00:00Steve joins us on set here. Steve, great to have you on the program. And I mean, it's pretty clear
00:06by I look at that board of who's reporting this week. Right. And blue owl is the standout in terms
00:13of the stock drop. I think it's still off about 60 percent from its highs. And the other big guys
00:18are down like 30 percent. So is this a case of one bad apple or or is there a problem
00:27in general with underwriting standards or was there a problem in general
00:29with underwriting standards like three or four years ago. Yeah. Well, first of all, Matt, thanks for having me. It's
00:35great to be on. I think, look, the
00:40Sasspocalypse has created issues. And I think we're in discovery and diligence phase. Right. I think there is there's absolutely
00:47no question that AI will have an impact on that software industry. It's a big slug of the overall private
00:55credit landscape.
00:57Fortunately, we are massively underexposed to to software in our middle market lending business. We've got three point seven. Was
01:03that by choice, by the way, Steve? I mean, a lot of these private credit
01:08firms are looking at 30 percent. Right. Software exposure. What about you? Yeah, it's a great question. Look, I think
01:14certainly in our performing credit business a year, year and a half ago,
01:18we looked at the risks we thought were inherent in in AI as relates to software and we reduced our
01:25exposure. And today we're in the top decile or top quartile of under exposure to software
01:32in that space. In in the middle market lending space, it was a little bit different. It's more about our
01:37discipline. And we want to vector towards four times leverage or so.
01:42And in order to lend in order to have the privilege to lend to software companies, you needed to stretch
01:48to five, six, seven, eight times leverage.
01:50And that's just not where we go. So our discipline, fortunately, our discipline kept us away from. Will you have
01:55the same? I mean, a lot of people have been saying, look,
01:57the twenty one, twenty two vintages are not going to be great. This year is obviously different. But will you
02:03have the same results when it comes to
02:06those vintages that the rest of the industry is kind of worried about? Well, the good news is we got
02:11into
02:12and sometimes it's better to be lucky than good. We got into the middle market lending space in 2022. So
02:18we missed that vintage. But at the end of
02:20the day, our you know, our impairment is is in the five or six basis points per year. And when
02:26we look at our portfolio again because we're so
02:28underexposed to to software and tech type issuers, we feel like we're in good shape. We're looking at, you know,
02:35redemption requests that are by
02:37industry standards pretty massive. And it strikes me that that has to be for the most part retail. Right. Because
02:43institutional your your big pension funds or whatever the big institutional money is, they knew the limits and were prepared
02:52to
02:53keep their capital locked down. Do you see that as the case? Yeah. Look, I think the redemptions that we
03:01hear about on
03:02almost a daily basis now are are for all intensive purposes from the private wealth space. And when we talk
03:09about
03:09redemptions, we're typically talking about BDCs and interval funds. And as you know, typically there's an opportunity for investors to
03:18redeem in total total of the fund 5 percent, 6 percent, 7 percent. And so it feels like that will
03:26continue apace. I think it's worth talking about,
03:30though, because the and maybe just a step back when we we've recently moved into the private wealth space. The
03:38paradigm that we
03:39focus on is as opposed to selling the private wealth sector on our products is we want to educate them
03:45on our products. And that
03:46means talking about all the characteristics, including the contractual obligations that we've signed up for, meaning call it 5 percent
03:54redemptions per quarter. The and so I think it will be who it would be who the entire industry to
04:02make sure that we're
04:02focused on education because surprises aren't good. Right. So I have no perspective on on whether those will continue. As
04:12I said, we
04:12we've recently moved into the private wealth space. So we've been we've had the we've been the beneficiary of inflows
04:18and we haven't had
04:19redemption issues. But it's certainly an issue in the space. What about the opportunity in this space? Because a lot
04:27of a lot of the
04:30big institutions or people that we talk to in this program are licking their chops at what they can get
04:34now, especially if there's an
04:35exodus from private wealth investors. You can get it on the cheap. Do you see that as well. Yeah. Well,
04:40look, you know, a wise investor
04:43once said be fearful when when other others are greedy and be greedy when others are fearful fearful. I wish
04:49I had coined
04:50that term, but I didn't. And so if past is prologue, you look at what's happening now. And there really
04:57is opportunity in this
04:59vintage in the 2026 vintage.
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