YouSaid · the spoken record

Thomas Majewski

lines on the record: 112
first: 2022-12-01
most recent: 2022-12-01
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“But somehow that shape something else you learn. And I know I've got that. I've improved my own emotional intelligence and I can identify this. And when we look to bring people in here and when I look at my friends in my life, I've probably self-selected to it without realizing it for a fair bit, but maybe I'm doing it intentionally now, and I think I'm better off for it”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“So a change I have made personally, I have spent a lot of time and effort increasing my emotional intelligence. I'm a very intellectually curious person. And I've known that, but I might not have even been able to articulate that five years ago. And certainly not 10 years ago. And I try to surround myself both professionally and personally with people who share that curiosity. You can always learn something new. It could be politics, it could be religion, it could be the bond market. It could be lots of other things. I don't want to be around people who think the same thing as me. I just want to be around people who have the same curiosity as me, who want to keep learning. And when someone says, I just learned something new, and it might be seemingly arcane trivia.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ah, life's a long game. It's not about what you can do today. When you ask the question, what do you want to be in five years? I think of my career, five year intervals. I think of my family life and five-year intervals. I lost my mom earlier this year, which was a toughie. But it was very much long-term. Where are you going to be five, ten years from now? She was a teacher. But looking to the future and modeling everything you do today to be to that goal, you want to be at in a handful of years. And that's one of the most valuable lessons I've really ever learned.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“The thing we don't know well enough, and I don't think many investors do is geopolitical brisk. There's no knowns. Going to be some country in the news that causes distress in the world that we're not talking about right now in the next year's something we don't like in any investment we make is where there's a single point of failure and there's 190 odd countries in the world I'm sure every one of them's got something on the drawing board and how those will affect the markets we don't know Our defense to that is our CLOs have long reinvestment periods. And if things go haywire, if loans fall and we can keep reinvesting, but if I look back at the things, it's geopolitical things that happen and no one's smart enough to accurately predict those perfectly every time going forward.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're finding lots of different ways in that ecosystem to capture value for our investors. But it all goes back to that same raw root material.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“That one's an easy one. CLO equity. There's not enough good CLOs in the world. We wish there were more. We wish AAAs would be tighter, but we're always looking for something interesting to do in that market where our funds are sponsoring new CLO collateral managers now, where our fund takes ownership interest.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“No success is guaranteed, but you really have to stuff it up from there. And I watch how they run their organization and they're very good at fostering collaboration amongst the portfolio companies. They have other businesses in our space. And once we take that awkwardness off the table, we share and collaborate. And I watch how that's fostered across different businesses. And I've tried to replicate that here within our organization. So one was on nuts and bolts strategy tackling person. One was really how to run a business. And I've been blessed to have been around those people and many other folks. But those two people stand out when I look at the things I do every day. It's filtered.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you think about a typical hierarchy at a bank, the boss is two or three years older than you, he or she probably got their guard up, making sure you're not going for their job and all these other bad things that might have happened over the years. This was someone that was able to take me under his wing as a mentor. No way in the world. He had six times more experience than me. There wasn't a question that I could be a threat to him. And as a result, he gave me all the time and knowledge and mentoring I could possibly have hoped for. And then I'll actually point to Chuck Davis over at Stone Point. Incredibly nice and kind individual, obviously extraordinarily successful. But I will often say of Stone Point, they're an HR firm with a little investment business on the side. Obviously, more than a little investment business on the side, but what I've learned from them is you get the people part of things right and you have a halfway decent business idea.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Say one directly and maybe one a little more indirectly, a fellow named Mike, who is my boss at JP Morgan way back when I was twenty-five and he was probably 50. And this is when I was hired to undo those broken CLOs. He was the senior executive put in charge. Needed someone to do all the nuts and bolts work, and that was me.