Goldman Sachs veterans Rob Allard and Jonathan Egol are to launch Firebreak Capital (Firebreak) later this year, a dedicated private debt hedge fund focusing on the opportunities created by financial regulatory reform and bank capital requirements.
With the rapid evolution in financial services, Firebreak aims to be an alternative balance sheet in the illiquid lending and investment sector, leveraging the emerging disruptive trends in consumer and commercial direct lending, as well as providing private credit, asset-backed and structured finance solutions. Firebreak will prospectively add cutting-edge technology that delivers insight and an efficient approach to its private debt strategy.
Post-2008 regulatory changes have irrevocably redefined, and diminished, traditional banking services due to new capital and balance sheet requirements. But, borrower needs remain robust, so they are gravitating to new sources of financing, representing a fundamental secular shift. There now exists a lending market that is, and will continue to be, underserved by the traditional banking system, emerging as a widely recognised trend across a variety of assets that require finance particularly in the more complex, structured solution based financing that will be Firebreak’s specialty.
“The skill-set required to be successful in monetising this opportunity is distinct and unique from typical fixed-income trading strategies,” noted Rob Allard. “It comes from sell-side experience, a deep well of sourcing, structuring, and risk management expertise tested through market cycles. You either have that experience or you don’t.”
Egol says: “Today, private debt is a natural place for investors to turn to achieve better risk-adjusted returns versus the more traditional fixed income allocations. Within this strategy, we build the product interactively with the borrower. If you have a better understanding of what the borrower needs, you can build something that is more desirable, rather than simply reaching for returns.”
While at Goldman Sachs, Allard was Head of Structured Product Origination and Distribution, and Egol was Head of the Mortgage CDO, Correlation and Derivatives trading business, in addition to sitting on the institution’s GS Bank Risk and Counterparty Credit Risk Committees. They are joined by experienced institutional investment and sourcing individuals that bring a holistic risk management approach to the private debt strategy.
