How I Invest with David Weisburd Sep 21, 2026 48m 32m saved
With Ted Koenig, Chairman and CEO of Monroe Capital
Before the financial crisis, 90% of the financing for leveraged buyouts came out of the regulated banking system. Today 90% of it comes from outside the banking system, and Ted Koenig has spent 24 years on the side of that line that won.
Almost everything written about private credit this year has asked whether the asset class is a bubble. Koenig's answer is that the question is aimed at the wrong part of the capital structure.
"And private credit, we're 50% loan to value in our deals. So if you think about it, we're at the top of the capital stack. We're senior secured. the real risk is in the equity side, private equity market."
Ted Koenig, Chairman and CEO of Monroe Capital, on How I Invest with David Weisburd, practiced law for fourteen years before starting the firm in 2001 with three bankers who each gave up a $100,000 salary, and now runs $24 billion with 350 people.
The full interview is covered here so you can skip it. 48 minutes of audio, 16 minutes of reading.
Here are the 9 lessons that matter.
Key Takeaways
90% of buyout financing was done inside the banking system before 2008; today 90% is done outside it — and Koenig says the cause was regulators reacting to a liquidity failure, not to bad loans
550 private credit firms exist and only four have been around more than 20 years, with 40% of them under a decade old
Private credit is a $2T market Koenig expects to reach $5T in five years, having become two thirds of what KKR, Carlyle, Apollo and Ares now do
There are only two ways to make alpha in credit: earn more than the next manager, or lose less
Monroe lends to companies with $35M of EBITDA and below, a segment holding 200,000 US companies, half the workforce and a third of GDP
Retail money, not institutional money, was the fastest-growing source of private credit capital over five years — and it paused for nine months when AI raised doubts about software, which is 38% of the M&A market
His firm has compounded at 25% a year for fifteen years with no acquisitions, which he says is what happens when returns rather than fee growth drive the business
Public credit managers are paid on assets under management, not on what investors earned — Koenig says analyst reports on his listed competitors never print the investor return
The cost of building it was the weekdays with his children, which he calls a trade-off rather than a regret
1. Law To Lending, In 2001
Koenig trained in accounting, finance and law and spent about fourteen years as a mergers-and-acquisitions and bank finance lawyer, mostly for private equity buyers. What he noticed from that seat was that banks could not structure what his clients needed.
Two non-banks were doing that work at the time, GE Capital and Heller Financial, and neither was regulated, so both could customize a deal. Both were also chasing large transactions. Nobody was doing it for smaller companies.
He started the firm to copy the two non-banks, aimed one tier lower
There was nobody really doing lower middle market or smaller deals in a non bank format.
Ted Koenig
He recruited three bankers, a credit person, an originator and an underwriter, each earning $100,000 a year and each with a family to support. He said they were reticent and he talked them into it.
Asked what made him so sure a new asset class was forming, his answer was that he was not sure of anything of the kind.
He was not predicting an asset class; he was tired of being a lawyer
I didn't. I just was tired and burnt out being a lawyer, and I wanted to build something.
Ted Koenig
What he thought he was building was a modest lending business. The market turned out to be far larger than he had assumed, and the change he had to make was in himself: he had to stop doing deals and start building a company.
2. Moving The Goalposts
The host asked what still gets him up. Koenig gave two answers, and the second one is the one he kept returning to: being afraid to fail.
He wanted to be a professional basketball player first, and accounting and finance was the fallback. The competitive habit stayed.
The measure is winning, not the money
It's the competitive spirit. It's about winning. It's not about dollars. It's not about numbers.
Ted Koenig
His advice to the people he mentors is to refuse to be satisfied with what has already been achieved.
Achievement is a place to leave, not to sit
Once you have an achievement, don't rest on your achievement. Don't rest on your laurels. Don't read the newspaper clippings.
Ted Koenig
The example he used was Michael Jordan, a Chicago figure for a Chicago firm: a player written about in superlatives every week who, on his account, never read the coverage and simply went out and won.
Pressed on whether the competitiveness that billionaire founders describe is about self-actualization or about beating other people, Koenig said it is the former, and that wanting to beat a named rival is a poor engine for building a company.
He would rather be chased than chase
I want others to compete with me. I want to create space, and I want to build Monroe and let others compete with me.
