High Yield: When Volatility Creates Opportunity

Greg Campion: School is back in session. Investors are back at their desks. And along with them, something else has returned to markets: volatility. Should credit investors be worried, or are today's negative headlines setting up tomorrow's opportunity?

Adrienne Butler: There's going to be rating downgrades. There's going to be some defaults. There's going to be some other bumps in the market as we move forward. It's about looking at the long term. Look beyond where we are right now. The pull to par, the asset appreciation is huge in this market. And if you can look at that long- term perspective, I think that's where you want to be.

Greg Campion: That was Adrienne Butler, Co- Head of U. S. High Yield at Barings, and this is Streaming Income, a podcast from Barings. I'm your host, Greg Campion. Coming up on today's show, Co- Heads of U. S. High Yield, Adrienne Butler and Scott Roth, on finding opportunities in high yield amidst today's volatile backdrop. All right, Adrienne, Scott, welcome to the podcast.

Adrienne Butler: Thanks for having us. It's good to be here.

Scott Roth: Great to be here. Thanks, Greg.

Greg Campion: Well, let's dive in on high yield bonds and loans, which we're here to talk about today. And maybe let's start, Adrienne, with you and let's address the elephant in the room, which is the volatility that we've been seeing in markets. Obviously, we've seen a real return to volatility this year, but volatility is something that's not new to either one of you. You've both been managing money through multiple cycles. So, Adrienne, I guess I'm curious from your perspective, what's been surprising about this recent bout of volatility, and then what's maybe been less surprising to you?

Adrienne Butler: Yeah, sure, I'm happy to talk about that. I think that is probably the overwhelming headline right now for everybody. You're right, we both have managed money through a variety of cycles, and probably more importantly, the team has managed money through a variety of cycles so we've got good cohesion on the team. But to talk about what's going on on the markets today, I think the most interesting thing is the number of things that have played into this cycle. I mean, it started with COVID. That took us to a supply shortage, supply demand imbalance where the consumer then spiked in demand. We had to manage through that, and that then led us into an inflationary environment. And now we're seeing rising rate environment and couple that with a Russian- Ukraine War. We mix all that up, you've got an interesting brew. All of those factors affect different companies and sectors in different ways, so it's been an interesting cycle to get your arms around. In terms of things that haven't surprised me, I think I'd like to look at it more on what's the silver lining here? Coming out of COVID, we've seen so many companies in better financial positions than they would've been pre- COVID. They've raised a lot of liquidity. They've got runway. They've extended maturities. So we've got more companies than I would've thought in good positions while we're going through this cycle.

Greg Campion: Mm- hmm. Mm- hmm. I wouldn't mind coming back to that because I know that's an increasing concern for folks, just the idea that we could see the double whammy of an earnings hit at the same time as you're seeing rates go up and what does that mean for the financing picture for a lot of these companies. So let's come back to that. Scott, maybe one for you, just thinking about actually managing portfolios through this recent environment, what's been the biggest challenge for the team, would you say, so far this year?

Scott Roth: Well, you're right, there have been a multitude of challenges we've faced this year. I think the biggest one, maybe from my perspective, has been just the interest rate volatility. We're really in an unprecedented area. You have to go all the way back to really 1981 to find an inflation level that's comparable to today's. We've been in this bond bull market for the better part of four decades, so this is a pretty significant pivot. And historically, high yield has been negatively correlated with rates. So you have an uprise in the economy, rates move higher, spreads compress. So that's a pretty good outcome for high yield. I think what's different this time is just the sheer volatility of rates. The reality is spreads just aren't at a level that can buffer you or really insulate the market from this move that we've seen in rates. I think from a high yield manager's perspective, we're used to dealing with credit risk, not rate risk. If you think about the market structure and how that's changed over time, there's been this real uptiering in quality in the high yield market over the past 15 years. It's now a more BB centric market. BBs are over 50% of our market, and there's been really record issuance over the past, call it, calendar year 20 and 21. A lot of that's been low coupon, long duration assets, which are highly rate sensitive. So this is an area fortunately we've been able to sidestep for the most part, really just because coming out of COVID, we wanted to take really selective credit risk versus rate risk. And that rate risk component really has underperformed this year. So that's been, I think, a benefit or accretive to what we've done. I'd say from the analyst perspective, we're coming off a period of record operating margins. And so, when you're at these levels, you're always looking around or over your shoulder in terms of what's going to knock these margins off its perch. We've just been surrounded with rising input costs. I think the analysts, their challenge has been really to focus on the verticals, companies that have the ability to pass through these rising costs, and conversely, the companies that may be more challenged on that front. So from a PM perspective, more the rate fall analyst really honing in on what companies have pricing power.

