Crispin Love

Crispin Love (Piper Sandler) inquired about Arc Home's Q1 2026 origination volumes and gain-on-sale margins compared to Q4 2025, seeking clarification on its January profitability. He also asked about TPG Mortgage Investment Trust's preferred investment areas for incremental capital, specifically within home equity, non-QM, and agency-eligible strategies, and any cautious segments.

Answer

Nick Smith, Chief Investment Officer, clarified that Arc Home's $1 million in January represented its individual profitability. He noted continued sequential volume increases and healthy margins driven by a favorable yield curve, tighter credit spreads, and increased liquidity. Smith emphasized MITT's primary investment focus on home equity and agency-eligible credits due to their strong performance and credit quality, with no current areas of caution mentioned.

Crispin Love asked for more details on ArcHome's Q1 volumes and gain on sale margins relative to Q4 2025, and sought clarification on ArcHome's January profitability. He also inquired about TPG Mortgage Investment Trust's preferred areas for incremental capital investment (home equity, non-QM, agency-eligible) and any segments where they are more cautious.

Answer

Nick Smith, Chief Investment Officer, clarified that ArcHome's $1 million in January represented individual profitability, not EAD. He noted ArcHome's continued market share gains, healthy margins driven by a steep CP yield curve, tighter credit spreads, and increased liquidity, leading to sequential volume growth. Smith stated the company's primary investment focus remains on home equity and agency-eligible credits due to their strong performance and borrower quality, with no current areas of caution.

Crispin Love from Piper Sandler & Co. asked for an assessment of the securitization market's health amid recent volatility and sought insights into the long-term attractiveness of the home equity market, especially considering potential interest rate changes.

Answer

CEO T.J. Durkin described the securitization market as having paused in early April but since reopening with wider spreads of 50 to 75 basis points. CIO Nick Smith expressed confidence in the home equity market's durability, noting the 'lock-in effect' on existing mortgages makes the sector resilient to all but the most significant rate rallies, positioning it for continued growth.

Crispin Love inquired about Hercules Capital's confidence and caution areas within its software portfolio, specifically application versus system software, in light of AI disruption, and the company's views on M&A and IPO activity for 2026.

Answer

CEO and Chief Investment Officer Scott Bluestein differentiated system and application software, expressing general confidence in the software portfolio due to their focus on mission-critical solutions, AI integration, and conservative underwriting (low LTVs, short duration). He projected robust M&A activity in 2026, driven by strategic acquisitions of distressed companies, but expected the IPO market to remain muted in terms of number of deals, despite increased dollar volume from larger transactions.

Crispin Love asked for a deeper dive into Hercules Capital's software investment portfolio, specifically identifying areas of confidence and caution given the AI disruption theme, particularly within application and system software. He also inquired about the outlook for M&A and IPO activity in 2026, especially for tech companies, and if recent volatility has impacted the IPO pipeline.

Answer

Scott Bluestein (CEO and Chief Investment Officer) explained that system software differs from application software (e.g., cybersecurity vs. general user solutions). He expressed general confidence in the software portfolio, stating that AI is a disruptive but not necessarily destructive technology for companies providing core mission-critical solutions, embracing AI, and building agentic solutions. He noted Hercules' conservative underwriting with low LTVs, low attachment points, and shorter duration. For M&A, Mr. Bluestein expects continued robustness in 2026, driven by strategic acquisitions of distressed smaller competitors. He anticipates the IPO market to remain muted in terms of number of IPOs, despite increased dollar volume from larger transactions.

Crispin Love asked about any changes in borrower behavior amid recent market volatility and Hercules' confidence in credit stability, especially if portfolio companies find it harder to raise equity. He also inquired about the ongoing trend of venture capitalists focusing more on valuation and its potential impact on future debt and equity availability.

Answer

CEO and Chief Investment Officer Scott Bluestein responded that while the operating environment has become more challenging, causing some companies to pause decision-making, Hercules' credit outlook remains positive. He noted that key credit metrics are stable, with the weighted average credit rating showing only an immaterial change and non-accruals remaining very low at 0.5% of the portfolio's fair value. He confirmed that VCs continue to be selective and valuation-sensitive, but pointed to the $2.5 billion in new capital raised by 25 portfolio companies in Q1 as evidence of continued strong capital access for quality businesses.

Crispin Love from Piper Sandler asked about changes in borrower behavior, confidence in credit stability, and whether VCs continue to focus on valuation discipline.

Answer

CEO & CIO Scott Bluestein affirmed confidence in the portfolio's credit quality, noting minimal changes in credit ratings and only two loans on non-accrual. He observed that some companies are pausing decisions due to policy uncertainty. Bluestein confirmed VCs remain valuation-sensitive, but highlighted that Hercules' portfolio companies still successfully raised $2.5 billion in new capital during Q1.

Crispin Love asked for details on credit quality, specifically the drivers behind the $54 million in realized losses and the increase in Grade 4 rated credits. He also questioned what drove the significant pickup in funding activity in Q4.

Answer

CFO Seth Meyer and CEO Scott Bluestein clarified that the largest realized loss stemmed from the Convoy workout, of which $41.9 million was already recognized as an unrealized loss in 2023. Bluestein explained the increase in Grade 4 credits was due to three specific companies facing fundraising challenges. He attributed the Q4 funding surge to reduced uncertainty following the election and Federal Reserve rate decisions, which prompted companies to move forward with financing.

Crispin Love inquired about Hercules Capital's intermediate to long-term expectations for deal activity in the venture capital ecosystem, particularly looking beyond the 2024 election into 2025. He also asked about the potential implications of different election outcomes for the venture industry and Hercules specifically.

Answer

Scott Bluestein, CEO and Chief Investment Officer, expressed long-term optimism for the venture ecosystem but noted that Q3 was intentionally slow as high-quality companies delayed financing decisions pending Fed rate actions and the presidential election. He highlighted that post-quarter-end pending commitments surged to over $600 million, signaling a positive shift. Regarding the election, Bluestein stated the primary concern is not a specific winner but the potential for a disputed outcome, which could create a period of paralysis and uncertainty in the market.

Crispin Love of Piper Sandler & Co. inquired about the potential impact of Federal Reserve rate cuts on venture capital deal flow and Hercules' funding activity. He also asked for details on a specific loan write-off and broader credit quality trends.

Answer

CEO and Chief Investment Officer Scott Bluestein responded that he expects demand from quality late-stage companies to increase in a declining rate environment. Regarding credit, Bluestein explained that the write-off related to a small loan where the company's assets were sold. He expressed overall optimism about credit, pointing to stable weighted average credit ratings and a decreasing percentage of lower-rated (Grade 4 and 5) credits in the portfolio.

Crispin Love asked about the impact of recent mortgage rate movements, the rally earlier in the year, and administration support on Redwood Trust's business volumes in early 2026 compared to the fourth quarter of 2025. He also inquired about opportunities within the Aspire non-QM platform and potential impacts from GSE reform.

Answer

President Dash Robinson stated that January 2026 volumes were $3.6 billion, indicating an accelerating run rate from Q4 2025, with the rally helping but jumbo mortgages remaining somewhat insulated. For Aspire, he highlighted strong momentum, leveraging the existing Sequoia network, and the growing non-QM market (estimated $130 billion in 2025, with 10-15% growth expected in 2026). He noted that depositories have a smaller footprint in non-QM, and a securitization platform is launching soon. Dash Robinson believes GSE reform is unlikely to impact non-QM due to the unique borrower types and technology involved, expecting private capital to continue supporting these products.

Crispin Love asked about the impact of recent mortgage rate movements and administration support on Redwood Trust's business volumes in early 2026 compared to Q4 2025, and also inquired about opportunities within the Aspire non-QM platform and potential effects of GSE reform.

Answer

CEO Chris Abate reported January 2026 volume at $3.6 billion, indicating continued acceleration, and noted that the jumbo business has been somewhat insulated from agency market dynamics. President Dash Robinson highlighted Aspire's strong momentum, leveraging the existing Sequoia network and the growing non-QM market, which was estimated at $130 billion in 2025. He also stated that GSE reform is unlikely to impact non-QM products, with private capital expected to continue supporting these assets.

Crispin Love of Piper Sandler Companies inquired about the expected sale prices for legacy assets relative to their new marks, the types of buyers showing interest, and the drivers behind the strong Sequoia gain-on-sale margins.

