Guest Speaker: Jose Maria Martinez de Haro

From Ownership to Protection: A Different Investment Mindset One of the most important distinctions José María introduced was the difference between private equity and credit investing. While private equity focuses on acquiring ownership, improving operations, and generating high returns through growth, credit operates with a fundamentally different philosophy: “play not to lose.” In credit investing, returns are contractual and therefore capped, but the priority lies in protecting capital. This is achieved through seniority in the capital structure, collateral, and covenants that act as early warning systems. The role of the investor is not to maximise upside, but to carefully identify risks, quantify them, and structure deals in a way that limits potential losses. Why Private Credit Has Grown So Rapidly The session also explored why private credit has expanded so dramatically in recent years. Following the 2008 financial crisis, banks faced stricter regulatory constraints, reducing their ability to lend, particularly to mid-sized or riskier companies. This created a financing gap that private credit funds quickly filled. Today, the market has grown more than fivefold, exceeding $2 trillion globally. Its appeal lies in its flexibility: faster execution, customised structures such as bullet loans, and the ability to offer higher leverage and returns compared to traditional banks. Balancing Opportunity and Risk However, José María also highlighted that this rapid growth brings new challenges. An influx of capital into the sector has increased competition for deals, sometimes leading to weaker underwriting standards. At the same time, higher leverage levels and concentrated exposure to sectors like technology increase vulnerability if market conditions deteriorate. Another key concern is liquidity. Many private credit funds offer periodic withdrawals despite investing in inherently illiquid assets, creating potential mismatches in times of stress. Structure as a Tool for Risk Control A central takeaway from the session was the importance of structure. The position a lender occupies in the capital stack, ranging from senior secured debt to equity, directly determines both risk and return. Tools such as covenants and collateral are not just legal features, but essential mechanisms to manage uncertainty and maintain control when things go wrong. Key Takeaway The session reinforced a powerful idea: credit investing is less about chasing returns and more about discipline. As highlighted in previous YIN sessions, understanding how capital is structured and protected is just as important as understanding where it is invested. For us as students, the key takeaway was clear: successful investing is not only about identifying opportunities, but about managing risk with precision and consistency.