Greg Campion: Mm- hmm. Mm-hmm. And so, you're talking about price inflation. Adrienne mentioned inflation as well. If you think about how inflation is feeding through to the high yield market, is it mainly that way, so is it mainly through higher input costs and things like that for the companies that you're following? Or how does inflation play into the whole equation here?

Scott Roth: Yeah, no, for sure, it's definitely on the input cost side that the companies are facing the ability to pass that through. What's really interesting about this period is actually earnings estimates have actually been far more durable than I think a lot of people have expected. Earnings estimates for'22 and'23 have really held in there, surprisingly so in the face of what is really negative sentiment. I think one thing that needs to be factored in is the fact that we've had really strong nominal growth, and earnings are driven in nominal dollars. And so, historically that's why stocks are viewed as a bit of an inflation hedge. You look at periods like the 1970s, nominal growth was always positive. And so, for high yield credit, you have revenue, EBITDA, driven in nominal dollars, debt is fixed. And so, that's a pretty decent setup for high yield in terms of the ability to meet their fixed obligations going forward. Look, I think the major point here is probably while we're potentially headed to a more difficult economic environment, earnings may be able to hold up better than in previous down cycles.

Greg Campion: Now, the rate component is a big part of all of this. And so, we've obviously just been watching the Fed get more and more hawkish and really stand their ground in terms of forward guidance about continuing on that rate- hiking cycle. So it's pretty clear the message that they're trying to send. I guess my question would be for you Adrienne. Thinking about loans and CLOs specifically, we usually think about these asset classes as, I don't know if you would call them hedged to higher rates, but they're floating rate asset classes, so you usually see more interest in these asset classes in periods of rising rates. Is that the case this time around? And curious to see what you're seeing out there in terms of the dynamics in the CLO and loan market right now.

Adrienne Butler: Yeah, no, I think you bring up a really good point. When we talk about the loan market, it is seen as a bit of a hedge in an inflationary market because so much of the yield component is derived from the base rate, which is a floating component, right?

Greg Campion: Mm-hmm.

Adrienne Butler: So loans are a floating product and oftentimes people gravitate to that in times like this. In addition, I think what we're seeing right now is really nice returns for loans. If you look at single B new issuance right now, the All- In Yield is about 8%. That's 300 basis points above where we were just a year ago, so it's a nice total return right now for investors. And then to couple that with the fact that we've got security and collateral, which really protects you on the downside there, loans are an interesting place to be right now, in my opinion. Have we seen the flows yet into the loan market? Not yet, which is interesting. But we're at the beginning of a cycle, and at the beginning of the cycle, usually there's a flight to cash, a flight to quality, to stability. And then, oftentimes, people take a little bit of a wait- and- see attitude to make sure they know where they're going. But the opportunity, I think, in loans and CLOs are really unique right now because we're in that market, because it's a little bit inefficient right now, there is an opportunity to get into that loan market in CLOs. Have we seen the CLO demand? Not yet. We've seen some of it. We've been pretty successful downstairs in being able to issue CLOs this year, but I think that's really limited. And the reason being is very technical. Right now in the CLO market, so much of that is driven by the AAA demand for CLO tranches. AAA demand is really driven by large banks. The large banks are really taking into consideration their asset allocation right now, and as a result of a lot of big buying they did in AAAs last year, they've pulled back. It's not so much a mandate on credit as it is just an asset allocation issue. So there is a technical in the market which is slowing down CLO issuance. Year to date, we're about$ 20 billion off of where we were last year in terms of CLO issuance. And if you look at the month of August, we're about half of where we were last year. So there is a significant slowdown in CLO demand. Why is that important, and how does that play into loans, and why is this an interesting time to be in loans? Because the CLO market is about 70% of the buyer base for loans. And when the CLOs are not creating new vehicles, the demand for loans will then be decreased. So you then see a little bit of an air pocket. So for folks who can get into the market now, who are looking at the loan product, who are issuing CLOs, there's an opportunity to really pick up loans at a nice discount. I think that total return is something in loans that is super attractive.