Answer

President Dashiell Robinson stated that the marks reflect levels where they have been executing sales and that buyers are varied, with resolutions happening on a line-by-line basis. He emphasized the short earn-back period for redeploying the unlocked capital. CEO Christopher Abate noted that strong Sequoia margins are driven by efficient, regimented securitization issuance and that while they are optimistic, they hesitate to forecast above the long-term average.

Crispin Love asked for details on the 9% to 12% EAD ROE guidance for 2025, its expected cadence, and the implications for dividend coverage. He also inquired about the status of the share repurchase program.

Answer

CFO Brooke Carillo explained the ROE ramp is driven by reallocating capital from non-strategic investments to high-return operating businesses. She clarified the 9-12% is a target run rate for the second half of 2025. She also confirmed an existing share repurchase authorization of over $100 million is being actively evaluated. CEO Christopher Abate added that a low near-term debt maturity profile provides flexibility.

Crispin Love inquired about the strong performance fees in the quarter and the softer carried interest realizations in Q4 2025, asking if this was a surprise and acknowledging the difficulty in forecasting.

Answer

Michael J. Sacks, Chairman and CEO, confirmed that Q4 carried interest was lower than expected, acknowledging the inherent difficulty in predicting this revenue stream. He emphasized the importance of tracking the appreciating carry asset, which moved significantly in Q4 despite lower cash collections.

Crispin Love asked for clarification on GCM Grosvenor's 2026 fundraising expectations, specifically whether the stronger pipeline indicates an expectation to exceed the record 2025 fundraising. He also inquired if the softer carried interest realizations in Q4 2025 were a surprise and sought further insight into the absolute level for the quarter.

Answer

Chairman and CEO Michael Sacks stated that while the bottom-up build from business development teams suggests 2026 fundraising could exceed 2025, the company's base budget is currently in line with last year's record, and they will update when confident. Regarding carried interest, he acknowledged that Q4 2025 realizations were lower than expected, noting the difficulty in predicting this revenue stream. He reiterated the importance of tracking the appreciating gross unrealized carried interest balance, which moved significantly in Q4 despite lower cash collections, and expressed anticipation for increased realizations due to more market activity.

Crispin Love of Piper Sandler Companies asked about the timing for a first close of the GSF four fund, other significant fund closes expected in the second half, and sought confirmation of the full-year private markets management fee growth guidance.

Answer

President Jonathan Levin confirmed that a first close for GSF four occurred in July, subsequent to the quarter's end, and that a first close for their CIS for infrastructure product is expected toward the end of the year. CEO Michael Sacks affirmed that the company's full-year guidance for 5% to 8% growth in private markets management fees remains unchanged.

Crispin Love of Piper Sandler & Co. asked about the drivers behind the 2025 private markets management fee growth guidance of 5-8% and what factors would be needed to return to a 10%+ growth rate. He also inquired about the long-term outlook for international fundraising, noting the Americas' declining share of recent fundraising.

Answer

Chairman and CEO Michael Sacks explained that short-term fee growth is influenced by the mix of fundraising between 'pay on committed' versus 'pay on invested' capital, as well as the deployment pace from the latter. He affirmed confidence in the firm's long-term goals. Regarding international growth, both Michael Sacks and President Jon Levin emphasized that opportunities are global and not viewed in a domestic vs. international framework. They highlighted the individual investor channel as a massive, worldwide opportunity that will be a key focus, while noting the firm's geographic AUM mix has been historically stable.

Crispin Love asked about the outlook for Fee-Related Earnings (FRE) margins, including the potential for continued expansion and any long-term caps. He also inquired about the expected cadence of fundraising for 2025.

Answer

Chairman and CEO Michael Sacks confirmed that GCM Grosvenor sees continued operating leverage and opportunity for FRE margin expansion over the next several years, without specifying a long-term cap. President Jonathan Levin added that while 2025 fundraising is expected to exceed 2024 based on a bottoms-up analysis, the quarterly cadence is difficult to predict due to the timing of large, individual client commitments.

Crispin Love asked about GCM Grosvenor's confidence in its second-half 2024 fundraising forecast and the longer-term mix between fee-related and incentive-based revenues.

Answer

Chairman and CEO Michael Sacks expressed high confidence in meeting the fundraising goal, citing a 70% year-over-year increase in the late-stage pipeline. He affirmed the company's focus on growing fee-related earnings (FRE) but noted significant latent earnings power in carried interest, expecting adjusted EBITDA and net income to grow faster than FRE over the next four years, especially with a potential post-election pickup in M&A activity.

Crispin Love from Piper Sandler asked about Virtus Investment Partners' overall software exposure across its AUM, specifically inquiring about Crescent Cove Advisors' technology focus given recent market headlines, and sought management's general thoughts on the matter. He also requested a deeper dive into the Q4 flow picture, asking what drove the acceleration in negative flows quarter-over-quarter across open-end funds, SMAs, and institutional channels, and sought an outlook on flows moving into Q1 and the longer term.

Answer

President and CEO George Aylward stated that Virtus is generally underweight technology, especially in quality-oriented equities, and Chief Financial Officer Mike Angerthal clarified that Crescent Cove's early-stage technology focus is not at risk from AI disintermediation. George Aylward attributed the accelerated Q4 outflows to the prolonged underperformance of quality-oriented equity strategies, compounded by tax loss harvesting and year-end portfolio repositioning, while expressing hope for a market inflection and continued efforts to grow other business areas.

Crispin Love asked about Virtus Investment Partners' overall software exposure across its AUM and specifically at Crescent Cove Advisors, given their technology focus. He also sought deeper insight into the acceleration of negative flows in the fourth quarter across open-end funds, SMAs, and institutional channels, and the company's outlook on flows moving into the first quarter and longer term.

Answer

George Aylward, President and CEO, stated that quality-oriented equities are generally underweight technology, which has impacted performance. Michael Angerthal, Chief Financial Officer, clarified that Crescent Cove's early-stage tech entities are not at risk from AI disintermediation. Mr. Aylward attributed the accelerated Q4 negative flows to the prolonged underperformance of quality-oriented equity strategies and year-end portfolio repositioning, expressing hope for a market inflection while emphasizing growth in other strategies.

Crispin Love inquired about the elevated net outflows over the past four quarters and key levers to improve flows towards neutral or positive, beyond a shift in market favor from momentum to quality. He also asked for details on the impact of office space consolidation on the other operating expenses run rate and the nature of the $1 million discrete business initiative expenses.

Answer

George Aylward, President and CEO, explained that positive flows in fixed income, alternatives, and ETFs were overshadowed by significant outflows in quality-oriented equity strategies, which have underperformed momentum. He emphasized focusing on growing less correlated strategies and the historical pattern of quality outperformance following inversions. Mike Angerthal, CFO, confirmed that the office consolidation benefits are now reflected in the run rate, contributing to the lower end of the $30M-$32M OpEx range. He clarified that the $1 million discrete expenses were related to elevated inorganic activity.

Crispin Love asked about key levers to improve net flows, given four consecutive quarters of outflows, beyond just quality strategies returning to favor. He also sought clarification on the impact of office space consolidation on future OpEx run rates and details on the $1 million discrete business initiative expenses.

Answer

George Aylward, President and CEO, noted positive flows in fixed income, alternatives, and ETFs, emphasizing that overall outflows are largely due to an overweight in quality-oriented equity strategies underperforming momentum. He detailed efforts to grow less correlated strategies and highlighted historical underperformance of quality versus momentum. Mike Angerthal, CFO, confirmed that the office consolidation benefits are now reflected in the OpEx run rate, contributing to the lower end of the $30-$32 million range, and clarified that the $1 million discrete expenses were related to elevated inorganic activity.

Crispin Love from Piper Sandler Companies asked about M&A valuation trends in private and traditional markets and sought more detail on whether July's flow momentum continued from the strength seen in June.

Answer

President & CEO George Aylward explained that private market valuations remain higher than public ones and that strategic fit is the primary driver for any transaction. He confirmed that the positive flow momentum from June continued and even slightly increased in July, with particular strength in fixed income and ETFs. He also highlighted new opportunities in style-agnostic and aggressive growth equity SMAs.

Crispin Love of Piper Sandler & Co. requested a more precise comparison of January's flow trends to Q4 2024, excluding the large redemption, and asked for details on the $3.3 billion partial institutional redemption, including the total size of the client relationship.