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“The only person in the world with this pet peeve. In a typical fund management role, and CLO collateral managers are RIAs, they're fiduciaries and all the same things that we are and private equity firms are. There's owing back to the days when there were very few majority or no majority investors, CLO collateral manager contracts are basically ironclad. Absent capital C cause gross negligence You can't remove a collateral manager. You can always sell your security. By and large, the vast majority of CLOs have these ironclad contracts, which in a private equity fund or a hedge fund would not be tolerated. Unfortunately, our market, it is, and it goes back to the convention set up 20 years ago. I understand why they don't want to change them on the other side of the table, but... I'm still allowed to be upset about it.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right now is probably skiing. It's something I took up yoga about seven or eight years ago. I was first a little nervous. Not a lot of 40-something year old guys do that. And what a difference it's made in my flexibility, my ease. It's helped my golf game as well. But it's helped my skiing just tremendously. And it's one of the few things in life I can do where if you're thinking about anything else other than the mountain in front of you, you probably have a problem. And it's a good way to take your mind off of things. And then when you're on the lift, you chat with your colleagues, your friends, either work or social. It's a really nice mix. It's something I look forward to every single winter. And I'm getting emails right now about snow falling out west. And I'm looking my chops.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“We eat our own cooking, very much a team culture. No one here has points in their funds. We all rise and fall together. It's not your funds doing great. You have a great year. Your fund isn't. We're in it together as a team. And that helps with the collaboration and that helps with the creation of new ideas. So roll the clock forward five years. We're doing exactly what we're doing, whatever the market demands us to do. And then we'll be doing a few other things that look kind of similar to what we're doing, but are new and interesting.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Can generate, we think, outsized returns or extremely attractive risk adjusted returns. And we've kind of got our eye on the next few things around the corner. And I suspect we'll keep expanding prudently. We've hired a few people that really aren't managing money yet, but we know what we want them to do in other little niche high income areas. And that's what clients look to us for.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“We actually set up a whole business around investing in those securities issued by other firms at this point, and that's now billions of dollars. And we keep looking around the corner for where some other very interesting value. What I suspect will continue to have is new and additional ways in kind of niche markets where we're going to be able to deliver significant outperformance and bring investment opportunities to institutional investors that they might not have thought of before. And when we went out with the BDC debt strategy, people like, oh, I think I invest in a couple of BDCs. I said, well, BDC debt outperformed BDC equity from 2014 to 2019, even though there weren't a lot of credit problems then. Just the yield opportunity was so great it outperformed on an index basis the equity. And those are the kind of things where we're going to look for. Again, it's not a giant market. It's not trillions of dollars that's measured in the tens of billions.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Always looking where value is being captured. And over our years, we started with CLO equity. We kind of looked at CLO debt. We took our part of our CLO fund public, which is ECC back in 2014. And then we started issuing preferred stock and junior debt off of that vehicle. We started looking at that like that's actually a very interesting investment unto itself in the 82 years since the 40 Act has been passed. As best we're aware, there's only been two defaults ever by Forty Act companies and both were 100% recovery. Huh.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we offered a number of different ways. We have a public vehicle, which is a closed end fund. So you can just buy and sell the shares freely on the New York Stock Exchange under Ticker EIC. It's a closed-end vehicle. It's not an ETF where we then have to go quickly sell the security same day. I'd be a little more cautious with that. It just takes a little extra effort and the risk of harm to investors, in my opinion, could be greater. Not impossible to manage, but a higher bar at a minimum. So that's the principal way to do it where the portfolio managers can focus on fundamental long-term value creation. And investors can choose their entry and exit point without harming other investors. So that's the ideal. We also manage it in separate account format for institutional investors.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Greater. Against that, the prices could fall farther, and it cuts both ways, but it is a really attractive entry point for those.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Doubled our distribution in the same time frame just with the benefit of floating rates coming our way. And then you have the potential for the convexity and that many of these securities are trading in the 70s and 80s at this point. They do have a funny habit of paying off at par. Obviously, there's risks and uncertainties in the future. Things could be different. But if history is any guide and the historic loss experience, it's a pretty interesting time to get involved. We've gone back and backtested some of the JP Morgan has an index for CLO double bees. You can find it buried somewhere on Bloomberg, but we've run some data that shows anytime you invest in double bees when loans are at this kind of price point, the one, two, and three-year returns are in the last decade have historically been very, very good. So it's something you can act more quickly than equity in that there's more supply. It's a more liquid instrument. You can get more money put to work quickly. And the potential convexity could be significant.