Logo for: AGL Credit Management

Investment Model

AGL is a fundamentals based long-term investor with a three-part investment model targeting safety plus robust risk adjusted cash returns across all phases of credit cycles and market conditions.

AGL's Investment Objectives

  • Defensive “all-weather” annuity-like cash-on-cash absolute return
  • Preservation of invested capital through minimal loss incidence and dispersed over time if incurred
  • Alpha contribution to asset class from superior risk-adjusted returns
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AGL’s Differentiated Three-Part Investment Model:

Eligibility criteria:

  • Ability to repay at par under market duress
  • Appropriate risk adjusted return
  • Acceptable structure and documentation

Enabled by proprietary private-side (non-public) analytics:

  • Access to private-side information including five-year projections
  • Constant dialogue with portfolio company management and financial sponsors during life of investments
  • Bank-like underwriting approach and “DNA”

Approach to Portfolio Construction Currently has 10 Dimensions

  • 1st D: AGL Credit Rating. Each borrower assigned an AGL internal rating to reflect its credit risk
  • 2nd D: A-B-C Sensitivity to Cycles. Classify a  borrower’s sensitivity to business cycles as a-recessionary “A”, beta “B” and cyclical “C” and maximize “As” to reduce sensitivity thereto
  • 3rd D: 1-2-3 Intra-Portfolio Correlation. Identify and overweight idiosyncratic business model characteristics to reduce intra-portfolio correlation and maximize heterogeneity
  • 4th D: Industry Weightings / Exclusion. Favor growing and stable industries and avoid contracting ones
  • 5th D: Position Size. Create more uniform position sizes over time to target levels based on internal risk ratings and risk-adjusted returns
  • 6th D: Age of Credit Origination. Favor shorter average portfolio lifespan as a borrower risk profile statistically increases with passage of time
  • 7th D: Borrower Enterprise Value. Credit risk can diminish with increasing company size
  • 8th D: Surveillance Population. Monitor credit quality migration metrics including interest coverage, loan to value and EBITDA rate of change
  • 9th D: Sponsor Assessment. Consideration of PE firm’s history as steward of debt capital
  • 10th D: Reserve Level. Build reserves to offset potential credit costs

Highly Proactive Portfolio Management

  • Portfolio composition constantly reassessed and repositioned
  • Risk actions as warranted
  • “Reserve” maximization via Original Issue Discounts (“OID”)
  • Risk adjusted optimization for liquid loans

A powerful and differentiated platform, with experienced leadership and innovative strategies in senior secured corporate credit loans.

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