Answer

President and CEO George Aylward clarified that January retail fund flows were tracking similarly to Q4, while ETF flows were running ahead of the Q4 average. He noted the known institutional pipeline for Q1 showed modest net outflows but was an improvement over Q4's underlying trend. Regarding the redemption, Aylward described it as a large, important relationship where the client added a new sub-adviser, resulting in a reallocation from all existing managers, including Virtus.

Crispin Love inquired about the flow trends for the fourth quarter, specifically comparing October to September, and asked about the sustainability of the lower adjusted other operating expenses run rate into 2025.

Answer

President and CEO George Aylward noted that positive flows continued in October for retail separate accounts, ETFs, and global funds, but cautioned about potential volatility in November and December due to the election and tax season. Regarding expenses, Aylward and CFO Michael Angerthal explained that the lower operating expense level reflects the success of cost optimization initiatives, such as streamlining investment systems and data usage, which have offset inflationary pressures. Angerthal confirmed the Q3 level is a reasonable run rate for near-term modeling.

Crispin Love asked what would be required for Blue Owl to incur material losses in its software portfolio, seeking clarification on LTVs, first lien senior secured exposure, remaining maturities, and recovery expectations in a 'draconian scenario,' while also asking for the total software exposure as a percentage of AUM.

Answer

Co-CEO Marc Lipschultz clarified that Blue Owl is primarily a first lien lender in software, with an average loan-to-value of around 30%. He stated that for material losses to occur, 70% of a software company's value would need to be destroyed, which is highly improbable given the portfolio's average significant growth and cash generation. He emphasized that their software companies are large, deeply embedded in Fortune 500 processes, and operate in low-risk environments. CFO Alan Kirshenbaum added that total software loan exposure across Blue Owl's AUM is 8%.

Crispin Love sought clarification on the conditions required for Blue Owl to incur material losses in its software portfolio, focusing on LTVs, first lien status, remaining maturities, and private equity value structures. He also asked for the software exposure as a percentage of total AUM.

Answer

Co-CEO Marc Lipschultz emphasized that Blue Owl is primarily a first lien lender with an average 30% loan-to-value in its software portfolio. He explained that material losses would necessitate a 70% destruction of company value, which is not supported by current performance, as these companies are still growing at mid-teens rates. Marc highlighted their focus on business process-oriented software with data moats. CFO Alan Kirshenbaum stated that total software exposure across Blue Owl's AUM is 8%.

Crispin Love from Piper Sandler Companies questioned the competitive landscape in triple-net lease, particularly with new entrants, and how it affects Blue Owl's positioning amidst the expanding data center opportunity.

Answer

Co-CEO Marc Lipschultz stated that while the market is growing, Blue Owl's leadership in net lease has accelerated, not diminished. He emphasized that the firm remains the 'go-to' partner with a growing pipeline and strong investor trust, as demonstrated by the successful $2.1 billion first close of its latest flagship fund. He conveyed confidence that Blue Owl is the unquestioned market leader and is not seeing any meaningful shift in the competitive dynamic.

Crispin Love questioned the path to achieving the full-year 2025 FRE margin guidance of 57% to 58%, given that margins were softer in the first quarter, and asked about the expected cadence for the rest of the year.

Answer

Chief Financial Officer Alan Kirshenbaum directly addressed the question by reaffirming the company's full-year guidance. He stated, 'We still stick with that guidance. We still fully expect that we'll come in 57% to 58%.'

Crispin Love of Piper Sandler & Co. asked for views on the data center sector post-IPI acquisition, including growth opportunities and how to balance them in light of industry news like DeepSeek.

Answer

Co-Chief Executive Officer Marc S. Lipschultz positioned DeepSeek as a positive development that accelerates AI adoption, reinforcing the 'picks and shovels' investment thesis for data center infrastructure. He emphasized that Blue Owl's strategy is focused on downside-protected, stable returns by providing essential infrastructure for major tech companies, which are increasing their capital spending.

Crispin Love asked about potential positive offsets to lower interest rates, such as a pickup in deal activity, and how management views the net impact on the business.

Answer

Co-Chief Executive Officer Marc Lipschultz explained that while the dividend is set based on a conservative rate view, a stabilizing rate environment would inevitably unlock significant PE deal activity, driving deployment. Chief Financial Officer Alan Kirshenbaum added that, specific to Part 1 fees, continued fundraising and deployment in the growing BDC business would provide a partial offset to rate headwinds.

Crispin Love of Piper Sandler asked about the trajectory of Brookfield Asset Management's Fee-Related Earnings (FRE) margins, specifically the sustainability of current 60%+ margins and the potential for further expansion given business tailwinds.

Answer

Hadley Peer Marshall, Chief Financial Officer of Brookfield Asset Management, explained that while the Oaktree acquisition will initially shift consolidated margins due to its lower operating margins, the underlying operating leverage across Brookfield's platforms will continue to drive margin improvement. She noted a one-time presentation change for partner managers to provide more transparency, which will impact reported revenues and costs but not FRE or DE.

Crispin Love asked about the trajectory of Brookfield Asset Management's FRE margins, which have expanded to over 60%, inquiring about their sustainability, potential for further expansion, and any associated puts and takes.

Answer

Hadley Peer Marshall, CFO, explained that the closing of the remaining 26% Oaktree stake will shift consolidated margins due to Oaktree's lower, cyclical margins. She also noted a one-time presentation change to bifurcate partner manager revenues and expenses, which will impact reported margins but not FRE or DE. Importantly, she affirmed that core business margins will continue to improve due to operating leverage, with most businesses (except real estate due to catch-up fees) expecting stronger margins in 2026.

Crispin Love from Piper Sandler Companies requested an update on the real estate sector, asking about investor appetite, deployment and realization activity, and which areas are currently most attractive.

Answer

President Connor Teskey described a "robust recovery" in real estate, citing that year-to-date deployment has doubled and monetizations have quadrupled compared to the prior year. He noted record leasing in major cities and significantly improved financing markets. He stated the market is discerning but rewards high-quality assets, making it an ideal environment for Brookfield to deploy capital into opportunities and sell stabilized assets.

Crispin Love asked about the funded volumes mix between purchase and refi, particularly the increase in refi, and expectations for Q1. He also inquired about the competitive landscape in the mortgage space and how Rithm Capital's gain on sale margins held up compared to competitors.

Answer

Baron Silverstein (President and COO, Newrez) explained that the refi volume increase reflected the market rally in late summer/September and anticipated a pickup in production for Q1 2026 due to tightening spreads. Michael Nierenberg (Chairman, CEO and President, Rithm Capital) added that investments in marketing and new talent aim to improve recapture rates, emphasizing that Rithm Capital prioritizes profitability over market share in a competitive environment, differentiating itself with a diversified platform and a conservative MSR mark-to-market approach.

Crispin Love inquired about Rithm Capital's funded volumes, specifically the purchase versus refi mix, noting the refi percentage was the highest in several years. He asked for details on whether this was due to competitive takeaways or recapture, and sought expectations for overall volumes in Q1 2026 given recent mortgage rate movements. Additionally, Crispin Love asked about the competitive landscape in the mortgage space and Rithm Capital's gain on sale margins.

Answer

Baron Silverstein, President and COO of Newrez, explained that the refi volume reflected the market rally in late summer/September and the 'Trump bump' in January, expecting 2026 volumes to be up around 10%. Michael Nierenberg, Chairman, CEO and President of Rithm Capital, added that investments in marketing and AI, along with new talent, are aimed at improving recapture rates. Michael Nierenberg also stated that Rithm Capital maintains pricing discipline and does not chase market share, differentiating itself from competitors who might be more aggressive, and highlighted the company's diversified platform and conservative MSR approach.

Crispin Love from Piper Sandler Companies inquired about how recent mortgage market shifts are impacting NewRez's strategy across its channels and asked about the most likely path for optimizing Rithm's corporate structure.

Answer

Chairman, President & CEO Michael Nierenberg highlighted the dramatic growth in the non-QM business and noted key executive hires will drive further growth and tech efficiencies. NewRez President Baron Silverstein added that AI initiatives are successfully lowering servicing costs. Regarding corporate structure, Nierenberg stated that while a C-Corp conversion is being evaluated, it requires achieving greater scale in both the REIT and fee-related earnings at the asset management level first.