Greg Campion: Mm- hmm. Mm-hmm. Adrienne, what do you think changes that CLO dynamic? I know you mentioned, and I know your team's been really busy, so I'm actually curious to understand how you've been bucking the trend, so to speak, there. But I'm curious, what do you think needs to change there to see some of these banks and others come back into the CLO market and drive demand for new CLOs to be created?

Adrienne Butler: Yeah, I think it's just really a function of time right now and potentially new buyers coming into the market to help create the CLOs. Are the larger managers able to issue? Yeah. I mean, large managers with the liquid following, we're able to go out in the market, and we're not the only manager who's been able to get out there. We have had a busy year this year. We like these markets. When there's dislocation in the market, when I can pick up loans at a discount and use our credit shops to really create an interesting product, that's when we want to be in the market. I find this market very attractive, and there's other managers like us who are excited by this market. But yeah, I think it's a function of time. Eventually, the banks will deal with what their asset allocations issues are, what their risk- based capital issues are. They'll be back in the market as well. The CLO product and CLO trenches have always been an interesting place for those large investors.

Greg Campion: Yeah, that'll be great to watch.

Scott Roth: What's interesting or notable in loans this year is the coupon, so the base rate, has actually exceeded in the bond market for the first time in history. So it's been a function of the increased base rate coupled with what I talked about earlier on the bond side where you've had a lot of BB issuance, lower coupons. So that actually inflected in July. And as we looked at performance really through the first part of this year, actually through the middle of May, loan significantly outperformed any other asset class. I think investors looked around, and as liquidity became a premium in the market, loans were the easy asset class to sell just because they've held in, they're the best. And so, we saw that technical dynamic take hold. But again, if you think inflation is going to be more persistent, that base rate, that floating Ray coupon is pretty attractive.

Greg Campion: Speaking of supply- demand dynamics, let's shift to the bond side, Scott. Interested to see what some of the factors are, I guess, that you're watching most closely that are influencing high yield bonds at the moment.

Scott Roth: The technicals, obviously, play a big part in terms of the direction of play for bonds. Despite the outflow activity that we've seen on a year- to- day basis, there's been some real offsetting factors. Again, there hasn't been the supply component that we've expected. Supply is running at just de minimis levels. We have to deal with a little bit of a surge here coming into the fall period. But for the most part, supply has been a technical tailwind for the market. And so, again, despite outflows, we've also seen a lot of corporate actions, so calls, tenders. Rising stars have been another big proponent where those dollars are leaving... or those credits are leaving the high yield market, but those dollars will circulate back into the high yield market. So net net, technicals have been a positive year to date. Again, you're always coming to a little bit of a tenuous period here in September and October in the market. The street has basically committed backlog of roughly 65 billion that they want to place by year end. That's loans and bonds. I think that split is roughly maybe 40 billion loans, 25 or so, on the bond side. And they can toggle back and forth a little bit depending on market demand, but that's sort what we're facing. There are some, what I would characterize as, late cycle LBOs here, a handful that need to clear the market. So it will be interesting to see where risk clears here ultimately. But once you get past this surge here, if you will, I think there's not really a calendar to speak of, and that could lead to a very positive technical setup for really the balance of the year.