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Things in theory, if the world turns, could pivot back to par very, very quickly. At the same time, the actual coupons on CLO debt are the highest they've been in the decade we've been here at Eagle Point. The things going on right now with floating rate, because they're all indexed off of LIBOR or Sofar, when we turned up here on January 1, LIBOR was 20 basis points. LIBOR is four and a half percent now. One of our public funds, EIC, is principally CLOB investing 70-odd percent of the portfolio, give or take, maybe 65 of CLO double B's. We've increased the distribution on that so many times. We just had another distribution increase yesterday, another 14%, such that the dividend to the commons shareholders is more than doubled from where it was at the beginning of 2021, just due to rising rates. And people want to benefit from that investment-grade bonds are down 15%.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“We'll just keep the 125 financing outstanding, please, for as long as we need. So that optionality inures to us. You get paid well on a relative basis for writing that option as a CLO debt investor. In my opinion, you take very little credit risk buying CLO debt, even at the double B level, the class just above the equity, the long-term default rate is less than 20 basis points per annum. So the actual instances of loss down there just as equity nearly as all had a positive return. What do you know? Nearly all the debt tranches have been paid in full to nothing a lot of credit risk, but you've got the spread uncertainty, the repayment timing uncertainty, and mark-to-market volatility. So right now you can build a very interesting portfolio of CLO double bees at 80 cents on the dollar.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So CLO debt is a very interesting animal. You get paid very well in normal markets. You have a floating rate asset, so you don't have any rate risk. You get a premium spread compared to CMBS or other ABS type products. So you're getting paid a premium. But you're writing a spread option in that CLOs have a 12-year legal final, but a two-year non-call. And the person who controls that call is me. So you don't know if you're going to get paid back in year 2.1 or 11.9 or anywhere in between. Now, when we issued a CLO last year in 2021, AAAs were 125. And I didn't know if spread's going to go wider or tighter. If they went tighter, I would refinance those CLOs right now Lock in 100 or whatever the level is. It turns out they've gaped wider and it's 225 or 250 over.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“With all of this constant change of the opportunity set within CLO equity you mentioned earlier some opportunities in the debt. And we'd just love to hear where you're seeing some of those opportunities and why extend past CLO equity.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Private equity sponsors are looking to make three times their money when they buy a company. And while they're going to kick and scream about every eighth of a point on the darn loan, If they pick a good business that can grow EBITDA, if they make 2.9 times or 3.1 times. No one's going to complain. So while it's important to them, they're working in integer multiples and credit people are working on basis points.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“And every private equity firm has two or three associates and VPs focused on making sure that never happens. So firm one is working on this company, has got 400 million in debt. Firm two is working on this company, has got 800 million in debt, different maturities. Third, just making rational decisions around each one. If you're a private equity sponsor, so take a step back, one firm just had a little bit of 2023 debt. They had maturities probably through 28, but they had a loan doing 23, maybe $200 or $300 million out of a billion in total indebtedness. L plus 225, they just refinanced it to SOFA plus $375. But again, it's 20% of their indebtedness, and now it's a 29 maturity, and it's tomorrow's problem.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“In my experience, the wall of maturities has never toppled over. It's often talked about, but it's never toppled over. The wall of bridge loans, however, is That's interesting. And one of the things we show, and I believe you can see this in our public filings for ECC and EIC, we actually show the maturities of our loans by year, how many are due in 23, 24, 25, 26. And if you look at it every year, it's basically the same chart just with the years moved over one. It just naturally happens. So there are about 2,000 large cap syndicated loans. Many of them are backed by private equity firms. You have to be in a very dire situation to let your long-term debt get into the current portion of your balance sheet.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is probably not the right investment for you. And now that we've got the behind us, let me tell you about the merits of what we do, we don't want to surprise anyone. We want people to know that right up front. And I think by the end of the meeting, usually they focus more on the positives, but I want to make sure everyone appreciates that right from the outset.