Crispin Love of Piper Sandler asked about NewRez's strategic response to recent market changes, including M&A and elevated rates, and which origination channels the company will prioritize for growth. He also inquired about the most logical path to optimizing Rithm's corporate structure.

Answer

Michael Nierenberg, Chairman, President & CEO, highlighted significant growth in the non-QM business and the impact of recent key hires focused on consumer growth and technology. Baron Silverstein, President of NewRez, added that technology and AI initiatives are driving cost efficiencies. Regarding corporate structure, Nierenberg explained that while a C-Corp conversion is being evaluated, it requires achieving greater scale in the REIT and higher fee-related earnings in the asset management business first.

Crispin Love of Piper Sandler inquired about management's expectations for sustainable operating ROE in the long term and asked for commentary on the potential implications of the upcoming U.S. election for Rithm's business.

Answer

CEO Michael Nierenberg stated that Rithm consistently targets mid-teens returns on equity, which he believes is sustainable as the asset management business grows. Regarding the election, he noted the primary risk is the growing federal deficit but explained that Rithm is positioned defensively with high liquidity and a low-risk profile to navigate potential volatility, regardless of the outcome.

Crispin Love of Piper Sandler inquired about the company's expectations for sustainable operating ROE over the intermediate term and asked for management's thoughts on the potential implications of the upcoming election.

Answer

CEO Michael Nierenberg stated that Rithm consistently targets mid-teens returns on equity across its businesses. Regarding the election, he explained the company is positioned defensively with high liquidity and a low-risk profile to navigate potential volatility, regardless of the outcome, noting the growing national deficit as a key challenge.

Crispin Love asked about PennyMac Financial's Q1 activity, including refi pickup, purchase trends, and January momentum, and sought insight into the expected trajectory of ROEs and the components of the ROE guide, particularly MSR cash flow realization and recapture targets.

Answer

Chairman and CEO David Spector described January as a good production month with increasing production and improving recapture rates, noting generally stable margins and a return to rational pricing in TPO. CFO Dan Perotti confirmed an expected ROE ramp throughout the year, starting in lower double digits and moving to mid-to-high double digits. Perotti also stated that dollar-based MSR cash flow realization is expected to be similar to Q4 in Q1 and throughout the year, with incremental gains in recapture facilitating increased production income and TPO/broker share, which will offset servicing segment declines.

Crispin Love inquired about PennyMac Financial's operating ROE expectations for the fourth quarter, specifically whether they would trend towards the low 20s given the recent mortgage rate rally, and also asked about the implications and expected impact of a potential government shutdown on the FHA business and other areas for PFSI.

Answer

Dan Perotti, CFO, explained that a sustained rate rally could push Q4 operating ROEs higher, potentially to the low 20s, but noted typical Q4 seasonality impacts on purchase volumes and custodial balances. David Spector, Chairman and CEO, addressed the government shutdown, stating PFSI is prepared with sufficient Ginnie Mae commitment authority and robust technology to adapt, noting a slight increase in forbearance calls but not expecting substantive impact.

Crispin Love inquired about PennyMac Financial's operating ROE expectations for the fourth quarter, considering the recent mortgage rate rally and typical seasonality, and also asked about the potential implications and impact of a government shutdown on the company's FHA business and overall operations.

Answer

CFO Dan Perotti explained that a sustained rate rally could push Q4 operating ROEs to the higher end of the high teens to low twenties range, though seasonal factors like lower purchase volumes and custodial balances might offset some gains. Chairman and CEO David Spector addressed the government shutdown, stating PennyMac is prepared with sufficient Ginnie Mae commitment authority and robust technology to adapt, noting a slight increase in forbearance calls but not expecting substantive long-term impact.

Crispin Love from Piper Sandler Companies questioned the dip in Q2 operating ROE to 13% and sought clarity on the company's confidence in returning to its mid-to-high teens guidance. He also asked for details on changes to the MSR hedging strategy.

Answer

CFO Daniel Perotti attributed the lower ROE to reduced production margins and higher MSR cash flow realization but noted margins were improving. CEO David Spector confirmed this positive trend. Perotti explained the hedging strategy now better incorporates the increased capacity of the direct lending channel as a natural hedge, which is expected to lower costs and improve consistency while maintaining the 80-90% hedge ratio target.

Crispin Love of Piper Sandler & Co. asked about the impact of recent rate volatility on loan volumes and locks in April. He also sought more detail on the MSR hedge strategy, its near-term expectations, and key sensitivities affecting its effectiveness.

Answer

Executive David Spector observed that while activity declined with rising rates, it was less than expected, attributing this to a lag in correspondent activity and persistent demand from borrowers refinancing high-rate loans. Executive Daniel Perotti added that while rate volatility increased hedge costs early in Q2, the team successfully insulated the company from significant rate impacts. He noted the target hedge ratio is currently in the 80% to 90% range.

Crispin Love asked about origination channel performance, specifically why conventional correspondent locks increased during the quarter. He also inquired about the company's outlook on mortgage rate volatility and its potential to create opportunities.

Answer

Executive Daniel Perotti explained the rise in correspondent locks was due to a lag effect, with Q4 funding reflecting lower rates from Q3, and also due to increased activity in sourcing investor loans. Executive David Spector commented that unprecedented daily rate volatility validates their balanced business model, which is prepared to capitalize on opportunities whether rates rise or fall.

Crispin Love inquired about the near-term outlook for Return on Equity (ROE) and the assumptions underlying the 2025 forecast of high teens to low 20s. He also asked if management still considers the industry's $2.3 trillion origination forecast for 2025 to be ambitious.

Answer

Daniel Perotti (executive) explained that Q4 operating ROE will be rate-dependent but is expected to be in the mid-to-high teens. The 2025 ROE forecast is based on a production market similar to or slightly above 2024, with lower rates pushing results to the higher end of the range. He affirmed that a $2.3 trillion market is achievable with lower rates but emphasized that PFSI's balanced model is built to perform well in any rate environment.

Crispin Love asked about the uptake of the BREP owner shares, its motivation related to capital deployment in real estate, and the specific areas of deployment focus. He also inquired about institutional investors' sentiment towards real estate.

Answer

Jon Gray, President and COO, stated that institutional owners are more open to real estate discussions than two years ago, indicating a sentiment shift. He noted modest uptake in BREP over the last year, with December seeing the best net flows in over three years, but it's too early to fully assess the bonus shares' reaction. The motivation was to attract capital for a favorable environment, and he emphasized that consistent strong performance, like BREIT's 8.1% net return in 2025, is key to driving future flows.

Crispin Love asked about the uptake of the recently announced BREP owner shares, whether it was driven by deployment opportunities in real estate, the firm's deployment focus in that area, and institutional investors' current sentiment towards real estate.

Answer

Chairman and CEO Steve Schwarzman confirmed that institutional investors are becoming more receptive to real estate, indicating a shifting sentiment. He noted a modest uptick in BREP over the last year, with the bonus shares motivated by attracting capital for a favorable investment environment. He highlighted December as having the best net flows for BREP in over three years but stated it's too early to assess the full reaction to the bonus shares. He emphasized that performance, such as BREP's 8.1% net return last year (outperforming public and other private REITs), is key to driving future flows.

Crispin Love asked for a characterization of the current capital markets environment for M&A and IPOs and what factors could drive a change in the coming months.

Answer

President and COO Jonathan Gray stated that the environment could change quickly with policy shifts, especially a resolution to tariff uncertainty. He described the IPO market as the most impacted and 'toughest' area. For M&A, he noted that financial buyers with access to private credit remain active, while strategics are more cautious. He believes the current slowdown is temporary and activity will rebound once stability returns.

Crispin Love asked for Blackstone's outlook on interest rates, given its proprietary data showing disinflation versus broader market concerns, and the potential impact on PE and real estate activity.

Answer

Jonathan Gray, President & COO, expressed confidence in continued disinflation, citing proprietary data from their portfolio, especially in shelter, where they see inflation around 1% versus official data of 4.6%. He also pointed to a balancing labor market. While he believes this data will be supportive for the Fed, he thinks the central bank has the "luxury of being patient" due to the strong economy and will likely wait to see the new administration's policies before acting.

Crispin Love asked for an outlook on M&A and IPO activity and the potential implications for Blackstone if more companies choose to stay private for longer.

