But if you look by and large, at the secondary new ads into the portfolio, you’re going to see those in the mid-20s. The types of sellers of those investments — and those are all — we have privately negotiated transactions. Some are done via a BWIC process or bid wanted in comp, quite a few are done off sheet where it’s just over the phone and negotiating a price. Some of our edge there is our ability, our knowledge of nearly all CLOs, our ability to analyze any transaction and be current on it very quickly using our own proprietary technology and our knowledge of the transaction documents and CLO collateral managers The types of sellers varied widely from, in some cases, maybe even one or two funds winding down, maybe other investors who didn’t always appreciate what they were signing up for.
Maybe people who bought new issue and got their model wrong and just want to punch out. The stuff we buy, we typically focus on less seasoned, so newer CLOs, but not brand new, with as much reinvestment period as possible. We probably pay up for that a little bit, but I will give up some degree of yield on our portfolio to keep the weighted average remaining reinvestment period as long as possible. We value that greatly. We saw it through COVID, we saw through the 2008, 2009 cycle ages ago that the number one defense to have is reinvestment period. And while it’s very, very expensive to get that in the new issue market, we can get it pretty nicely in the secondary market, picking up a lot of 2021 vintage CLOs, maybe some early 2022.
Ryan Lynch: Okay. That’s helpful color on the market dynamics going on there what you’re seeing. The other question I had was kind of a high-level question about some trends that are occurring in the CLO market in the private credit market. You mentioned the one loan that was refiled from the broad syndicated loan market to the private credit market. That’s certainly a trend that is likely going to continue, if not accelerate going forward. I’m just curious I’ve seen some recent projections from different banks on the level of CLO formation that they expect in 2024. And again, these are just estimates that in subject to change very much so. But a couple of trends from those was that they expect CLO issuance to be down for the third consecutive year in 2024.
Additionally, this is Bank of America, who recently put out a report, he’s talking about, there’s going to be a big increase in middle market CLO formation in 2024. And there’s already been a big increase in 2023, as those trends of loans, more and more loans going to private credit providers that are either holding them on their balance sheet or actually then funding them through middle market CLOs. So I’m just curious from where you sit, if these trends continue, both lower CLO formation or an increase in middle market CLO formation, what does that mean for your business?
Tom Majewski: Sure. We’re working in a plus or minus $1 trillion market. Is it going to get bigger or the new issue, the newly formed component is one part of it. The called component is another part. you’ve got to look at the two of those combined. Certainly, to-date, we have not seen a situation where we’ve had — even in years where issuance is way down, where we’ve had a shortage of investment opportunities. Typically, when issuance is down, the secondary opportunities are more robust, frankly. At the same time, when folks are talking about down, it might be going from $100 billion. I don’t remember BofA specific numbers, but it could be going from $105 billion to $90 billion or something like that, while it’s still down.
All we need to deploy is a couple of 100 million in a given year and be more than fine. So our ability to source investments in the short to medium-term is not something, frankly, I use a lot of sleep over. Importantly, ECC actually also has a strategic interest in one CLO collateral manager. You can see in our portfolio, and it’s disclosed in the footnotes. But where the ECC actually owns or has a revenue interest in a piece of the collateral manager that is independent of further — beyond meeting a certain investment requirement that continues one way or the other. It’s sort of like, I guess, it’s a permanent revenue share. So one of the things we’ve done in that case is it’s an opportunity to continue to get access to CLOs if we want, while we certainly expect that platform to raise capital elsewhere.
It’s something that we obviously have a very deep tie with and we’ll have continued access. And then finally, when you look across our portfolio, there’s two things you’ll see. We have that a lot of that — we have deep relationships with a small number of select issuers. And these are our issuers that, by and large, for us, have performed very, very well and where we have a special place with them. And as long as they keep performing, they have a special place with us. So our access to the market, I think, is different and more durable been a transient coming into the market. Across all of our different investment vehicles, including ECC, we believe we’re the largest holder of CLO equity in the world, which gives us a meaningful advantage.
That said, we do have to keep investing to keep the portfolio fully deployed. And then to the point you’ve raised of the increase in private credit CLOs formerly called middle-market CLOs, whatever just put a different label on it. Like junior debt or senior equity kind of the same thing. By and large, what we saw during the financial crisis going back to 2008 and 2009, is that middle market CLOs as they were called back then, while they had better credit experience in terms of fewer defaults and better recoveries than syndicated loans in general, the CLO equity frequently underperformed broadly syndicated CLOs. And that was, frankly, because many of the collateral managers didn’t have the DNA to reinvest cheap rather they make a new loan, 200 basis points wider.
