📝 The AGM Q&A: Credit Underwriting in the Age of AI and Uncertainty
Views from the field with Permira's Benoit Vauchy
Permira has grown into one of the industry’s specialist Private Equity and Credit platforms with a transatlantic focus and a mindset of helping to accelerate growth at scale.
The firm’s heritage resides in private equity. Permira was founded in 1985 under the Schroder Ventures name. In 1996, the firm formed an independent company called Schroder Ventures Europe, and in 2001, the firm was renamed Permira to reflect its separation from Schroders.
Permira has scaled its investment platform across Buyout, Growth Equity, and Credit to over €89B in committed capital.
The firm’s credit franchise, Permira Credit, has become one of Europe’s leading specialist credit investors over the past 18 years since its creation. They support businesses with flexible financing solutions across Direct Lending, CLO Management, and Strategic Opportunities.
In this edition of the AGM Q&A, we had a chance to sit down with Partner, Executive Committee Member at Permira, and Investment Committee Member at Permira Credit Benoit Vauchy at a time when private credit is at an inflection point due to a number of factors.
Credit Underwriting in the Age of AI and Uncertainty
Benoit Vauchy is a Partner at global investment firm Permira and a member of the firm’s Investment Committee, Executive Committee, and Financing Group. Before joining Permira in 2006, he spent over a decade in leveraged finance, including six years at JPMorgan in Frankfurt and London. Today, he also sits on the Investment Committee for Permira Credit, the firm’s credit platform, which has been active for nearly two decades in European private credit, as well as running a transatlantic liquid credit business.
As AI reshapes industries, supply chains shift, and geopolitical uncertainty becomes the norm, credit underwriting is entering a new phase — one where sector expertise and investment discipline matter more than ever.
We sat down with Benoit to discuss how Permira Credit is navigating this environment and why the next cycle will separate disciplined lenders from the rest.
Q: How are you underwriting risks as it relates to AI, supply chain, and geopolitics?
Let me start with AI, because I think there’s a misconception in the market that you can simply sidestep the risk. A few years ago, lenders tended to rely on broad-brush sector calls — avoid retail and chemicals, lean into software — as a way to manage downside risk. The emergence of AI has completely upended that playbook. Software, once considered a safe haven, is now one of the sectors facing the most disruption.
The reality is that AI touches virtually every industry. You can’t ringfence it. The only productive response is to embrace the complexity and develop the expertise to assess it company by company. Within any given sector, there will be businesses that benefit enormously from AI adoption and others that are made obsolete by it. The job of a credit underwriter is to distinguish between the two — and then, critically, to walk away from the businesses on the wrong side of that divide.
The same principle applies to supply chain and geopolitical risks. These aren’t sector-level problems with sector-level solutions. They manifest differently depending on where a business sits in its value chain, where its suppliers are concentrated, and how adaptable its operations are. You need granular, bottom-up analysis to underwrite those risks properly. That’s where sector expertise becomes non-negotiable.
Q: How do you define underwriting discipline?
At its core, discipline means being willing to say no. In private credit, there’s no equity upside — returns are contractual. That means the single most important thing a lender can do is avoid losses. Everything else flows from that.
In practical terms, that starts with how much capital you raise relative to the opportunities available. If a manager has raised more money than it can prudently deploy, the pressure to do deals inevitably leads to compromises — looser terms, tighter pricing, or taking on risks that don’t make sense. We’ve seen that play out across the market, particularly with some platforms that have taken in significant capital through wealth and retail channels. The math is simple: too much capital chasing a finite set of quality deals leads to worse outcomes.
We’ve been intentional about avoiding that dynamic. Our focus has always been on building a strong pipeline of high-quality opportunities rather than scaling capital ahead of where the market can absorb it. And when we encounter a business that’s structurally challenged — regardless of how attractive the pricing looks — we pass. Raising the spread on a loan doesn’t compensate for fundamental risk. There are some credits that just shouldn’t be in a portfolio at any price.
Q: How much does the broader Permira / PE platform help with credit underwriting?
It’s central to how we operate. Permira has spent more than four decades building sector-specific knowledge through its private equity business, and that insight flows directly into our credit process. We don’t treat credit underwriting as a standalone exercise — our credit team works alongside dedicated sector specialists who live and breathe the industries we lend into every day.
That matters because the quality of a lending decision increasingly depends on understanding the specific dynamics shaping an individual business, not just the financial profile in front of you. A generalist lender typically relies on the due diligence their borrower or sponsor provides. We think that’s insufficient, especially in the current environment. A lender should always be capable of forming an independent view on a business — its competitive positioning, its vulnerabilities, and how durable its model really is. Being embedded in a platform with that depth of sector knowledge gives us a meaningful advantage in doing exactly that.
Q: Permira Credit has multiple strategies across the credit spectrum. Where do you see the most compelling opportunity in the current market?
We have three core strategies at Permira Credit — Direct Lending, Strategic Opportunities, and CLO Management. In the current market environment, each is well-positioned for different but complementary reasons. Across all three, the same Permira Credit differentiators apply: specialism over generalism, experience over cycles, and selectivity over volume. These are all then underpinned by a single, integrated platform; deep, shared sector expertise with Permira’s PE business; a purpose-built in-house restructuring team; and the broader Permira value creation capabilities behind every strategy. It’s a powerful combination.
In Direct Lending, the opportunity right now is firmly in the European core mid-market, where deep sector understanding and underwriting rigour matter, in our view, more than scale. Over more than 170 senior transactions, that selectivity has translated into a near-zero annualised loss rate on our senior funds and recoveries above par on the defaults occurred. Critically, the mid-market hasn’t been distorted by the capital overhang affecting larger-cap lending — a meaningful competitive advantage today.
On the Strategic Opportunities side, a looming refinancing wall, bank retrenchment, and geopolitical disruption are widening the complexity gap in the market — and complexity is what we get paid for. But accessing that complexity premium requires something most credit platforms don’t have: the ability to understand businesses the way an owner would. That’s where being embedded within the broader Permira platform becomes a genuine differentiator. Our four sector teams — Technology, Consumer, Healthcare and Services — bring operational and commercial insight that flows directly into our credit underwriting. Our mandate gives us the flexibility to provide bespoke solutions across the capital structure and to move between primary and dislocations depending on where we see the best risk-adjusted returns — and it’s that integrated PE insight that allows us to do so with conviction.
In CLO Management, for the right client, the yield profile is genuinely compelling: CLO equity delivers strong cash yield from early in the investment lifecycle, directly reducing the J-curve. Managing our own CLOs and investing in the CLO market over the last 19 years gives us deep visibility into underlying credit quality and active control over portfolio construction — but what has driven consistent returns across market conditions is our active management of both the assets and liabilities of each CLO, continuously improving asset performance while reducing the cost of our liabilities over time.
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