Answer

President & COO Jonathan Gray expressed his belief that the environment is improving for both M&A and IPOs, driven by lower debt costs and higher public market valuations. He noted that internal conversations about IPOs have become more practical and expects a significant pickup in 2025. While some companies may use continuation vehicles, a healthier IPO market is a clear positive for realizations.

Crispin Love with Piper Sandler inquired about the drivers behind the significant portion of sales events from alternative managers, specifically if they were new wins or expanded client relationships. He also asked for more detail on the anticipated positive announcements regarding sales momentum expected by the April earnings call. Additionally, Love questioned the wide gap between net recurring and non-recurring sales events in the quarter, asking if it was primarily due to the professional services strategy.

Answer

CEO Ryan Hicke confirmed strong sales momentum and anticipated tangible updates on larger IMS opportunities by the April earnings call. Phil McCabe, President of Investment Manager Services, noted that the $20 million in IMS sales events was a mix of new business and cross-sales, with a strong pipeline for 2026, especially for large enterprise clients. CFO Sean Denham and Sanjay Sharma, President of Private Banking, attributed the non-recurring sales events to the growing professional services strategy, which involves early engagement in advisory capacities and long-term transformation projects for clients. Hicke emphasized SEI's evolving value proposition from fund operations to a firm-wide platform partner.

Crispin Love asked about the drivers behind the significant portion of sales events from alternative managers, inquiring if they were primarily new wins or expanded relationships. He also sought clarification on the expected positive announcements regarding sales momentum in the IMS business for the April earnings call. Additionally, Love questioned the wide gap between net recurring and non-recurring sales events, specifically if it was due to the professional services strategy.

Answer

CEO Ryan Hicke confirmed strong sales momentum in the IMS business, particularly with larger organizations, with more tangible updates expected in April. Phil McCabe, President of Investment Manager Services, explained that ALTs sales were a mix of new business and cross-sales, with a strong pipeline for 2026. CFO Sean Denham attributed the recurring vs. non-recurring sales gap to the professional services strategy. Sanjay Sharma, President of Private Banking, elaborated on engaging with prospects earlier in an advisory capacity, influencing overall strategy and transformation journeys. Ryan Hicke further highlighted SEI's evolving value proposition from fund operations to firm platforms and from investment processing to C-suite technology partnerships.

Crispin Love inquired about the composition of SEI's sales events, specifically noting that two-thirds were from alternatives, and asked if this trend was consistent with recent quarters and if these wins were primarily from large or smaller alternative managers. He also sought details on the recent private banking contract loss, including client tenure and the reason for the loss.

Answer

Ryan Hicke (CEO) and Phil McCabe (EVP and Head of Investment Managers Business) clarified that the high proportion of alternative sales reflects increased transparency and surging demand for outsourcing, with wins diversified across large and small clients, and no single event dominating. Sanjay Sharma (EVP, CEO, and Global Head of Private Banking and Wealth Management) and Ryan Hicke (CEO) explained the private banking loss was a one-off event known since 2022 due to a client's strategic shift, not a trend, and that SEI is supporting the client through the deconversion.

Crispin Love from Piper Sandler inquired about the composition of SEI's sales events, specifically noting that two-thirds were from alternatives, asking if this trend is consistent with recent quarters and if these wins are primarily from large or smaller alternative managers. Crispin also asked for details on the private banking contract loss, including whether it was a long-time client, and if it resulted from a merger or competitor takeaway.

Answer

Ryan Hicke, CEO, and Phil McCabe, EVP and Head of Investment Managers Business, SEI, clarified that the high proportion of alternative sales events reflects surging demand for outsourcing and is a mix of large and small clients across various alternative strategies, with no single event dominating. They anticipate further announcements regarding larger managers in early 2026. Sanjay Sharma, EVP, CEO, and Global Head of Private Banking and Wealth Management, SEI, and Ryan Hicke, CEO, explained that the private banking loss was a one-off event known since 2022 due to a client's major operating model change, not a trend. They emphasized SEI's conservative approach in announcing the full loss despite a multi-year deconversion schedule and highlighted other significant wins in the segment.

Crispin Love inquired about SEI's key investment areas in talent and technology, the potential size of these future investments, and the specific reasons for the temporary delays in private banking sales events during the quarter.

Answer

EVP & CFO, COO Sean Denham explained that investments are focused on hiring ahead of anticipated sales in the Investment Managers segment and streamlining technology for scalability, noting that Q2 margin levels are expected to be consistent going forward. CEO Ryan Hicke, with additional color from Executive VP Sanjay Sharma, attributed the private banking delays to market volatility in April that pushed deal closings, but affirmed the underlying pipeline remains strong and well-balanced.

Crispin Love asked about the 'secret sauce' driving the significant uptick in sales events over the last three quarters and requested more detail on which parts of the alternatives space are seeing the most success.

Answer

CEO Ryan Hicke attributed the sales momentum to three factors: a strong foundation of client engagement, a differentiated market positioning as a horizontal solutions provider, and higher overall activity levels. For alternatives, executive Phil McCabe highlighted SEI's global leadership in private credit, along with strong activity in private equity, real estate, and infrastructure. He noted that investments in on-the-ground talent in the U.K. are successfully attracting large global managers.

Crispin Love of Piper Sandler inquired about the composition of the quarter's strong sales events, asking about deal concentration and cross-segment wins. He also requested details on the drivers of positive net flows within the Investment Advisers and Investment Managers businesses.

Answer

Executive Ryan Hicke confirmed sales events were broad-based, not reliant on a single deal. Executives Philip McCabe and Paul Klauder added that strength in the Investment Managers segment came from secular tailwinds like the retailization of alternatives, while the Adviser segment saw strong adoption in SMAs and strategies, offsetting mutual fund headwinds. Ryan Hicke noted the enterprise sales vision is still in its 'early innings'.

Crispin Love asked about the administration's focus on housing affordability, what actions AGNC would recommend to address affordability, and how AGNC gauges the positivity of the agency MBS investment environment compared to prior periods, and its impact on leverage.

Answer

Peter Federico credited the administration, FHFA, and GSEs for their actions in 2025, particularly their focus on mortgage spreads and maintaining stability or tightening them. He suggested that changing the GSE portfolio cap would be a beneficial action to provide more capacity and maintain attractive spread levels. Regarding the investment environment, he noted that while spreads are tighter, they are still wide by historical standards, offering excellent mid-teen returns. He highlighted that policymakers are effectively limiting the *upside* of the spread range, providing greater certainty for levered investors like AGNC, and expects actions to be taken if spreads materially widen due to exogenous events.

Crispin Love inquired about the administration's focus on housing affordability and, if in their position, what actions AGNC's management would take to address affordability, given supply constraints. He also asked for a comparison of AGNC's current positivity on the Agency MBS investment environment versus prior periods and its implications for leverage.

Answer

Peter Federico, President, CEO, and CIO, credited the administration, FHFA, and GSEs for their 2025 actions, particularly the guiding principles focusing on mortgage spreads. He suggested changing the GSE portfolio cap as a beneficial action. He noted that while current spreads are lower, they remain wide by historical standards, offering mid-teens returns. He highlighted that policymakers are now limiting the upper end of the spread range, providing greater certainty for levered investors compared to a year ago.

Crispin Love from Piper Sandler Companies asked about the core earnings trajectory and its implications for the dividend, the pace of capital deployment, and expectations for future equity issuance.

Answer

Peter Federico, President, CEO & CIO, indicated that core returns are in the high teens (18-20%), aligning with current mortgage valuations, and expects net spread income to remain in the mid-to-high 30s to low-to-mid 40s cents range. He noted that about half the capital raised in Q2 was deployed during the quarter, with another billion dollars invested post-quarter end, primarily in higher coupon (5-6%) specified pools. He clarified that Q2's high issuance was opportunistic and not indicative of future levels.

Crispin Love inquired about how AGNC managed the extreme interest rate volatility in early April and asked for the company's forward-looking outlook on leverage and its hedge ratio.

Answer

Peter Federico, President, CEO, and CIO, credited the company's ability to navigate the volatility to its strong starting position, including moderate leverage of 7.5x and a significant liquidity position of $6 billion (63% of tangible equity). This allowed AGNC to avoid forced selling. He noted that while current wide spreads could support attractive returns at lower leverage, he does not expect these spread levels to be sustainable long-term.