Ted Koenig
3. Where The Drive Came From
Asked where that gets its fuel, Koenig told his father's story.
His father was a Holocaust survivor who lost his mother, his father and two sisters, and was alone in Poland at 13. He was held in four concentration camps and was liberated from Dachau by the Allied army.
The survival itself is the part he cannot explain
And there were a thousand permutations of why he should not have lived.
Ted Koenig
His father reached Israel, fought in the war of independence, emigrated to the United States, and was sent to Korea — which is how he got his citizenship. Koenig was the first person in his family to go to college.
He said he carried that without understanding it for a long time, and that the useful version of an adverse experience is the one you convert rather than the one that freezes you. He puts it to younger colleagues as taking whatever they have and turning it into fuel for what they do not think they can do.
The host matched it with his own account: parents who arrived with $600, a mother working two minimum-wage jobs, and a sense of mandate he says he read very differently from the way his sister read the same childhood. Koenig agreed that the reading is the variable — he has two brothers and a sister, and they think the hours he works are insane.
4. How Banks Handed It Over
The clearest market history in the episode is Koenig's account of why private credit exists at the size it does.
His census of the industry: 550 private credit firms operate today, 40% of them less than ten years old, and only four have been in business more than twenty years — which means fewer than 15 of the 550 predate the financial crisis. It is a $2 trillion market he expects to be a $5 trillion market within five years, and it is the fastest-growing private asset class. The large buyout firms he came up against as a lawyer have changed shape around it.
KKR, Carlyle, Apollo and Ares are now mostly credit businesses
Today, those businesses are two thirds private credit.
Ted Koenig
Then the mechanism. Before the crisis, 90% of buyout financing was done in the banking system and 10% outside it. Today that is reversed. The reason, on his account, is what actually broke the banks.
Banks did not fail on credit quality
They didn't fail because they had bad loans. They didn't fail because they had bad assets.
Ted Koenig
What tanked banks was liquidity challenges.
Ted Koenig
Banks were underwriting to distribute. A buyout sponsor would win an auction and the bank would commit $6 billion, $7 billion or $8 billion of financing it never intended to keep, on the assumption that pension funds, insurers and sovereign funds would buy the paper at above-market rates. In late 2007 that bid disappeared inside thirty days, leaving banks holding commitments they could not fund. TARP was the liquidity that let them digest the commitments; Koenig named Wachovia and Citibank as failures and said Wells Fargo came close.
The regulatory response was to price the activity out of banks: heavy capital charges on leveraged buyout loans, light capital charges on receivables, inventory, equipment and real estate lending. The business did not disappear, it moved. Between roughly 2010 and 2017 asset managers arrived to underwrite and service it, then the buyout firms themselves, then insurers.
Koenig had six or seven years of operating history when that happened, which he treats as the whole of his advantage.
Fifteen years of compounding, and a comparison he knows is a joke
I laugh, I tell people, we're not a finance firm. We're a AI chip company. We're like Nvidia.
Ted Koenig
5. Two Ways To Make Alpha
The host put it to him that he has said there are only two sources of alpha in private credit.
The whole list is two items long
One is to make more money than the next guy, and the other way is to lose less money than the next guy.
Ted Koenig
The reason there is no third is that the product is fixed income and is bought for a specific job.
Nobody is underwriting a multiple here
Private credit is a fixed income, not making two x, three x, five x your money.
Ted Koenig
His account of who needs it is specific. Pension funds have retirements, health and welfare benefits and member benefits to pay, and he put their annual liquidity need at 8% to 9% of capital. Insurers writing forty- and fifty-year policies need about 6% a year on an actuarial basis. Between them they are the largest part of the institutional investor base worldwide, and what they need is a return that does not care about the cycle.
That is the claim the asset class rests on: private credit has produced consistent returns through different economies, different interest-rate regimes and different shocks, so allocators have come to plan around it.
That universe runs from upper market through middle market and lower middle market to real estate, venture debt, specialty finance and asset-backed lending. Koenig picked one end of it deliberately.
The moat is the segment Wall Street will not go down to
What we've tried to do at Monroe is find our space that we're really good at and build a moat around it.
Ted Koenig
Monroe lends to companies with $35 million of EBITDA and below.
The reason why we love that is because Wall Street's not focused on it.