Greg Campion: Do you expect that CFOs out there looking at the financing environment, coming back to take advantage of rates where they are right now with the anticipation that they go higher, or do you think that that companies have already got themselves in pretty good position over the last couple of years?

Scott Roth: Yeah. Clearly, financing rates are more restrictive today than they have been in quite some time. I think that does give CFOs a bit of a pause here. As we talk to our capital markets folks, we recognize that a lot of financing has taken place in the past couple of years, and so that runway has been cleared. And so, really, unless you've made some sort of strategic acquisition that you have to come to the market, that opportunistic financing, I think CFOs are going to look for windows to tap the market. I don't think they feel compelled at all right now to access the market. Quite frankly, most of what needs to be financed over the course of, really,'22,'23,'24 are higher quality companies. And so those companies always have access to the capital market. We don't see that being a problem, but again, I think CFOs are of the mindset that they're going to be opportunistic here.

Adrienne Butler: I totally agree with you. I don't think that any of the CFOs are going to want to go into the market that we're in right now. It's unpredictable, and I think now's not the time. And to Scott's point and what we mentioned earlier, they've raised a lot of capital. They've got a long runway.

Greg Campion: Now, you mentioned the improved quality of the market. Interested to hear a little bit more about that because I know we've seen a number of rising stars, as you mentioned. We've seen over the last few years some energy default, so some credits have come out of the index. Tell a little bit more about how you're viewing that quality of the high yield bond index today and whether historical comparisons on whatever measure you want to look at, so credit spreads, et cetera, are appropriate or less appropriate given the quality of the market today.

Scott Roth: You're right, that's a great question. I think just to start with, I don't think you can compare spread levels today versus other periods because of that market quality configuration that exists in the market. I mean, you have to make an adjustment for that. And so, as we think about spread levels, you're always having to do a little bit of a recalculation on that. And so, if you think about where we were post- GFC, we've seen BBs increase by about 1500 basis points in the market, so it's a pretty material part of our market. And it's a function of a lot of things. It was, as you pointed out, the commodity crisis, which was a bit of a inaudible cycle that we went through where a lot of the bad actors went through a restructuring process. And then you had COVID where you had a lot of fallen angels come into our marketplace and really increased the quality really in one fell swoop. And again, the agencies were a bit preemptive in taking companies down. As you saw, the earnings recovery happened really, really fast. And so, a lot of these companies ended up in our universe yet they were already performing really well by the end of 2020. And so, we do think there's a migration that's been in process, that's taking place, these rising stars, but we think overall, we haven't had these long periods of economic runway, if you will. We've sort of been stop start, stop start. That creates a situation where there's not a lot of time that's elapsed, that create a lot of excess in one particular vertical like we saw with the energy crisis. Before that, there was a lot of mal- investment in TMT, things of that nature. So again, we think that the construct for the market today is really different and really high quality versus previous periods.

Greg Campion: Makes a lot of sense. Okay, so I want to ask you both about opportunities. I know it's probably not the type of market or maybe it's never the type of market where you can make really big, broad brush statements about," Buy this asset class. Sell that asset class," that sort of thing. But as you look at the landscape today, and as you look at all the factors that we've been discussing so far, I'm curious to get your opinion on if there are pockets of opportunity you're seeing today, maybe some are in less obvious places, I don't know, but that would be interesting to hear about.

Adrienne Butler: Yeah, sure. You said it, when you're in markets like this, people want to gravitate to something more stable, and usually in this market would be non- cyclical, non- discretionary markets. You see a strong desire to head into something like a healthcare sector. But I think we've seen opportunities, and Scott alluded to this earlier, in certain pockets, in certain industries where they've been able to pass on those higher costs. We've seen certain names in our chemical sector, some in our paper and packaging sector where they have the ability to pass on additional costs. That's a function of being able to communicate with management teams, have the experience to understand the contracts that are in place with all of these types of issuers, and find those opportunities, those names who have been able to survive in a market like this to not only survive, but perhaps flourish in inflationary environment. I think those have been surprising areas to find opportunity. Additionally, in the CLO market, as you might be aware, and 2.0 CLOs, we now have a bond bucket, we haven't really used it much, but in this market where we're seeing bonds at depressed price levels, and I can pick up bonds at 85 cents in the dollar and know that there's that big pull to par, that there's par appreciation that I can recognize within a CLO, that's been a really interesting place for us to play. Typically, people saw that bucket as something that might be used because it has some enhanced spread to it. But I think in our case, we see that as a huge pull to par opportunity. It's something that we've used across all of our CLO platform post downturn inaudible.