Crispin Love questioned the rationale behind the significant increase in the hedge ratio during the fourth quarter, asking about its timing relative to the election. He also requested an update on the current state of demand for Agency MBS from key investor segments like banks and money managers.

Answer

Peter Federico, Director, President and CEO, explained that the hedge ratio was increased to 91% due to heightened uncertainty and expected volatility surrounding the presidential election and fiscal policy. He noted a belief that the backup in rates was not temporary. Regarding demand, he stated that the supply/demand outlook for Agency MBS appears well-balanced, with steady demand from money managers and potential upside from increased bank participation.

Crispin Love from Piper Sandler asked about AGNC's return expectations for Agency MBS given the current spread environment and how this outlook supports the current dividend level. He also sought commentary on the near-to-intermediate term expectations for 30-year mortgage rates.

Answer

Peter Federico, President and CEO, expressed confidence in the dividend's sustainability, stating that wide and stable Agency MBS spreads are generating attractive returns. He noted that current coupon spreads translate to ROEs in the 16-18% range. Regarding mortgage rates, he projected they would likely remain above 6.5% for an extended period, which improves the technical backdrop for the mortgage market by slowing supply.

Crispin Love asked about the dynamics impacting Net Interest Income (NII) and Net Interest Margin (NIM) in the first quarter, specifically the effects of recent Fed rate cuts, loan yields, and deposit costs, relative to the fourth quarter's strong performance.

Answer

Walter Phifer, CFO of Live Oak Bancshares, explained that 50 basis points of Fed cuts typically lead to near-term NIM and NII compression due to the variable loan portfolio repricing. He noted that deposit pricing adjustments and continued growth are expected to quickly restore an upward trajectory for NII and NIM, suggesting Q4 2024's performance after Q3 2024 cuts as a proxy.

Crispin Love asked about the dynamics impacting Net Interest Income (NII) and Net Interest Margin (NIM) in the first quarter, including the effects of recent Fed rate cuts on loan yields and deposit costs. He also inquired about the trend of gain on sale income, particularly in Q1 2026, given the Q4 2025 decision to hold more loans.

Answer

Walt Phifer (CFO, Live Oak Bancshares) explained that 50 basis points of Fed cuts typically lead to near-term NIM and NII compression due to the variable loan portfolio repricing. He noted that deposit pricing adjustments and strong growth would quickly push NII and NIM back to an upward trajectory. Regarding gain on sale, he clarified that the government shutdown had minimal impact in Q4 2025 and expected Q1 2026 gain on sale income to be more in line with Q1 2025 levels, followed by a typical stairstep momentum.

Crispin Love inquired about Live Oak's outlook for its net interest margin (NIM) and net interest income (NII) for the remainder of the year, and questioned the strategy of pursuing significant loan growth amidst an uncertain macroeconomic environment and an ongoing small business credit cycle.

Answer

Walter Phifer, an executive, responded that forecasting the margin is difficult in the current environment but emphasized the bank's asset-sensitive position. William C. (BJ) Losch III, an executive, addressed the loan growth concern, stating that the bank remains comfortable with the quality of its loan production and is maintaining a disciplined credit approval process.

Crispin Love inquired about the drivers of the elevated provision expense, asking for a breakdown between loan growth and specific credit issues, and questioned the outlook for the net interest margin (NIM) in Q1 and for the full year 2025.

Answer

Chief Credit Officer Michael Cairns explained that the provision was primarily driven by broad-based weakness in the SBA loan portfolio, reflecting macro challenges like interest rates and inflation, rather than a few specific problem credits. Executive Walter Phifer projected a similar NIM in the near term due to the impact of recent rate cuts on the loan portfolio, but noted that repricing CDs would provide a tailwind. He affirmed the 3.50% NIM target for late 2025 is still possible but could shift to early 2026 depending on Fed actions.

Crispin Love inquired about the drivers of the record $1.8 billion in loan originations, asking if a level around $1.5 billion could be the new norm. He also requested more detail on the three specific loan relationships that contributed to the increased provision for credit losses.

Answer

Executive William C. (BJ) Losch III explained that the record originations were broad-based, with a significant contribution from solar and seniors housing projects that had been delayed. He suggested a new normalized level would be closer to $1.2 billion, not $1.8 billion, but noted that pipelines remain very healthy. Chairman and CEO James Mahan added that the pipeline for hiring new lenders is also at an all-time high. Regarding the credit issues, Mahan described them as isolated incidents related to poor management transition, litigation overhang, and one simply not working out, stating it was not a systemic issue. Executive Michael Cairns concurred, seeing them as one-off events with no underlying theme in the broader portfolio.

Crispin Love from Piper Sandler inquired about the recent impact of declining mortgage rates on Northpointe Bancshares' 2026 guidance for saleable mortgage originations and MPP loan balances, and the assumptions for full-year 2026 mortgage rates and net interest margin trajectory.

Answer

CFO Brad Howes stated that the recent rate declines had a minimal impact on 2026 guidance, noting that a sustained decline is needed for significant P&L benefit, with Q1 2026 volume expected to be higher than Q1 2025. He clarified that 2026 guidance assumes mortgage rates dipping below 6% by year-end with a slow, gradual decline. Regarding the net interest margin, Mr. Howes explained that a slight improvement from loan mix shifts would be offset by two anticipated Fed rate cuts in mid-2026, leading to a consistent trajectory.

Crispin Love asked about the impact of the recent fluid mortgage environment, specifically declining rates, on Northpointe Bancshares' 2026 guidance for saleable mortgage originations and MPP loan balances. He also inquired about the assumed mortgage rates for 2026 and the expected trajectory of the net interest margin (NIM) throughout the year.

Answer

CFO Brad Howes stated that the recent rate declines had a minimal impact on 2026 guidance, as forecasts already anticipated rates dipping below 6% by year-end with a slow, sustained decline. He noted a positive pickup in refinance activity since September. For NIM, Mr. Howes expects a consistent trajectory within the 2.45%-2.55% range, with slight improvements from the loan mix shift (higher-yielding MPP and AIO loans replacing lower-yield residential mortgages) being offset by two anticipated Fed rate cuts in mid-2026.

Crispin Love with Piper Sandler inquired about Northpointe Bancshares' net interest margin (NIM) trajectory, specifically the 2025 and 2026 guidance, near-term trends, repricing dynamics, and the anticipated impact of Federal Reserve rate cuts. He also asked about residential lending channel volumes with recent mortgage rate movements and the potential trend for the All-in-One (AIO) loan product if mortgage rates continue to decrease.

Answer

EVP and CFO Brad Howes explained that the September rate cut's full impact would be seen in Q4, noting Northpointe is mostly asset-neutral. He highlighted continued NIM improvement from a favorable loan mix shift, as lower-yielding legacy mortgages are replaced by higher-yielding Mortgage Purchase Program (MPP) and All-in-One (AIO) loans. President and Secretary Kevin Comps added details on increased refinance activity in September (67% increase in closed volume, 50% of locks) and the AIO product's resilience to minor rate changes, with 2026 forecasts assuming modest mortgage rate decreases (30-40 basis points).

Crispin Love with Piper Sandler inquired about Northpointe Bancshares' Net Interest Margin (NIM) trajectory for Q4 2025 and into 2026, considering repricing dynamics and anticipated Fed rate cuts. He also asked about residential lending volumes, particularly for the AIO loan product, and its sensitivity to declining mortgage rates.

Answer

EVP and CFO Brad Howes explained that the September rate cut's full impact would be seen in Q4, noting the company is mostly asset-neutral with most assets/liabilities repricing within 30 days. He highlighted continued NIM improvement from a favorable loan mix, replacing lower-yielding legacy mortgages with higher-yielding MPP and AIO loans. President and Secretary Kevin Comps added that lower rates increased refinance volume significantly in September, and while AIO production can be affected, the target borrowers remain attracted to the product. He also clarified that 2026 forecasts assume four short-term rate decreases and modest mortgage rate declines.

Crispin Love of Piper Sandler Companies inquired about the primary drivers of the significant Mortgage Purchase Program (MPP) growth in Q2, the bank's capacity for future funding, the expected trajectory of the net interest margin (NIM) for the rest of 2025, and recent demand trends for the AIO loan product.

