Dwayne Hyzak: Sure. Eric, thanks for the question. When you look at the current activity in the first quarter, I’d say we didn’t have a huge increase in equity commitments from LP’s with some slight kind of moderate increase there, but continue to have active dialogue with new investors about either joining the fund or existing investors about increasing their commitments. So we hope to continue to add on to that over the next year or so. Just to give you a number, we’re probably at about $80 million or just over $80 million of LP commitments in that second fund. When you look at the range we provided, which was $100 million to $300 million, as you indicated. Today, I would say we’re probably expecting to be somewhere closer to the $150 million would be more realistic unless we have significant success with some institutional investors coming in, it’s unlikely we get to $300 million, but we still think it’ll be larger than the first fund.
And if we are successful in increasing it, when you put leverage on top of that it is a nice increase to our asset management business long-term. So we continue to be excited about the fund and continue to work on those fundraising activities. In terms of the timeline that you asked about, that’s contractual like any other fund when we go out and we start the fundraising period or process, you typically set a date for how long that fundraising period will last. So we’re no different. And when we set it, we set it for 18 months. So the fundraising process will continue for that 18-month duration. We started, I believe in September of last year, off the top of my head, so it’ll last through March of 2025, at least directionally, I think if that’s not exactly right, that’s pretty close to what the time period is.
Eric Zwick: Thanks, Dwayne, that’s very helpful. And second one for me. Just given the diversity – industry diversity within your existing portfolios, as well as the current pipelines, there’s still, I think some degree of uncertainty over the economic trajectory and in which sectors or maybe industries are performing better or worse. I guess, are you able to see – do you have kind of a glimpse through all of your activities of how the economy is underperforming and are there any industries or sectors that you feel have kind of weakened and you’re shying away from at this point at all?
Dwayne Hyzak: Sure, Eric, I would say there’s not a change from what you’ve likely heard us say over the last 12 to 24 months. If I was to look at the industries and the portfolio companies that were invested in broadly, we have more companies today that are over-performing than are under-performing. And if you look at the over-performance, I’d say the over-performance is pretty broad based. If you look at it from an industrial or kind of a B2B standpoint, or even businesses that are focused on the higher-end consumers from a demographic or from a customer base standpoint. We have been and continue to be risk-off or shy away from companies that are more focused on the consumer, particularly the lower-end of the consumer.
I think you’ve probably heard this not just from BDC or investment firm calls over the last couple of quarters, but I think you’re increasingly hearing it more broadly across the U.S. economy, that the lower end of the consumer is being cost conscious, he or she’s trading down in terms of what they’re buying, how much they’re buying, et cetera. And we’ve definitely seen that in the quarter. We had really good performance broadly across the portfolio. We did have a couple of companies that had significant underperformance, and as a result, we recognized meaningful, unrealized depreciation on those companies. And they were both businesses that have significant consumer exposure and I would say kind of broad, kind of lower end consumer exposure.
So the risk we’ve been concerned about for the last couple of years, I think you’re, that’s an area you’ve seen really start to impact things here the last three to six months or so. But other than that, I wouldn’t really hit on anything else. But that has been a headwind here more recently.
Eric Zwick: I appreciate the color. Thanks for taking my questions today.
Dwayne Hyzak: Thank you, Eric. We appreciate it.
Operator: Our next question is from Bryce Rowe with B. Riley Securities. Please proceed with your question.
Bryce Rowe: Told you I’d be back, Dwayne, maybe just a couple more for me. Can you talk about some of the yield dynamics within the three portfolios? And you lay it out in the press release, looks like there was a bit of compression in the lower middle market in the private loan. Just assuming that is reflective of where spreads have gone over the last, three months or so?
Dwayne Hyzak: Sure. Bryce, thanks for joining us again. Thanks for the follow up question. I’ll get some color on the low middle market side, and then I’ve got Nick Meserve here with who leads our private credit group. I’ll let him give some additional color on the private loan side. On the lower middle market side, I wouldn’t say that we’ve seen the interest rate environment, our ability to get good yields on new investments change. We’re very disciplined and we continue to be disciplined there. And having really seen any impact. When you look at our lower middle market rates change. If it is going down, it’s more a result of our existing portfolio companies, particularly the ones that are performing really, really well.
It’s not uncommon for them to have an interest rate pricing grid in place. And as they perform, grow your delever and move down that grid, from a leverage standpoint, they’ll see a benefit. So if you see some reduction in the rates on our lower middle market portfolio, it’s really going to be that which we obviously, we take a balanced approach. We think we’ve got some great companies, and we’d rather keep those companies in the portfolio longer term as opposed to have them exit. So we don’t necessarily view that as a bad thing. On the private loan, private credit side, I do think, and you probably heard this from others, I do think you’re seeing some pressure there. The pressure is more, in my opinion, more on the rate side, less on your kind of structure and leverage.
But I’ll let Nick give some additional color there.
Nick Meserve: Yes. Bryce, I’d say we’re probably back to 2021, 2022 spreads after kind of the spread widening of last year. And so we’re probably in somewhere between 50 basis points and 75 basis points over the last six to nine months. As the market’s gotten a little more competitive and people are out there trying to put more money to work. I’d say it’s really focused on spread so far and less on incremental debt leverage or deal terms.