Greg Campion: What type of allocation is that bond bucket usually?

Adrienne Butler: Well, it's usually about a 5% bucket, maybe slightly more in some cases. Right now, we've only used about a 1% position. We're lugging into it. You don't want to go in too far. We've seen folks who went into early and prices have dropped on them, so we're trying to be judicious in our use of the bucket, but it can be very meaningful to pick up discount like that in a closed end product like CLOs.

Scott Roth: Yeah, that was a really good trade, I think, that we put on earlier. Again, late second quarter, there was a dynamic where BBs were selling off just as hard as lower parts of the market here, and that really created a real discount in the market for total return bonds, for CLOs, and that was a really good opportunity. Now, I think what's changed a little bit is we've seen a run in high yield. There's been a huge compression move in BBs to BBBs. And so, we were at one point over 200 basis points, BBs to BBBs, that's compressed inside of 100 basis points. So that total return component for BBs over the past two months has been about 4% versus BBBs has been about 80 basis points. So, in atypical fashion, we've actually been selling some of our BBs, buying BBBs that are at spreads north of 300 basis points. And so, this is the first time since I've been managing high yield money that we've had such allocation to really a non- conventional component of bonds. We've been able to do that. That's been an interesting trade recently for us.

Adrienne Butler: It's pretty awesome being able to work with the team because a lot of the bonds that we bought in the CLOs, not what we traditionally do, we could leverage off the team. They were bonds that they were already owning, that they knew the stories behind, that really sleep- at- night credits. It was really nice to have that kind of collaboration.

Greg Campion: That was nice to have that built- in expertise to leverage. What else looks interesting? I know that you and the team have been looking at some stuff maybe in Europe. Given the different dynamics with Russia, Ukraine, everything else, what do you see in there?

Scott Roth: Yeah, there's a few things that I think we find interesting right now. I think you look at yield curves in the market, for the high yield market, it's pretty flat. You look at the treasury curve, it's highly inverted. So I think there's some opportunities within capital structures in the high yield market. I think a broad theme that we've been deploying across our portfolios is really this overweight to services relative to consumer durables. Consumer durable demand really went vertical during COVID as there was this fiscal stimulus, really this money drop. And so, you're seeing consumer durable demand well above trendline. Services demand collapsed during COVID, and so we think there is a bit of a reversion of the mean that's taking place on both of those fronts. We're trying to take advantage of that across portfolios to the extent can. You mentioned Europe, and really our global portfolios. I would say, we own a number of global companies, so they're able to finance in multiple currencies, US dollar, euro, sterling. And given some of the technicals and liquidity across markets, we found opportunities to swap our USD- denominated debt into euro sterling, pick up incremental spread, and really hedge the currency back into the base currency of the portfolio so you're not taking any FX risk there. And so, that's been something we, again, deploy from time to time based upon market conditions. I would just say, looking forward, you're right, Europe could be a source of an opportunity as we come through the end of the year here given the energy crisis that has really unfolded there. Our team has been involved in that market for literally decades. Again, that market can get highly technical and dislocated. It did during the sovereign debt crisis. That was a really great opportunity for our portfolios. We went overweight Europe, that played out really well for us. The European market is wide of ours right now on a spread basis, that's not uncommon, but it is a higher quality market versus the US. It's more BB centric. The commitment to finance CCCs is very low. It's also a market that has a really good history of operating in a low growth environment. Again, that's a market that we will look to take advantage of if there is further dislocation.

