Eric Hagen: Okay, thank you.
Smriti Popenoe: So I think on the leverage, there are really two big considerations, okay? One is what’s causing the leverage to go up? Right now we have the number one thing that’s causing our leverage to go up is wider spreads period. And wider spreads is an inherent risk that we take. It’s a native risk to our balance sheet and I think that’s something that we evaluate every day to be able to say, is this risk a risk that we want to cut or is this risk — a risk that we want to continue to take? All right. When you have high levels of leverage, if you will, let’s just say when we’re calling this high here, wherever we are, the number one consideration is how much liquidity you have. Now, we walked into this month with $450 million of unencumbered assets in cash.
And we consider that liquidity position — a position of strength. So we want to use our liquidity position to buffer further increases in spreads. And we only do that, obviously, if we believe that risk is worth taking. So I’m giving you the framework with which we use to think about risk versus return and how we’ve thought about whether it’s good or not good to take the organic risk that’s within our balance sheet, right? We have a very high conviction that the forward return on these assets is outstanding relative to our cost of capital. So all of those things are in our minds right now as we evaluate what to do going forward. I know that’s not a clear answer. People are looking for us to say, yes, we’re cutting risk or we’re taking on the risk.
You know, we’re managing the risk. You know, our shareholders have become very accustomed to us doing the right thing in these circumstances. I will remind you guys in October, November of last year when we got to these types of spread levels I will remind you guys we cut risk. We weren’t afraid to do it and I’m going to tell you I think it was the right call given everything that’s happened this year that was the right call. Okay, so we’re going to manage it actively when we have a disposable event relative to material change in our position, we will disclose it. You know, you have also a tradition of transparency and disclosure from us.
Byron Boston: Smriti, let me add one other thing for Eric, which is because you’ve listened to us over the years and these moments like these are evolving. They’re changing rapidly. And in some situations, like March of 2020, we just didn’t take questions at one point, because it was just changing too much. So I understand some of the things we asked some questions about, our position changes just as it’s not. It is changing, it is evolving, and we’ve talked about that. And we are prepared as a company to withstand what we’ve said in the past, we’ve used a sailboat as an example, the shifting and changes in the market. Boy, I can’t tell you everything. We sold this, bought that, sold that, we’ve bought this. So that’s, I just want to emphasize, just the moment in which we are right now in the markets, the team is prepared, and I think Smriti wants to jump back in here too with a couple of other thoughts.
Smriti Popenoe: Look, with regard to raising capital, all right? This asset class is cheap, period. It’s the cheapest asset class out there. It’s the asset class that every astute investor should be looking at, because the forward returns are extremely compelling. So if we’re out there raising capital, the story we’re telling is, number one, this is the asset class that’s gotten the cheapest. We know why it’s here. We know why it’s cheap. We know why we’re getting to earn this incremental spread, because private capital now can earn a risk premium that wasn’t previously there to earn. We have the skill to manage this asset class, and that’s the premise on which we go raise capital, right? So our current position, our track record, all of that are nice things to have on the side.
