Jeff Schwartz, founder and managing partner of Corbel Capital Partners, has long been a vocal advocate for the potential of private debt markets. In his thoughtful leadership and industry contributions, Schwartz paints a compelling picture of this dynamic segment of the financial landscape, highlighting its growing role in fueling business growth and generating attractive returns.

With almost two decades as a principal investor and nearly 30 years in the financial services sector, Schwartz steers Corbel’s structured private debt and equity investments and serves on the boards of several Corbel portfolio companies.

But that wasn’t his dream when he graduated from the prestigious Wharton School with a degree in economics.

“When I was in school, I certainly didn’t think that finance would be the path for me,” he told Ideamensch. “I was going to business school to start my own business, not to specialize in private equity. But the truth is that entrepreneurs are more about the drive than the speciality. Once I had the expertise down pat, it was an easier transition to go from having employers to being one.”

Jeff Schwartz: ‘A Need for This Capital’

Schwartz identifies a turning point in the emergence of private debt: the global financial crisis of 2008.

In an interview on the Ontra “Dogs and Docs” podcast, Schwartz elaborated. “Post-2008 in the financial crisis, many of the banks, there was significant bank consolidation, and the regulatory and reserve requirements placed upon traditional lenders increased significantly, so banks were less inclined to aggressively lend to small businesses, and lenders or other institutional investors recognized that there was still a need for this capital that was not being filled in the marketplace and formed private lending institutions — effectively private banks that were unregulated or less regulated than the traditional banks.” Schwartz champions the "structured capital" approach within the private debt market. This methodology transcends the limitations of traditional loan structures, instead crafting bespoke financing packages tailored to the specific growth trajectories and risk profiles of individual companies.

“There were many, many, many small businesses looking for what we at the time called structured equity,” he noted. “Now, it’s turned into more structured debt, but a structured investment product that provided them capital to either grow or recapitalize their businesses and also a level of private equity support and sponsorship that certainly doesn’t exist from a normal lending institution.”

Jeff Schwartz: Benefits for Businesses and Investors Alike

Schwartz underlines the dual-pronged benefits of private debt. For smaller businesses, it offers a vital source of capital that can fuel expansion and innovation, without the immediate need to relinquish control or ownership. This can be particularly impactful for early-stage ventures or businesses navigating periods of rapid growth. For investors, private debt presents the potential for attractive returns and diversification, complementing broader portfolio strategies.

While optimistic about the future of private debt, Schwartz acknowledges potential roadblocks on the horizon. Rising interest rates and economic uncertainty are seen as factors that could impact the market, potentially curtailing access to capital for some businesses. However, Schwartz expresses confidence in the resilience of private debt, highlighting its ability to adapt to changing circumstances and innovate its service offerings.

“In a low-interest-rate environment, people are aggressively seeking yield and seeking return, and one way to do that is to lend more aggressively in a current cash-yielding product,” Schwartz said on the podcast.

“While investors were not able to earn any money in the money market or traditional municipal bonds or investment-grade credits, or even high-yield bonds, to a certain extent, there was a demand not only for this type of capital albeit higher costs for companies; there was a demand for investors to earn those higher yields in relatively low-risk security or investment, which has created the development, supported the development, both from the supply side and demand side of this private debt market.”