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let alone find folks who are willing to build a business focused originally exclusively now predominantly for us on CLOs and CLO equity. So just by virtue of the headlines, the misunderstood aspects of these transactions, just as the majority of people are not likely to make a dedicated CLO allocation anytime soon, I would say a super majority of people would not be able to say 96% of CLOs had a positive return to the equity class from before the financial crisis with a median of 15 IRR. Outperforming private equity outperforming the S&P 500 even. So as long as people don't know that data, we're going to be slim. And I say to everyone, sometimes the marketing department kicks me under the desk. In the next five years, we're going to have a down 10% plus month. I don't know when. I don't know why. I know it's going to happen. And if that's not something you're comfortable with.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a very short list of folks who appreciate the business that can be created delivering value in this niche market. When we talk to prospective investors, the majority of large allocators in the world don't even want to talk about a specific CLO allocation.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Given the interesting kind of inefficiencies and resources required and a limited number of competitors, I'd love to hear what you think is misunderstood for, say, an allocator looking at this space of why you aren't just swamped with even more competition.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“On a CLO, there's always the next one, and we have to keep that in mind. Let's not, if we can sense this someone else bidding keenly. Okay, that's fine. We'll let this one go. That's the nice thing in our world. There's always another. Good and bad. There's not a shortage of supply. Real estate, they're not making any more CLOs, they're making more. But it helps us. It makes it easier to be much more disciplined, frankly. And when we see our competitors acting, we have public vehicles. Some of them have public vehicles. You can kind of see what's going on. Certainly any day, one of our competitors publishes a queue. We've looked at it thoroughly, and I'm sure they do the same of ours. And it's always interesting to see the different trends. Some people like more banged up deals that have had a little more problem. We might focus on things that are a little cleaner. Optically, they might have a higher IRR potential, but maybe there's more uncertainty in that IRR, different ways to slice it, but there's probably about five firms that form the core of the equity market who are, I think the street would consider the most sophisticated. And then it kind of trickles down from there.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are a handful of bona fide competitors and a whole laundry list of transient competitors. We hold the top competitors in high regard, and I believe they would say the same of us. They're full-time folks who are dedicated, that have multiple professionals dedicated to this market We all have different flavors. Many of them are based here in Greenwich, as luck would have it, but we have a respect for each other. We know it they're going to do. They probably know the things we're going to do. And the nice thing is there's always another. So if we were running a real estate fund, let's say, and the Chrysler building came up for sale, that's a once-in-a-care trade. You're going to bid you're going to come up with every last dollar you can to be the highest bidder because you want to own the darn Chrysler building.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“And be adapting to the market conditions. So while many people are on the org chart doing the same position, the actual tasks they do day to day change quite regularly with the business cycle. And I think that's great. And that helps people thrive.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over the years, when we started, there was just one fund. There was no allocation question. We didn't have that debate. Then we took some funds, public ECC, and EIC. Now we have to manage within the Fortiac rules. Then some ERISA plans came to us and said we'd like a separate account, so now we're managing ERISA money, yet a different set of rules. We also trade some stocks for different strategy we run called our defensive income strategy, which is focused on being involved in lending money to BDCs and other private credit funds, but sometimes we actually buy the stocks where our credit works as the stock is undervalued. We've actually become insiders at some companies because we own so much of their stock as well. And all of those rules, these are all I said to the lady who's our CCO, your title hasn't changed in a few years, but you weren't doing any of this a year ago. And I don't know what we'll be doing next year. And we want to give people, we want to have people who can figure things out on the fly, be studied on them.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today, it's about quick analysis in the secondary market. Next year it'll probably be about new issue CLO process and the things that we're trying to bake into documents. So his job really changes every six to 12 months based on the market conditions. I look at our chief compliance officer. She's been here probably since 2014, started as deputy CCO, been promoted up to CCO.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“jointly making all the major investment decisions. Separately, we have a credit committee for our CLO business, which I'm a part of. They're separate RIAs, but I'm dual-hatted, so I can see both sides of the equation. We have our own approved list for loans. Every CLO has loans we don't like, but we're able to filter through the portfolios through names that we know and like and dislike and whatnot when making investment decisions. And when we stress CLOs, that's one of the things we can factor in. But we have people in the seats who do the thing they're best at. We have a number of people here named Dan, but Dan, the person who's in our documentation focused person last year was all about refinancings and resets.