Answer

Founder, Chairman & CEO Charles Williams attributed the MPP growth to bringing previously participated loans back onto the balance sheet post-IPO, pent-up demand, and strong execution by the sales team in adding new clients. EVP & CFO Brad Howes addressed the NIM, stating that while guidance is maintained at 2.45% to 2.55%, it will likely be at the lower end, with improvement expected in H2 driven by a better asset mix. President & Secretary Kevin Comps confirmed that demand for AIO loans remains strong for both their own portfolio and their subservicing business.

Crispin Love asked about the significant increase in credit hedges from September to October, inquiring about the drivers behind this increase, management's view on current credit spread tightness, and whether the decrease in the CLO portfolio in October indicated a more cautious credit outlook. He also sought clarification on the reason for the slight decrease in the CLO portfolio from $380 million to $371 million in October.

Answer

Larry Penn (CEO) explained that the increase in credit hedges was primarily a function of the growing portfolio size and increased leverage from repo financing, emphasizing their role as tail hedges for liquidity in severe downturns. Greg Borenstein (Portfolio Manager) added that these hedges protect against drawdowns, are not necessarily short positions, and are adjusted as positions change. He also noted that tail risk is attractively priced. Larry Penn further clarified that the debt portfolio increased net month-over-month, while the equity portfolio decreased mainly due to distributions and a slight sell-off in CLO equity in October.

Crispin Love of Piper Sandler asked for clarification on the target size of a 'fully deployed' portfolio, the expected timeline for deployment, the pace of investment in April, and the outlook for Adjusted Distributable Earnings (ADE) covering the dividend.

Answer

Portfolio Manager Gregory Borenstein confirmed they accelerated capital deployment in April to capitalize on market weakness. CEO Laurence Penn explained that a 'fully deployed' state could exceed $300 million, contingent on the portfolio's asset mix and leverage, which is managed by risk limits rather than strict regulatory constraints. Penn also reaffirmed the previous outlook for ADE, expecting it may not cover the dividend in calendar Q2 but should resume coverage in Q3.

Crispin Love of Piper Sandler Companies asked about the deal environment for mortgage originator platforms, EFC's interest in further investments, the current status of credit quality, and the financial drag from remaining loan workouts.

Answer

Co-CIO Mark Tecotzky and CEO Laurence Penn detailed their strategy of making smaller, highly efficient equity investments in familiar originators rather than large acquisitions. CFO JR Herlihy confirmed that only one significant workout asset remains and that overall realized losses are extremely low. Penn quantified the drag from the remaining workout as minimal, less than a penny per share annually, with a potential positive swing upon its expected resolution in 2026.

Crispin Love inquired about the deployment of capital into attractive trading opportunities arising from recent market volatility and asked for details on the recent resolutions of commercial bridge loans.

Answer

CFO JR Herlihy noted modest net portfolio growth in April, with capital deployed into non-QM, closed-end seconds, proprietary reverse loans, and opportunistic non-agency MBS. Co-CIO Mark Tecotzky detailed how extreme spread widening in non-QM securitizations created buying opportunities. Regarding loan resolutions, JR Herlihy and CEO Laurence Penn explained that a discounted payoff and an REO sale freed up $20-$25 million in capital, eliminated negative carry assets, and left only one significant workout asset remaining.

Crispin Love of Piper Sandler asked for details on the closed-end second lien and HELOC opportunity and also inquired about the probability of the GSEs exiting conservatorship and the potential impact on EFC.

Answer

Co-CIO Mark Tecotzky described the second lien strategy as targeting high-FICO borrowers with low-rate first mortgages, viewing it as a large, long-lived opportunity. On GSE reform, Tecotzky sees a more immediate opportunity in the GSEs shrinking their footprint, creating space for private capital. CEO Laurence Penn added that he believes a full exit from conservatorship is a lower probability, highly complex process that would take a very long time.

Crispin Love asked about the timeline for Ready Capital to return to distributable earnings profitability and achieve dividend coverage. He also requested details on the recent bulk sale of legacy bridge loans, including the buyer profile, the amount of similar assets remaining, and the sale's pricing relative to original values.

Answer

CFO Andrew Ahlborn provided a detailed path to positive earnings, starting from the Q2 loss and adding back benefits from the recent asset sale's reduced negative carry ($0.05/share) and future reinvestment ($0.02/share), plus contributions from increased SBA and USDA volumes. CEO Thomas Capasse noted that in the interim, capital would be deployed into liquid CMBS. Chief Credit Officer Adam Zausmer described the loan sale buyer as a partnership between a multifamily operator and a fund, with the sale price at approximately 77% of UPB, effectively eliminating exposure to two specific syndicators.

Crispin Love asked about the near-term trajectory for distributable earnings, the timeline to cover the dividend, and the company's philosophy on share repurchases versus preserving liquidity.

Answer

Executive Andrew Ahlborn explained that a significant change in earnings will be catalyzed by the Q2 liquidation of noncore assets and subsequent reinvestment of capital. He projected Q2's earnings profile would be similar to Q1's, with an upward trend beginning thereafter. Regarding capital allocation, Ahlborn noted the company continuously balances the benefits of share buybacks against upcoming debt maturities and the need to rebuild net interest income, expressing confidence in their ability to access capital markets for refinancing.

Crispin Love inquired about Ready Capital's newly reduced dividend of $0.125, asking if first-quarter cash earnings would cover this level and what the earnings power outlook is for the upcoming quarters.

Answer

Executive Andrew Ahlborn explained that Q1 2025 will be the lowest earnings quarter of the year as the non-core portfolio moves to non-accrual status. However, he stated the company expects to cover the new dividend approximately 1.5x over the full year, with earnings ramping up as the year progresses. Ahlborn provided a bridge to this coverage, citing future OpEx savings, contributions from the Madison One USDA lending platform, exponential growth in the SBA business, and the accretive impact of the UDF merger.

Crispin Love inquired about the specifics of Q3 loan sales, including the total sale amount, discount, and resulting loss, as well as the remaining balance of loans slated for sale. He also asked for clarification on the amount of Payment-in-Kind (PIK) interest income and whether the reported percentage was based on total interest income or net interest income.

Answer

Executive Andrew Ahlborn detailed that Ready Capital settled $331 million in loans, generating $55 million in proceeds with an $0.11 per share loss. He confirmed $218 million in loans remain for sale. Ahlborn clarified that over 20% of top-line interest income was PIK or accrued, with a significant portion from construction loans acquired in the Mosaic transaction, which are expected to become cash-paying in Q4.

Crispin Love of Piper Sandler Companies inquired about TPVG's funding outlook, noting the conservative guidance despite a strong Q2, and asked about the potential for company stock buybacks following the sponsor's new share purchase program.

Answer

President and CIO Sajal Srivastava attributed the funding guidance to lower utilization rates of commitments and Q3 seasonality, but expected a stronger Q4. Chairman and CEO James Labe explained that while buybacks are considered, the current priority for capital allocation is maintaining financial flexibility for unfunded commitments and upcoming 2026 debt refinancing.

Crispin Love inquired about TPVG's funding outlook for the second quarter and the remainder of the year, noting the strong start with over $50 million funded quarter-to-date. He also asked for management's view on credit quality and the forward-looking outlook, especially given the changing market environment since the end of Q1.

Answer

Sajal Srivastava, an executive at TPVG, clarified that the company is maintaining its funding guidance of $25 million to $50 million per quarter for the first half of the year, expecting Q2 to compensate for Q1's lower volume. Regarding credit, he acknowledged that while market conditions were improving at the start of the year, recent volatility makes the outlook uncertain. Srivastava stated that TPVG is monitoring its portfolio in real-time and has not yet observed any material negative impacts.

Crispin Love inquired about TPVG's credit outlook for 2025 and the primary drivers behind the elevated level of prepayments observed in the fourth quarter.

Answer

Sajal Srivastava, an executive at TPVG, stated that the company is pleased with the improving trend on its watch list over the past three quarters. He anticipates a stable or improving credit outlook for 2025, provided market conditions remain stable. Regarding prepayments, Srivastava explained that the activity was intentional, with about 60% in 2024 coming from e-commerce and consumer companies as part of a planned portfolio rebalancing. He expects a pace of about one prepayment per quarter in 2025, primarily from older, more seasoned assets.