Greg Campion: Okay. Okay. Yeah, I mean, that's a good reminder, just low growth in general. You guys probably know the stats much better than me, but I think high yield has always done pretty well in low growth environments and you have an asset class that offers income. And as long as you can avoid defaults, you can still do okay coupon clipping, for lack of a better word, in the asset class.

Scott Roth: You have yields north of 8% right now. That's pretty attractive. We've seen periods really, as you pointed out, over the last decade where GDP growth has been really de minimis, but that's almost a bit of a Goldilocks environment for credit. Again, given the construct between Europe and the US, both pretty high quality markets and the uptiering that's taken place there, that's a pretty decent place to hang out.

Greg Campion: Yeah, interesting to hear how some of the opportunities are really varied. I think it's a good reminder, too, as well that you look across high yield, it's a pretty broad and deep asset class when you consider loans and bonds and across the US and Europe and include CLOs and different parts of the rating spectrum. So it is interesting to hear about just how some of the different market technicals, especially, are maybe opening up some opportunities in places that might be less obvious. I guess the flip side of that coin is what some of the big areas of risk are and some of the big challenges. We discussed upfront, we talked about inflation, talked a little bit about rising rates, but maybe as you think about that, I guess, Scott, curious, are there any things that are out there that are out there that are keep- you- up- at- night risks out there today?

Scott Roth: Well, there's a lot of risks have been thrown at us this year, so you really have had to keep your head on a swivel. I think most prominent risks that exist right now are pretty well- known by the market. You think about the energy crisis unfolding in Europe, partly as a result of certainly the Ukraine- Russia conflict. So that's sort all rolled up together. There's certainly downside scenarios you can paint there, but again, those risks are pretty well- known right now. You think of China, GDP growth there has been underwhelming. The amount of stimulus has underwhelmed expectations as well as the property market is really collapsed over there. And then you have the COVID suppression policies, they've implemented that again. So demand there probably hasn't met expectations, but on the flip side, you're probably at the point where that could potentially inflect to the positive. And then you have the Fed, you have inflation. Again, I think the market has their arms around many of these risks. I think we're always trying to think of what is not being contemplated in the market or where there's some level of complacency. Maybe that's quantitative tightening as QT ramps up in the coming months here. Our financial markets are ever so complex and you always think about the impact on liquidity, and so that's something that we're focused on. And even the energy markets, the natural gas markets are very tight, obviously what's going on in Europe, but the oil market is physically tight as well. That market has to deal with a couple of specific situations as we come through 2022. One is the SPR. We've been drawing down reserves in the Strategic Petroleum Reserve over the course of this year. That is expected to run off in the fourth quarter. That's been a mechanism to help balance the market. And then you have, essentially, the European oil embargo of Russian barrels 2. 0, if you will, that's set for December. We'll see how the European countries ultimately address that. But those are a couple areas that in a market that's very delicately balanced could swing it one way or the other. Again, we've benefited over the past several weeks, lower gasoline prices, but those are a couple potential headwinds that that market will need to face.

Greg Campion: Okay. Okay, so a lot of stuff to keep our eye on there. I think your point is a good one around maybe a lot of these are maybe factored to some degree, at least some of the big headline risks, but some of the other ones that you point out that maybe are less obvious or could be flash points for the remainder of this year, into next year, where things can change. That was a pretty good list, Adrienne. Hopefully there's not anything else beside that that's keeping you up at night, but anything else you would add to that list?

Adrienne Butler: Oh, I think Scott's got the world under control here in the geopolitical issues. I think the only thing you'd add to that is, from our perspective, is you'd then have to go a little bit to the micro. Where is leverage? Where is leverage for every company? When you're seeing rates rising, you've got to be able to do that sensitivity analysis. You cannot disregard the fact that we have a lot of companies who came into this with some significant leverage, and we need to pay attention to that. So I think that's always a consideration. The other piece that I'd throw into that is looking at forward guidance, making sure that we're paying attention to what companies are telling us. Because you can look at these large factors, but then you've got to take it down to the individual investment and what's happening at the company level. And so, I don't have much to add, but I think those are two points to consider.

