[REPLAY] Jonathan Lewinsohn – Diameter Capital Partners (Manager Meetings, EP.05)

What It Covers

Kristen Van Gelder interviews Jonathan Lewinsohn, co-founder of Diameter Capital, a $6 billion credit-focused hedge fund. Lewinsohn explains their all-weather credit strategy, combining research depth with trading speed across investment grade, high yield, and distressed debt. The conversation covers their COVID-19 response, shorting philosophy, and approach to building concentrated positions while maintaining portfolio liquidity.

Key Questions Answered

• •Industry-First Analysis: Diameter starts with top-down industry models before analyzing individual companies. When covering autos in 2007, they built models projecting US car sales would decline from 16 million annually, discovering General Motors couldn't profit below 15.5 million sales. This macro-first approach identified structural fragility before the financial crisis, enabling profitable shorts across the auto supply chain.
• •Liquidity as Alpha: The firm maintains highly liquid portfolios even in bull markets, avoiding illiquid 9% yielding securities that become popular during frothy periods. This positioning enabled them to reduce gross and net exposure rapidly in February 2020, selling cyclical longs in energy and travel within days of Wuhan's shutdown. Liquid books provide flexibility to pivot when macro conditions shift unexpectedly.
• •New Issue Market Access: Diameter reviews every high yield new issue and maintains native relationships with investment banks rather than being tourists in specific credit markets. During April-May 2020, this positioning delivered outsized allocations in the first-ever syndicated rescue market, buying investment grade bonds from Wells Fargo to Sysco Foods at unprecedented spreads when the Federal Reserve backstopped corporate credit markets.
• •Distressed Selectivity: The firm only invests in distressed situations involving cyclical problems, not secular decline. They target companies where they can influence bankruptcy proceedings without controlling 30% positions that prevent exits. During COVID, they invested in Hertz and Europcar rental companies, LatAm airlines, and cruise lines with temporary revenue shocks, avoiding retailers like JCPenney facing permanent structural headwinds.
• •Research-Trading Integration: Portfolio managers work directly with analysts in flat organizational structures, combining fundamental research with real-time market technicals. This structure enables speed of capital deployment, with traders providing immediate answers to banks on positions because the team maintains continuous awareness of preferred industries and securities. The partnership between research depth and trading execution creates one-plus-one-equals-three synergies that larger, hierarchical firms cannot replicate.