Crispin Love inquired about the potential implications of the presidential election on the venture capital ecosystem and asked for details on the significant quarter-over-quarter decrease in non-accrual loans.

Answer

Sajal Srivastava, an executive at TPVG, stated it was too early to opine on the election's full impact but suggested a new administration could foster a more favorable M&A environment. He explained the non-accrual reduction was driven by two main factors: the acquisition of Good Eggs by Grub Market and placing Moda Operandi back on accrual status following a new financing round.

Crispin Love of Piper Sandler Companies asked about the dynamics between Fannie Mae and Freddie Mac originations, the drivers of strong July agency volume, the long-term strategy for Single-Family Rental (SFR) versus multifamily bridge lending, and the near-term outlook for net interest income.

Answer

CEO Ivan Kaufman explained that agency competitiveness varies, and the record $1 billion July volume was driven by large transactions with loyal sponsors. He stated that a recent successful SFR CLO securitization allows Arbor to be more aggressive in growing its market share in the high-return SFR space. CFO Paul Elenio projected that net interest income would likely bottom in the next one to two quarters, with portfolio growth helping to offset some drag from non-performing assets.

Crispin Love inquired about the outlook for bridge loan originations following a strong Q4, the agency origination forecast for Q1, and requested an update on the previously disclosed DOJ/SEC investigations.

Answer

President and CEO Ivan Kaufman projected $1.5 to $2.0 billion in bridge originations for 2025, spread evenly throughout the year. Executive Paul Elenio noted that Q1 agency originations are expected to be light, potentially in the $600-$800 million range, due to seasonality and higher rates. Regarding regulatory inquiries, Kaufman stated the company does not comment on them but noted that elevated costs are due to enhanced auditing and compliance procedures.

Crispin Love of Piper Sandler & Co. asked for details on the plan to ramp up the bridge lending program, including expected origination trends. He also inquired about management's and the Board's confidence in the current dividend level amid potential near-term earnings pressure.

Answer

President and CEO Ivan Kaufman stated that bridge lending is now more attractive and projected closing $300 million to $400 million in bridge loans by year-end, with potential for substantial growth if short-term rates fall. Regarding the dividend, Kaufman and Executive Paul Elenio both affirmed their confidence, explaining that the Board takes a long-term view. They highlighted the diversified business model, where factors like increased agency volume and lower borrowing costs are expected to offset other pressures over time.

Crispin Love inquired about credit quality trends compared to three months prior, the potential impact of the student loan moratorium ending, and future ROTCE targets.

Answer

CFO Drew LaBenne confirmed that strong underlying credit performance has continued, noting the Q1 qualitative provision was a forward-looking measure. CEO Scott Sanborn added that they have seen no impact from the resumption of student loan payments. Drew LaBenne also stated the expectation is to maintain a double-digit ROTCE in Q4, similar to the Q3 guidance.

Crispin Love asked about consumer loan demand trends in the second quarter amid market volatility and inquired about the broader opportunity for insurance companies to become significant loan buyers.

Answer

CEO Scott Sanborn noted that Q2 is seasonally strong and that economic uncertainty can actually drive more demand for their debt consolidation product. CFO Andrew LaBenne described the insurance market as a 'massive' opportunity, explaining that the new rated product allows for direct sales to this large capital pool. Sanborn added that this rated product is another tool that provides pricing between whole loan sales to banks and unrated certificates.

Crispin Love from Piper Sandler Companies asked for clarification on the $32 million 'net gain in residual and securitizations' line, questioning if such gains would only occur with ALP securitizations. He also inquired about the impact of recent SBA rule changes on loan volumes.

Answer

EVP & CFO Frank DeMaria confirmed the gain was unique to the new securitization structure where Newtek owns 100% of the residual, a model they plan to use in the future. President, Chairman & CEO Barry Sloane stated that he does not expect the SBA rule changes to impact their loan volumes and reaffirmed the company's full-year guidance of $1 billion in 7(a) originations, noting their comfort with the new compliance requirements.

Crispin Love inquired about the sustainability of the elevated net gains on loans accounted for under the fair value option, particularly for the Alternative Loan Program (ALP), and asked for the rationale behind recent management changes, including the split of the CFO role.

Answer

Executive Barry R. Sloane explained that the gains on ALP loans are sustainable due to the significant, approximately 570 basis point spread between the loan coupon and the bond yield in recent securitizations. He stated that while challenging, the company is comfortable with its forecast. Regarding management changes, Sloane described them as a natural part of being a disruptive and innovative company, highlighting the firm's deep bench of long-tenured executives. He clarified that splitting the CFO role allows M. Scott Price to focus on the bank and Frank DeMaria to focus on the holding company, which was a logical transition.

Crispin Love inquired about the projected earnings cadence for 2025, questioning the significantly lower Q1 forecast, and asked for the drivers behind the Q4 $9.4 million fair value markup on loans.

Answer

Executive Barry R. Sloane explained the Q1 earnings forecast reflects seasonal caution, as Q1 is typically the slowest, but noted that production and pricing are currently better than expected, suggesting a potential revision. He clarified a typo in the slide deck, stating the Q1 EPS range is $0.28-$0.32, not lower. Sloane attributed the fair value markup to the high-margin ALP loans originated in the quarter, which are valued for securitization.

Crispin Love inquired about the potential benefits and headwinds for NewtekOne under a Trump presidency and asked for an explanation of the differing net charge-off trends between the bank and the consolidated company.

Answer

CEO Barry R. Sloane identified a stable corporate tax rate and a potentially upward-sloping yield curve as positives from a Trump presidency, while noting tariffs as a potential risk. Regarding credit, Sloane emphasized the company's long-term success with risk-adjusted returns. CFO Scott Price clarified the charge-off discrepancy, explaining it stems from different accounting models: the holding company uses fair value accounting where losses hit noninterest income, while the bank uses a traditional allowance model. He noted the increase at the bank was expected as its new SBA portfolio matures.

Crispin Love from Piper Sandler Companies asked about the sustainability of the $0.40 dividend, given the operating earnings run-rate is slightly below that level, and also requested an update on book value month-to-date in July.

Answer

Daniel Perotti, Senior MD & CFO, affirmed the Board's comfort with the $0.40 dividend, pointing to the run-rate's upward trajectory from $0.35 to $0.38 and the company's focus on dividend stability. He added that taxable income is also moving toward a level supportive of the dividend, bolstered by new non-agency investments. He also confirmed that book value in July was very stable compared to the end of Q2.

Crispin Love from Piper Sandler Companies questioned the sustainability of the $0.40 dividend, given that the operating earnings run-rate guidance is slightly below that level. He also requested an update on book value performance for July to date.

Answer

CFO Daniel Perotti affirmed the Board's comfort with the $0.40 dividend, citing the upward trajectory of the run-rate earnings and the company's historical preference for dividend stability. He added that taxable income is trending towards and supportive of the current dividend level. Regarding book value, Perotti reported that it was 'very stable' in July compared to the end of the second quarter.

Crispin Love of Piper Sandler Companies asked for an analysis of the current demand picture for Agency MBS, including the level of bank involvement, and how this could impact spread expectations.

Answer

Head of Agency V.S. Srinivasan noted that demand from fixed income funds and strong CMO issuance have been supportive, while demand from banks and overseas accounts remains muted. He believes spreads can tighten 3-5 basis points even without them, but the real bull case involves regulatory reform and Fed easing bringing those buyers back. CEO & Co-CIO David Finkelstein added that as the Fed cuts rates, banks will likely turn to Agency MBS to replace lost net interest margin.

Crispin Love of Piper Sandler Companies asked for an overview of the current demand picture for Agency MBS, including where demand is originating and how it could affect spread expectations.

Answer

Head of Agency Vyas Srinivasan noted strong demand from fixed-income funds and CMO issuance, which has supported the market even without significant bank or overseas participation. He believes spreads can tighten on fundamentals alone, but the bull case involves regulatory reform and Fed easing, which would materially increase bank and foreign demand.

Crispin Love inquired about the record $125 million in capital deployed, asking if Abacus is now fully deployed and what a future run-rate might be. He also asked for an update on the carrier buyback program's Q1 activity and prospects for new relationships.

Answer

CEO Jay Jackson attributed the high deployment to strong origination and investor demand, which facilitates capital recycling. He stated the company is well-positioned with over $43 million in cash and flexibility from recent capital raises. On the carrier buyback program, