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
AGL’s Differentiated Three-Part Investment Model:
- Eligibility criteria
- Ability to repay at par under duress
- Appropriate risk adjusted return
- Acceptable structure and documentation
- Enabled by proprietary private side analytics
- Enabled by private side information including 5-year projections
- Access to management and sponsors during life of investment
- Bank-like underwriting approach and “DNA”
- The four dimensional “4-D” diversification criteria
- 1st D: Classification of borrower’s sensitivity to business cycle are the basis for portfolio construction and management
- A: A-recessionary; B: Beta; C: Cyclical
- 2nd D: Seek borrowers with idiosyncratic attributes to maximize “sibling” differentiation and minimize intra-portfolio correlation (1 – idiosyncratic, 2 – somewhat similar, 3 – similar)
- 3rd D: Industry inclusion / exclusion + weightings with hard caps
- 4th D: Create more uniform position sizes over time to target levels based on internal risk ratings and risk-adjusted returns
- 1st D: Classification of borrower’s sensitivity to business cycle are the basis for portfolio construction and management
- Fund portfolios hold 250-300 BSLs
- target 50% A-recessionary loans
- Continuously increase value of each fund relative to invested capital by creating reserves / “building par” + improving credit quality
- Prioritize BSL new issue with accretive OID
- Opportunistic relative value secondary purchase and sale “swaps” arbitraging valuation variance and volatility
- Risk management actions as warranted