Ted Koenig
The size of that market is his answer to why it is worth defending: 200,000 middle-market companies in the United States, half of US employment, and a third of GDP.
6. The Bubble Question
Asked directly whether private credit is in a bubble, Koenig separated the two pools of money.
Institutions have been there for years and, he said, are not going anywhere. What changed about five years ago is that high-net-worth investors found the asset class: doctors, dentists, lawyers, plumbers, electricians, all of them looking for an 11% return at a time when a Treasury paid 2% or 1.5% and a bank account paid 10 basis points. It started with retirees on fixed incomes and worked down into people in their forties and fifties.
Monroe built a 40 Act vehicle for them about six years ago, after a conversation on a golf course with money managers who could not meet the firm's institutional minimums of $3 million or $4 million and wanted a way in at far smaller sizes. Koenig said it changed his business. He also said his own retail distribution is small next to the listed managers': he has around 15 people selling that product to registered investment advisers, where Apollo and Ares have 300.
The behavior of that money is what he thinks the bubble stories are actually describing.
Retail money arrives and leaves as one body
I told the Financial Times a few weeks ago, high net worth individual investors are like fish. They all swim in a school.
Ted Koenig
So they all come in together into a product. And when there's some adverse reaction, AI, let's say, or software concerns or the market blips, which it has in software, they all tend to swim out at the same time in schools.
Ted Koenig
The trigger was AI raising doubts about whether software companies would survive it, and software is 38% of the mergers-and-acquisitions market that private credit lends against. Retail allocations paused for about nine months. Institutions used the gap to buy. Nine months on, he said, nothing has actually gone wrong, and he expects individual investors back in the fourth quarter.
His structural answer is the one in the intro: Monroe lends at 50% loan-to-value, senior secured, at the top of the capital stack, and gets paid before the equity does. So the exposure people are worried about sits one layer below where they are looking.
7. No Quarter To Answer To
The host raised Apollo's Mark Rowan, who has pledged $1 billion of firm balance sheet, not fund capital, to build a retail business, and asked what Monroe is spending.
Koenig said Rowan is a friend with a much larger balance sheet, and that the two firms are aimed at different ends of the market. Monroe is putting as much of its own balance sheet into the high-net-worth channel as it can. The firm is roughly 30% retail and 70% institutional today, and his goal is about half and half within three or four years, which he acknowledged is a large move.
What he returned to twice is the structural difference between him and the people he is compared with.
Being private is what lets him plan in years
I'm not a public company like Mark's. I don't have to chase. I'm lucky. I don't have to chase quarter over quarter earnings.
Ted Koenig
8. The Scoreboard And The Pie
Asked whether the growth came in bursts or compounded, Koenig said it compounded, and that none of it was bought.
Fifteen years at 25% a year, all of it organic
The last fifteen years, we've grown our firm at a 25% CAGR compound annual growth rate. That's unheard of.
Ted Koenig
His explanation is that in credit the result is visible continuously, because investors are paid every quarter.
There is nowhere to hide in a business that distributes quarterly
Every inning, the score is on the board. You can't hide. Your returns drive your business.
Ted Koenig
He contrasted that with a buyout fund, which can tell investors to wait seven years for realizations and only face the scoreboard at the end.
It's the most Darwinistic portion, I think, of the investment business because every quarter, we've gotta disclose what our returns are and pay our investors.
Ted Koenig
The host's observation was that his listed competitors also watch a scoreboard, just a different one: assets under management and asset growth. Koenig agreed and sharpened it.
The published numbers for listed managers leave out the investor's return
If I would be like some of my Wall Street buddies, they're aligned by AUM growth and revenue growth. If you look at their analyst reports, nowhere did it say what their investor returns are.
Ted Koenig
The host pushed further: public shareholders mostly value these firms on management fees and do not know what to do with carried interest. Koenig said carry cannot be valued because there is no trend line under it.
Carry is performance, so it cannot be forecast
Carry is an impossible thing to value because it can be there or cannot be there.
Ted Koenig
A firm with 300 people selling product keeps growing assets and fees through a bad year, he said, even when the carry and the investor returns have gone.
On running the firm itself, Koenig has 350 people managing $24 billion, which he pointed out is several times the headcount that competitors five to seven times his size carry — a consequence of lending to smaller companies, which he called a blocking-and-tackling business. His organizing idea for that many people is a pizza.
