Welcome to Lender Lens, our series for profiling leaders in the Lender community.
With private credit playing an increasingly important role in the financial system, we wanted to find out how lenders are navigating the evolving landscape and how they assess the market in the coming years.
Dealmaking has become more complex in today’s market — and private credit is adapting.
Octagon Credit Investors, a firm with a three-decade track record in broadly syndicated loans and CLOs, has recently expanded into direct lending, bringing its institutional approach and credit-first mindset to the middle market.
In this edition of Lender Lens, we speak with Sean Sullivan, Head of Private Credit at Octagon Credit Investors, about the firm’s differentiated approach to middle market lending, the advantages of entering the direct lending market at this stage of the cycle, and where he sees the most compelling opportunities in today’s private credit landscape. Sean also shares insights on building a direct lending platform, navigating evolving market dynamics, and the experiences that shaped his career in finance.
How does Octagon Credit Investors approach middle market credit differently than its peers?
Octagon has many of the core attributes you would look for in a successful private credit manager, which is a big part of why I joined the firm about six months ago. We have a 30-year track record of loss avoidance and credit discipline investing in the broadly syndicated loan (BSL) and collateralized loan obligation (CLO) markets. And as the BSL and private credit markets increasingly converge, sponsors are looking for managers who can operate effectively in both. Octagon has the benefit of offering both BSL and private credit financing options and providing sponsors the flexibility to choose the right fit for each situation.
How does Octagon Credit Investors’ relatively recent entry into the direct lending market position it to avoid some of the challenges currently facing more established managers and funds?
I think starting out at this time in the marketplace is a real advantage for us. We have a clean portfolio with no legacy 2021 vintage deals, which gives us the flexibility to play offense. Because we’ve built our private credit portfolio largely over the past six months with a deliberate focus on AI related risk, we’ve also avoided older point-solution software exposures. We also benefit from the support of 20 investment professionals on Octagon’s BSL research team. Leveraging their sector expertise helps us anticipate where the market is headed and make better credit decisions.
What do you believe makes Octagon Credit Investors uniquely suited to succeed in today’s private credit environment?
What differentiates Octagon in today’s private credit environment is the combination of patient institutional capital, deep sourcing relationships and disciplined underwriting. There’s been a lot written recently about retail funds; having long-term capital matters greatly in this market. We are backed by institutional capital that is patient and aligned for the long term, which allows us to stay focused on underwriting quality instead of managing short-term liquidity needs. At the same time, we have sourcing relationships to access higher quality credits. As hold sizes come down across the larger managers, sponsors are prioritizing trusted partners for incremental capital opportunities. Because we’ve built those relationships over time, we’re among the first calls to join these attractive club transactions.
What sector does Octagon Credit Investors find most appealing in the current environment?
Historically, Octagon has focused on the mid-to-upper middle market, but our scale and capital base give us the flexibility to move to wherever we see the best risk-adjusted returns. In today’s environment, that’s the upper end of the middle market. As we saw in 2022 and 2023, larger private credit financings tend to price risk more efficiently —whereas in smaller deals, a single lender could misprice risk for their own reasons. For us, that dynamic favors larger, more resilient companies with experienced management teams, where we can earn an attractive risk/return premium with lower loss potential. There could be a time in the future where there is a premium in the lower end of the market, but the upper end of the market is where we think the opportunity set is right now.
Did you always know that you wanted to pursue a career in finance?
My father taught business in high school and college so I’ve been interested in finance since I was a child. He was also an entrepreneur before he went into teaching, so I appreciate the value of business building. The opportunity to build a direct lending business at Octagon is a great way to leverage both skillsets to create a better private credit manager. I look forward to embracing these challenges as we continue to scale the platform.
