These investments help highlight the importance of less correlated assets and the benefits of a diverse portfolio. I’ll wrap up our prepared remarks with a note on our investment pipeline. Thus far in Q4, we have made $105 million of new commitments, of which $97 million have closed and funded. We’ve also funded $12 million of previously committed debt and equity facilities. With that, operator, we’ll open the line for questions.
Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Kyle Joseph with Jefferies. Please proceed with your questions.
Kyle Joseph: Hey, good morning everyone. Thanks for taking my questions. Ian appreciate the color you gave around — on the deal outlook into ‘24. Sounds like a little bit cautiously optimistic with a lot of dry powder out there. But an election cycle and some macro uncertainty. Just kind of want to pick your brain on what you see spreads doing. Obviously, we can look at the forward curve to see what base rates are expected to do? But given a lot of the moving parts in the market just kind of want to see where spreads are in the context historically and where you could see those trending next year. And give us a sense for portfolio yields as you look into ‘24, given market dynamics and the forward curve?
Ian Fowler: Yes, sure. Good morning, Kyle. Happy to do that. And I’ll start off. Obviously, I don’t have a crystal ball and I have been doing this for 25-plus years. And this is definitely a little bit of a different market than I’ve seen over the 25-years. But I think you nailed it. I mean, right now, we’re in this anemic environment in terms of deal activity, because of this gap between buyer and seller on valuation. And you can understand why private equity firms are hesitant to go all in right now, because there’s still obviously inflationary pressures out there. I think it seems like the Fed’s backed off on telegraphing another 25 basis points, 50 basis points, but the higher and longer is elevated rates is definitely going to have an impact.
And we really don’t know where valuations are trading at because it’s not a normal functioning market with a lot of deal flow. So, like you said, that’s the environment that we’re in. I think to the extent we start to see some direction in terms of base rates, maybe getting closer to the election, pulling back a bit, and then getting through the uncertainty of the election, I think that’s when you might see, I’m not going to say floodgates open, but there is a ton of deals out there waiting to come to market. So when you look at today’s market and the deal activity that’s out there, especially on the new platform side, there are law managers that don’t have portfolios that they can rely on. 70% of our deal flow is coming from our portfolio, which is great because of all the economic uncertainty.
It’s nice being able to invest in companies you know and understand well, so that’s very attractive. But for new activity and with managers that don’t have portfolios, they’re being pretty aggressive on spreads. And so if it’s an attractive property that’s coming to market, we’re seeing spreads compress anywhere from 50 basis points to 75 basis points, maybe even as high as 100 basis points, depending on the deal and the opportunity. But again, I think if you look at, this is my perspective over 25-years, if you look at the all-in yields over 25-years, there’s always been a little bit of a reversion to a mean. As base rates go up, spreads come down, and we’ve just seen that historically in this asset class. So I’m not surprised by it, but at the end of the day, we’re still generating extremely attractive all-in yields for first-liens senior secured risk.
So, it’s a great vintage for this asset class.
Kyle Joseph: Yes, very helpful. And then — oh, sorry.
Ian Fowler: No, I was just going to say sorry for the long-winded answer.