Slice managers optimize their own piece; pie managers grow the whole thing
I'm a pie manager. I tell people that the only way that your slice is gonna get any bigger or that anything good is gonna happen to your slice is if the pie gets bigger.
Ted Koenig
He said one profit-and-loss account for the whole firm is what makes that possible, against the twenty, thirty or forty internal P&Ls a large public manager runs, where everyone is competing for their own. His hiring rule follows from it.
Whenever there's an opportunity, I tell our management teams and our people, always raise the bar.
Ted Koenig
Monroe has had no turnover among its senior and executive employees, which he named as one of the keys to the firm's record.
9. The Thing It Cost
The host, about to become a father, asked what Koenig regrets about being one.
He has four children, aged 34, 32, 30 and 26, all of them in private equity, and none of them working for him.
His own children will not join the firm
I can't get any of them to come to work with me at Monroe because they all tell me that they don't want to be nepo babies
Ted Koenig
Their reasoning, as he reported it, is that he built the firm with nothing and they want to do the same. The host called that the mark of a good kid. Koenig said it makes him feel he failed.
The regret he actually named is time.
He was a weekend father while the firm was being built
I worked so damn hard that I wasn't there for a lot of the Monday through Friday things. I tried to be good on the weekends. I was a good weekend dad.
Ted Koenig
As a parent, I would say that there's no substitute for time.
Ted Koenig
Asked whether that is a regret or a trade-off, and whether he would lower his ambition for the firm given the choice again, he said it is a trade-off, and that a different decision would have produced a different Monroe. He also said he does not know that he could have done it differently, because the wiring that built the business is the same wiring that kept him away from home.
Bonus Insights
Offices in five cities, a week a year in each
Koenig said Monroe has offices in Seoul, Abu Dhabi, Sydney, London and Paris, and that he spends roughly a week a year in each of them plus a substantial amount of time with the firm's larger clients. His brothers think he is crazy for it.
Sovereign wealth funds find managers, not the other way round
His account of how institutional capital arrives is that performance does the marketing: pension funds, consultants and sovereign investors in the Middle East call the manager whose numbers are public every quarter. That is the same point as the scoreboard, put from the fundraising side.
What he looks for in people is not spikiness
Asked whether the best people are exceptional in one dimension and weak elsewhere, Koenig said he does not know, but that the ones who work are detail-oriented and still understand they are part of a team. The times the firm has had to make changes, he said, were when someone put their own area ahead of the firm's.
The job stopped being an investing job
He underwrote deals himself at the start — cash flow, asset values, employees, distribution, meeting management. He now says the role is strategic management rather than investing, and that his head has to be three or four years out while the firm still has to run correctly today.
A billionaire's answer to the same question, from a different industry
The host brought up a day he spent with Jake Paul, who is building a gaming company and a consumer packaged goods company, and who told him he simply likes playing games and winning them, and finds business the most challenging game available. Koenig's reply was that everyone has their own motivation and his is the same one he has had since he was four.
Koenig's bottom line is that private credit's returns are structural rather than cyclical, because the loans are senior secured at 50% loan-to-value and get paid before the equity does, and that the risk everyone is hunting for in credit is sitting one layer down in the private equity that owns the same companies.
Products, Companies & Tools Mentioned
Monroe Capital ($24B under management, 350 people, lending to companies with $35M of EBITDA and below; roughly 30% high-net-worth retail and 70% institutional, with a goal of half and half)
Apollo, Ares, KKR and Carlyle (Private equity firms when Koenig started out, now two thirds private credit; Apollo and Ares each have around 300 people selling retail product against Monroe's 15)
GE Capital and Heller Financial (The only two unregulated non-bank lenders in 2001, and the model Koenig copied one tier further down the market)
Wachovia, Citibank and Wells Fargo (Named as the banks that failed or came close in the liquidity crisis Koenig says TARP was created to stop)
Nvidia (His own joke about Monroe's growth rate — "we're not a finance firm. We're a AI chip company")
Books & Resources Mentioned
The Financial Times (Where Koenig first used the line about high-net-worth investors swimming in schools)
TARP (The Troubled Asset Relief Program, which Koenig says gave banks the liquidity to digest buyout commitments they could not distribute in late 2007)
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