# A conversation with Canyon Partners' Josh Friedman ’82 Source: https://www.youtube.com/watch?v=1H5ew9gK97o Recap page: https://rapidrecap.app/video/1H5ew9gK97o Generated: 2026-03-11T21:04:55.207+00:00 --- ## Quick Overview Josh Friedman, CFO of Canyon Partners and a Harvard Law/Business alumnus, explained that his father's advice to start his own business, not work for others, influenced his early career decisions, leading him to focus on credit-oriented investing rather than purely equity-focused strategies, which he found more intellectually interesting and less risky, especially given the high interest rates and regulatory environment of the time. **Key Points:** - Josh Friedman, Canyon Partners CFO and HLS/HBS alum, followed his father's advice to start his own business rather than working for others. - Friedman initially worked at Drexel Burnham Lambert, but found the environment of high-leverage, high-risk deals less appealing. - He co-founded Canyon Partners, which initially focused on high-yield debt, structuring it as a hedge fund with proprietary capital and a 15-22% expected return, which was high for the time. - He noted that Canyon's initial focus was on credit-oriented assets, like distressed mortgage-backed securities and corporate debt, which he found more interesting than pure equity. - Friedman contrasted his firm's approach with the Silicon Valley trend of aggressive startup financing, emphasizing the importance of being credit-oriented and managing risk, especially when dealing with high-yield assets. - He credits his early experience, including his law school roommate's career path in bankruptcy law, for shaping his understanding of risk and deal structures. - The firm's success, in part, came from navigating the regulatory landscape where traditional banks were constrained, allowing Canyon to deploy capital more effectively in areas like distressed debt. ![Screenshot at 00:05: The introduction of Josh Friedman, Canyon Partners CFO, by the moderator, highlighting his dual HLS/HBS background and his role as CFO.](https://ss.rapidrecap.app/screens/1H5ew9gK97o/00-00-05.jpg) **Context:** The video features an interview with Josh Friedman, CFO and co-founder of Canyon Partners, who is also a graduate of both Harvard Law School (HLS) and Harvard Business School (HBS). The discussion centers on his career path, the founding philosophy of Canyon Partners, and the differences between credit-oriented investing (like Canyon's focus) and traditional equity investing, particularly in the context of the high-interest-rate and regulatory environment of the early 1980s when he began his career. ## Detailed Analysis The conversation begins with the moderator introducing Josh Friedman, CFO and co-founder of Canyon Partners, noting his dual HLS/HBS background and his Marshals Scholar award. Friedman recounts his father's simple logic: don't work for others; start your own business. This advice, coupled with his early exposure to high-risk, high-leverage deals at Drexel Burnham Lambert, motivated him to pursue entrepreneurship. He explains that he found the culture at big firms focusing on high-leverage deals less appealing. Instead, he and his partner, Mitch, decided to start Canyon Partners, initially focusing on high-yield debt, which they structured as a hedge fund using their own capital plus a smaller amount from an insurance company. This initial fund aimed for 15-22% returns, which was high at the time. Friedman emphasizes that his focus was credit-oriented investing, which he found more intellectually stimulating and less risky than pure equity, especially since he saw many highly intelligent peers focusing on areas like entertainment law or physics. He specifically contrasts this with the Silicon Valley model of aggressively funding startups with large amounts of debt, which he views as risky, especially when high interest rates or economic downturns hit. He mentions that they structured their deals to avoid situations where the underlying assets (like mortgages or corporate debt) would be subject to immediate scrutiny or default. He cites the example of a major regional bank client that had high-yield assets that the Federal Reserve was scrutinizing. Friedman states that his firm specialized in structuring deals where they could either get paid back quickly or retain control of the assets, unlike traditional equity investors who might struggle if the company faced distress. He concludes by noting that the firm's success came from their focus on credit analysis and structuring deals to manage risk, which he believes remains their competitive advantage. ### Introduction and Career Motivation - Friedman's father advised him to start his own business; disliked the high-leverage deal culture at Drexel Burnham Lambert; co-founded Canyon Partners focusing on high-yield debt. ### Canyon's Early Strategy - Initial $17 million fund was structured as a hedge fund using proprietary capital plus institutional money; aimed for 15-22% returns; focused on credit-oriented assets like distressed debt and mortgages. ### Contrast with Equity Investing - Friedman preferred credit analysis because it's less risky than equity, where you might lose everything if the company fails; he contrasts this with the aggressive startup financing common in Silicon Valley. ### The Importance of Expertise - His early experience with bankruptcy law (from his law school roommate) and his father's advice shaped his focus on structuring deals that protect capital. ### Regulatory Environment Advantage - During the 1980s, banks were constrained by regulations (like the 75/25 rule) on high-yield debt, creating an opportunity for Canyon to step in and deploy capital where banks could not. ### Deal Structuring Philosophy - Canyon sought deals where they could secure high returns (e.g., 10x returns on loans) or gain control of assets (like the Coke family's building) rather than just being passive equity holders. ### Concluding Advice - The key to success is focusing on what the market truly wants and developing a structural advantage, rather than just relying on general intelligence or being the first to market. ![Screenshot at 00:05: The introduction of Josh Friedman, Canyon Partners CFO, by the moderator, highlighting his dual HLS/HBS background and his role as CFO.](https://ss.rapidrecap.app/screens/1H5ew9gK97o/00-00-05.jpg) ![Screenshot at 00:27: The moderator asks Friedman about his career path and the decision to join Canyon Partners after Drexel.](https://ss.rapidrecap.app/screens/1H5ew9gK97o/00-00-27.jpg) ![Screenshot at 03:36: Friedman elaborates on his father's advice: don't work for others, have your own business, and focus on things that are not overly risky or complex.](https://ss.rapidrecap.app/screens/1H5ew9gK97o/00-03-36.jpg) ![Screenshot at 07:07: The moderator poses the first question to Friedman about his conviction for joining Canyon Partners and building the business.](https://ss.rapidrecap.app/screens/1H5ew9gK97o/00-07-07.jpg)