all things Technology and Operations within KPMG’s Advisory group.

Our team assists clients who invest in Alternative Investments, such as General Partners, Insurance Asset Managers, Pension Plans, Sovereign Wealth Funds, to tackle the unique challenges associated with private market investments. A typical engagement might focus on defining a target operating model, selecting and / or implementing a vendor solution, and launching a new client fund or product.

For example, my team recently completed an engagement with a large institutional asset management company to select a new private credit system. As part of that project, we created the system requirements based on a target operating model, then, we successfully deployed the system – on time, on budget, and on scope – across multiple investment teams and locations.

Prior to KPMG, I spent time on both the buy- and sell-sides at various large investment banks driving strategic technology and operations initiatives in Tokyo, New York, London, and Singapore.

Q: How would you explain “private credit” to a friend or colleague who isn’t in the industry?

I take out a dollar bill, hand it to the person, and tell them we just completed a private credit deal. When they try to give me the bill back, I stop them and say they actually owe me a dollar twenty-five.

Such a simple, relatable example grabs their attention and I’m able to use that as a springboard to talk about the various nuances of private credit transactions, including how the 2008 financial crisis fed  demand over the past 10 years, how private transactions can be highly bespoke (for good and bad), and how challenging these private transactions can be to support.

Q: How has the demand for alternative investments changed in the past 5 years? Is there greater demand for private credit opportunities? Are their appetites for risk changing?

Demand for private credit has skyrocketed over the past 5 years, especially as investors’ appetites for alternative assets have grown. This demand has been driven by a greater need from institutional asset managers (i.e. Limited Partners) to increase investment returns to cover liabilities (e.g. pension plans) while remaining within the parameters of their risk profiles (e.g. insurance asset managers).

General Partners have increasingly leaned into the resulting demand as the margins for these investments remain high and the long duration of the investment helps reinforce strong relationships with the Limited Partners as clients. KPMG expects this to continue into the foreseeable future given continued macro trends in the industry, as alternatives become more widely available and institutional investors diversify into risk adjusted asset classes.

Q: When you advise your clients who want to expand their portfolio, what advice do you typically give them?

Take the time to figure out what your “North Star” is. Where do you want to be 5 years from now in terms of your fund’s investors, asset classes, infrastructure, etc. What is  your fund’s special sauce that will bring it all together? Let the answers guide you through the ebbs and flows of the inevitable business cycles that we all encounter.

Q: Given your experience, what operational advice can you give fund managers and loan servicers?

Buy, don’t build. People rarely think about the ongoing development and maintenance needed to support a proprietary system.

Q: The question everyone wants to know: What was the first car you ever owned?

1983 BMW 320ii. I worked for 8 months at a moving company and Dunkin Donuts to pay for the 12-year-old car. After buying it in Maine, I drove it down to Key West then to New Orleans, San Francisco, Seattle, and back to Maine in an epic 4-month, solo road trip when I was 20 years old. I ended up selling the car to my older brother, who then ended up selling it to one of his high school students, who did God-knows-what with the car. What I wouldn’t give to drive that car one more time…