Greg Campion: Yeah, really good point. Okay. Well, as we land this ship here, I want to ask you both to maybe zoom out a little bit. We've been talking a lot about what's going on currently in the market, a lot of the opportunities, a lot of the risks, that sort of thing. But maybe if we zoom out, and I think your team has always done a really nice job of looking at things from more of a longer term perspective and working with our clients to think about their allocations over a long term perspective. So curious, maybe Adrienne start with you, as you are having those client conversations today, what are some of the things that you're talking to clients about with regards to managing their allocations in this part of the market?

Adrienne Butler: I think you're right, the focus is on the long term and it should be on the long term. We would advise clients not to pay attention to a lot of the noise that we're hearing right now. There's going to be rating downgrades. There's going to be some defaults. There's going to be some other bumps in the market as we move forward. It's about looking at the long term, not afraid when I'm managing a CLO or when you're managing a loan portfolio to say," Hey, there's downgrades." Yeah, it's about picking the right credits. It's about being able to manage through that. It's being able to make the decisions of when to buy, when to sell, when to hold, having the team that's there to make those right decisions. We've always said, and if you look at the great financial crisis, look beyond where we are right now, the pull to par here, the asset appreciation is huge in this market. If you can look at that long- term perspective, I think that's where you want to be.

Greg Campion: Yeah, makes sense. Scott, we're going to give you the last word, same question.

Scott Roth: Well, look, spreads have been pretty compressed recently, and I think as we have discussions with our clients, they're always looking to be opportunistic and buy the market when spreads are back up. That's easier said than done. It gets very emotional. Again, our dialogue with clients has been around different spread break points and doing some analysis and thinking about legging in over time and trying to be opportunistic as the market sells off. You might not catch the exact whys. I mean, when spreads are 600 basis points, investors always want to buy it at 800 basis points. We understand that. The problem is those can be really tight windows and you can miss the bulk of the outperformance if you're not involved in the market, and then you end up trying to chase the market. And so, we're just trying to encourage clients here, spreads back up, we're right around 500 basis points in our market. I think clients need to understand there is a lot of capital on the sidelines, this draw down capital, if you will, that is looking to come into the market at different spread levels. It was very evident last month when spreads blew out to 600 over that there was a pretty immediate reaction in the market. A lot of money came into the market, bought it, spreads collapsed pretty quickly. I think a lot of investors were sitting on the sidelines thinking," Well, I wish I know would've had that opportunity again." I think it's just you got to be patient and let the market come to you, but don't try to top tick this. Again, when you get to 600 basis points over, on a historical basis, that is a really good time to deploy money. The forward returns on that over a 1, 2, 3- year period are just about double digits annually. I think just putting that in context, understanding that there is capital elsewhere that's going to come into the market, and not try to get too cute with it.

Greg Campion: Yeah. Yeah. I think that's a great reminder that looking back at history, some of the periods of volatility have offered some of the best times for opportunity in the market. That's great perspective. I appreciate both of your perspective. I think you have a tremendous amount to offer here just given all your experience in this market and your views on bonds and loans and CLOs and everything else. I appreciate you taking some time with me today. I hope this has been valuable for our investors. I've certainly learned a lot, and I hope they have too. Thank you both, appreciate your time.

Adrienne Butler: Yeah, thanks for the discussion today.

Scott Roth: Thanks, Greg.

Greg Campion: Thanks for listening to episode number one of season seven of Streaming Income. If you'd like to stay up to date on our latest thoughts on asset classes ranging from high yield and private credit to real estate and emerging markets, make sure to follow us and leave a review on your favorite podcast platform. We're on Apple Podcasts, Spotify, Google Podcasts, and more. We publish a new episode every other week. And if you have specific feedback, you can email us at podcast @ barings. com. That's podcast @ B- A- R- I- N- G- S. com. Thanks again for listening, and see you next time.