Private Credit. The Beautiful Game: Why process matters more than individual talent

**SPEAKER_1** (0:00)
What can the world's greatest football teams teach us about credit investing? In this episode of What Matters, MA Financial's Frank Danieli discusses his latest investor letter, The Beautiful Game, Why Process Matters More Than the Individual Talent, and the parallels between the world game and disciplined credit investing.
Drawing on his experience overseeing more than $7 billion in private credit investments, Frank explains why successful investing isn't built around one or two star loan pickers. It's built on the collective team approach underpinned by disciplined process, structure, depth and consistency. He also shares what MA Financial's private credit portfolios and proprietary lending ecosystems are revealing about Australia's home loan market, arrears and the broader economy.

**Tom Brown** (0:46)
Welcome to What Matters. Frank Danieli, you've been on Capital Allocators recently, a massive podcast in the United States. You've been on Equity Mates, one of the most popular podcasts in Australia. You join us again on What Matters. You've been busy on the marketing and podcast front, that one in the States, that's big time.

**Frank Danieli** (1:03)
Well, thank you, Tom. But this is the one that I've been really waiting for, of course, to sit here with you and Andrew.

**Tom Brown** (1:08)
Andrew Pridham, welcome as always to What Matters.

**Andrew Pridham** (1:11)
Thanks, Tom. Thanks, Frank. I think Frank, this is really the pinnacle of investment podcasts.

**Frank Danieli** (1:19)
It is. It is. One of the most widely listened to, diverse audiences of any podcasts I've been on.

**Tom Brown** (1:25)
Frank, the title of your latest investor letter, The Beautiful Game, Why Process Matters More Than Individual Talent, just for context, this is Frank's quarterly Global Solutions Investor Letter, that's just gone out this week and that we cover on this podcast. Tell us first off, Frank, about, I want to go obviously to the funds that it covers, but tell us about the inspiration behind the letter.

**Frank Danieli** (1:49)
Yeah, well, I'm a huge football fan, Tom, and by that, I mean not the type of football that Andrew Pridham is involved with, but soccer. The World Cup's been on and it really got me thinking about what it takes to actually succeed. One of the things, if you look at the history of the World Cup, it's never the team with the most champions or necessarily the most talented individual players that take out the trophy. If you look over the long history of the tournament, it's always the teams that have systemic process regard, good structure, good discipline that play in a cohesive way that actually can, over the course of a tournament, not just one game, consistently deliver results. And I actually think that is somewhat reflective of what we need to do in credit. In credit, we always like to say we're in the business of avoiding losers not picking winners. We're not in an equities business where we're trying to pick 10 of the best possible companies in the world and invest in those. We're not trying to do broad-based lending where we minimize the chance of problems.
And I think that there was a lot of symmetry.

**Andrew Pridham** (2:51)
One of the things I actually liked in the letter, Frank, is the analogy. Even though it was soccer, I can give you an AFL analogy to bring things back to a proper sport.
If I can take you inside the coaches room, the coaches always talk about the importance of having a champion team rather than team of champions, which is where you were going there. The other word that I noticed is very much throughout the letter is process, and coaches always talk about in the AFL to follow the process. It's somewhat from a fan point of view, they often think, what does follow the process mean? It's a game of repetition and learning of process, and that's what gets results.

**Frank Danieli** (3:35)
Yeah, we spent a lot of time here in our credit business thinking about this. We spent a lot of time on what our process is today, how we're following that process, and how we can improve the process to deliver results for our clients. We're not trying to find and hire the world's best loan pickers who know the top quadrant loans everywhere. We're actually just trying to find people that respect process, that can follow it as a collective, and then believe that that will deliver the results for investors. That's one of the learnings of a lot of us in the credit business, including me, who started in the restructuring investment banking business where we worked on Credit Gone Wrong. And one thing we learned from that is that it's all about the process and the process discipline. That's the thing that will protect you, so we spend a lot of time on it.