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have two full-time secondary debt traders who report to that individual. We have a full-time walking document person who's a super individual and one of the most important people on our team. We have a full-time structure, analyst who supports them all. Me, one of our other senior partners.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. A couple things about our team. We have a large investment team wrapped with all the right support and services. Of the things I'm most proud of in our decade at Eagle Point, I've never had a direct report to me ever leave the firm? We have 99% client retention. You put all that together, and that's the right framework, that's the right culture to start with. And how do you create and maintain that culture is getting the right people in the right seats who can do their job, do it well, and either advance or in many cases their job changes as the market changes. And so we have a full-time head of CLO new issue and new issue everything and equity trading.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Across these activities in this market, we've talked about sourcing through relationships, deep data analysis, trading components, restructuring terms. It just sounds like there's a lot of different specialties. I'd love to hear the team you have in place that's required to make this work.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“We thought about it. I don't know. Why don't you sort by AUM? And who's your biggest investor? And maybe that person should go first. And of course, we recognize these people have multiple clients and we can't get everything we want. But the list was reworked in our favor, shall we say. And you take care of your biggest customer. The only business that doesn't take care of their biggest customers are airlines who charge their last minute customers the highest fare. Most businesses you take care of your biggest and most important customers. But we're mindful these folks have businesses and we want them to succeed in aggregate, but we're supposed to win all ties.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“If we're doing a reset that's taking away their shelf space to do new. We want to do a reset, but probably the deal before us and the deal after us also wants to do a reset. So there's a tension both with the collateral manager's growth objectives and across different investors. And in 2021, when it was reset Palooza, and we did 37 corporate actions last year, one collateral manager said, I'm going to do this very fairly. I'm going to go in order. So the first deal can go first, then the second deal.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those five options available to us, the first two at any time, and then the last three after that non-call period in addition. We've, in our history, taken well over 100 corporate actions here across our portfolio, owning a CLO, buying it is just the beginning. Managing it and making sure the collateral manager is focused on it. The more you talk to portfolio managers about your CLOs, you're going to get more portfolio mindshare. One of the dilemmas that comes up, like when CLOs are getting reset, this is where you reopen the documents and come up with a new five-year tenor, a CLO collateral manager can only be doing a reset or a new issue at the same time. They can't do both. And every money manager in the world comes in on january 1 and has a chart that goes up and to the right. This is we need to grow AUM by this much. We're guilty of it. Everyone has that same chart. We could debate the slope, but we know the direction.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. Every position in our portfolio, once we get past a short non-call period at the beginning of a CLO, we can do nothing. We can sell the security in the market. Those are always available to us at any time. We could force a liquidation of the CLO, tell the collateral manager game over, sell the loans, pay off the debt, we'll keep the residual. We could refinance a CLO, and this is where we keep everything the same except go out and lower the debt spreads. AAAs were at 200, now they're at 150. Just call up the old guy. Sorry, we'll give you 150 on the wire. If not, we're going to market most of the time they just say go to market. Call Pimco if they're answering the phone or wherever else you might go. Or we can reset a CLO. And this involves reopening the entire portfolio, all the documents, and recasting the tenor of the CLO, adding a new five-year reinvestment period, new rules, and whatever the most latest provisions are in the market. Those are the basic things we can do.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stress case, certainly in our view, we don't see 15% of corporate America defaulting over the next three years, but maybe. But then, what's the price of loans on that day? It's probably not $92. It's going to be a fair bit lower. Let's look at the sensitivity of those loan prices. You look at a handful of those scenarios, and let's say everything works out really quickly, and the Fed pivots quickly, and rates start coming down, and defaults stay very low. But loans are going to start repricing then. If the market takes off again, all these high spread deals that have just been issued in the loan market, people are going to try and squeeze those down. So maybe your spread's going to compress. And it's kind of looking at the balance between the two of those. Oddly, the higher default, lower reinvestment price scenarios are typically the best, but that goes back to my data about 2006 and 2007 being the best vintages. So we'll study all of that. We'll think about the collateral manager, different collateral manager shelves trade at different prices, someone like a Blackstone is going to be very keenly bid firm. There's tier two and tier three, which we won't put names to those, but they're going to trade wider.