There are number of concerns regarding inflation, Central Banks, quantitative tightening and geopolitical risks, notably the War in Ukraine. Despite that, we feel spreads on subordinated of financials are extremely attractive at close to 400 bps. Moreover, from a credit standpoint, financials are in an extremely strong position as indicated by capital and excess capital. The very strong credit metrics of the companies we own make us feel we have strong visibility regarding the income we will receive

To summarize, despite the negative performance in Q1, our outlook is positive for the rest of the year, as credit quality within our companies remains very strong. This ensures strong visibility of the high income with yields close to 5%. At the same time, as we have seen during multiple periods including last year, we have a very low sensitivity to interest rates. Valuations are at very attractive levels and consequently, we should benefit from potential price appreciation. Finally, the technical is very supportive. We expect limited net supply going forward, as most of the new issues should be for refinancing needs. Therefore, demand should be higher than supply, which should support the valuation of our securities.

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