Dennis Klemming – Why are you surprised with the award?
We are very proud that Prudent Group have been awarded the GAMECHANGER™ PROGRESS CHAMPION AWARDS for our initiative to constant striving to be better and better at diversity, equity and inclusion. This is an interview that I made when we got the award. Which we are very proud of.
I would say there are many other firms in our industry that voice or publicize their diversity goals, while we elect
to pursue our diversity goals as a normal course of business, and without advertisement. Perhaps this approach
is a bit old-fashioned, but my goal regarding the culture and diversity of our firm (and frankly, my philosophy
in general) is always to treat people exactly how I want to be treated myself. Acceptance and unbiased thinking
should not even need to be advertised, but more-so instilled as a norm. Importantly, this includes treating every
person with respect and dignity. There should never be biases based on looks or belief systems; as my team
knows, I very clearly have zero tolerance for bigotry or bias.
This is not a trivial issue and I certainly realize that bias (either conscious or unconscious) is a serious problem
in many settings or other workplaces, but from a moral and competitive standpoint, it cannot exist at Prudent
Group. The moral aspect of the issue is quite straightforward, but the competitive aspect is existential; Prudent
cannot afford to stray away from true meritocracy. We simply could not survive in the competitive market if we
focused on other aspects outside of merit and skill.
So its a matter of don’t fix what isn’t broken?
It would be arrogant not to reflect on myself and the culture of our firm after winning this award, even though
my sense is that we have an inclusive environment. “As investors, we are intimately familiar with the concept of
confirmation bias, and thus, our investment process is one of continuous evaluation and innovation”, states the
Group Chairman Dennis Klemming.
In other words, this recognition has motivated me to evaluate our company culture in a similar way that our firm
Congratulations to the award Dennis Klemming!
strategy, North America Opportunity Fund, four years ago and see this award as a testament to our efforts”
says Dennis Klemming the group Chairman. As most investors who are familiar with our company know,
prior to 2018, we were primarily focused on supply chain financing in emerging markets. While North America
Opportunity Fund employs a similar risk management and underwriting philosophy as our emerging market
strategy, we were unsure (when starting out) if we could generate similar return characteristics. This uncertainty
stemmed from the general risk/return expectations in developed vs. emerging markets. However, our track
record shows that we have fortunately managed to generate similar returns–which we suppose is one of the
main reasons for earning this award.
Dennis – what is the key to your track record?
I would say that our broad market and credit experience, unique sourcing capabilities, and deep focus on
underwriting are essential elements. These elements, in combination with access to global investors/investment
capital, are what we believe are the keys to our success.
Sourcing these types of lending opportunities requires both a large network and an established credibility in
the marketplace. Additionally, the companies we partner with need funding in a timely manner. Our partners
typically choose to work with lenders that (1) have an established track record and (2) will work closely with
them, rather than as counterparties. We believe we provide those brands to our partners.
Our underwriting team is extremely diligent and guides us toward our goal of generating persistent and dependable returns. To help achieve our goals, we thoroughly evaluate transactional situations with ultimate
payors and borrowers. For example, in cases where medical clinics are the borrowers with outstanding
receivables, payors with outstanding payables may be the US government or a blue-chip insurance company.
Alternatively, in the case of an aluminum recycling company we work with, the ultimate payor could be a
multinational car manufacturer. In short, we spend a lot of time looking at the history and current financial
health of potential borrowers to make sure they are creditworthy; as an extra layer of risk management, we
practice the same evaluative measures for the ultimate payor. In most cases, major market participants such
as research firms, investment banks, or credit rating agencies have already scrutinized the payors and ascribed
their own rating (or other similar evaluation) to these entities’ creditworthiness. This offers extra input into our
own underwriting process and serves as an added layer to our risk management process.
Of course, no lending process would be complete without the funds to deploy to our borrower partners. At
Prudent Group, we have been able to match fund-needing borrowers with investors who are looking for stable
and predictable returns as part of their investment portfolios; this matchmaking process throughout our
company’s history is what has made this all come together. We strive to treat our borrowers as partners and
can offer them flexibility when it comes to their funding needs. This has only been possible by cultivating trust
and true partnerships with our investing clients as well. Our unique sourcing capability is facilitated by–what we
believe to be–uncommonly deep partnerships with investors who truly understand our investment process and
who appreciate the return pattern we have been able to generate for them over the years.
Ok, so much for looking in the mirror of what has happened historically, how will you keep this going in the
That, of course, is the most important question and our sole focus at Prudent Group. Although we can look at
history to help us understand how we got here, our focus remains on providing the consistent and persistent
returns that we have managed to generate historically. As you know, the asset management field is highly
competitive. Without continuous improvement, an asset managing company risks losing its position as “a lender
of choice.” If you lose that positioning, returns can diminish.
In this process of improving, we have targeted two main areas to place our focus and resources–borrower
diversification and selective headcount additions.
Over the past few months, Dennis Klemming says, we signed agreements with a few different service providers in the healthcare field.
The companies we signed agreements with offer services to smaller healthcare providers by helping them in
day-to-day operations. Prudent Group’s partnership with these companies will ideally help them to improve
their services and product offerings through financing solutions. Additionally, the new partnerships provide
Prudent Group with significant potential in terms of lending opportunities, increases in portfolio diversification,
and ultimately increased returns.
On the headcount front, we recently hired a Chief Operating Officer who brings vast knowledge and experience
from years in management roles in a world leading investment bank. He will spearhead efforts to continue
optimizing our company’s structure and to help the company prepare for growth. The recent decision will allow
our Chairman and other key individuals to focus on existing operations. Furthermore, the Chief Operating
Officer will assist in maintaining the focus of our underwriting staff, help to expand the number of borrowers,
and increase overall productivity.
While we want to grow as a company, our main priority remains with existing borrowers and clients first and
foremost. We think the investment into our team will allow us to facilitate both.
Dennis Klemming – Thank you very much for speaking with us!
Thanks again for presenting us with this award! As mentioned earlier, we take this as an indication we are
making the right decisions.
We will continue to strive to be the optimal partner for our borrowers and diligent stewards of our clients’
capital. If we continue to focus on helping our two main stakeholders thrive, hopefully our success will continue,
we and me, Dennis Klemming, will have the honor of speaking with you in the future again.