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“To put a dollar price on it, we have a million inputs that have to equal one number. How do we translate that? So again, our systems, we can just punch up. And we start with a big suite of standard scenarios that we're going to run on a different portfolio stresses. So I'm very punitive ones. Looks like I got some upside scenarios. And we want to focus in on those that have the least downside and those that have the most upside. Our traders, when they're looking at equity, will run hundreds of scenarios. The system does it almost instantly. And it ultimately comes down to I know our traders, when we talk about things, we're looking at six or seven different scenarios. Here's some bad things. Here's some good things. And when we're looking at bad, we're saying, well, okay, well, let's see what kind of losses could happen. But also, what's the reinvestment option worth on that day? And what's the price the collateral manager is reinvesting in? And so we might run, let's say, 5% defaults for the next three years and then normalize thereafter. That's probably a”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“On that resource side, when you're on the other side of a call and it sounds like sometimes there's a relatively rapid turn for a bid, what are the analytics look like that are required for you to dive into a CLO and understand at the end of that what you would want to bid?”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“People will find that out and you won't be happy in three months, and then you'll learn your lessons typically. When we see folks who are sometimes thinking about investing in funds or maybe going direct. Should just think very carefully and make sure they're appropriately resourced. That's probably the biggest thing. It's not a market for transients.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you're buying used, with limited exception, there's no bad bonds, just bad prices now. And if someone's a little less good at managing a CLO, we'll just back up our bid five points. And maybe that offsets it. So we're a little more flexible in the depths of 2020. We were buying majority positions at 2025 cents on the dollar. Maybe not with our favorite collateral managers, but again, 20 cents on the dollar, you do have to be a little more flexible on these things. Everything we didn't buy in that period was a mistake with the benefit of hindsight, but we ran reasonably selective. But it's, again, it's an inefficient off-screen market. If you're a new to the market participant,”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“While the customers, the end buyers, the people who could bid on the list don't know who it is of 30 dealers know, Wall Street's a little bit leaky that's going to get out. So they might call just one dealer, whoever they have the best relationship with, whatever it may be. Hey, I'm looking to move these three bonds. I'd like to get it done today. Go to two or three accounts who you know can act. And we want to be the first call on those things. And it's keeping warm relationships with the dealers. It's maintaining confidentiality. We don't say to anyone we saw this bond, and we certainly don't say where we saw it from. Those people are usually much more likely to act. So we want to be the first call. I can't say we are every time, but I think we are a lot of the time, and we're able to act quickly, decisively. We know every CLO collateral manager, whereas on a new issue basis, we're going to be extremely selective.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then there's a go shop period, and they'll call you back while you're amongst the top if you want to improve, let us know. And it's just an arduous and drawn-out process. So that's one side, but it's inefficient, it's woefully inefficient, frankly. And the amount of time and effort spent versus the amount of securities that actually trade hands, the ratio is way off. Then there's things that are sold privately. This gets more interesting, where someone owns a position, maybe they have a fund that's winding down, they have some liquidity needs at the end of the quarter. Maybe there's some articles in the press about some UK pensions that all their guilts moved around and they had to sell other things to free up to meet margin calls wanted to sell, but probably didn't want to blast to the whole world if a seller sends a list to 30 dealers.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the amount of hours, our analysts will spend a few hours, but the analysts at the firm up the street and the next firm up the street have also spent hours and hours and hours. So it can be a woefully inefficient process. And one of the things we try and understand is, is this a real seller, first off? And do they have realistic expectations? Everyone's a seller at a certain price. Is this a realistic seller? If we're going to spend our time and effort on it, let's figure this out. Then you put in a bid like a Bewick might be due at 10 o'clock. Bids have to be good for three hours. What do you think happens in those three hours? Wouldn't it just simply be sort by price? And at 10.02, you'd know who the winner is. Not so simple. People don't usually put in the bid till 11.30 or 12 on a 10 a.m. list.”
2022-12-01 · Capital Allocators · Thomas Majewski – Empty Rooms: Masterclass on CLOs at Eagle Point Credit Management (Capital Allocators, EP. 284) · IDENTIFIED FROM THE TRANSCRIPT · source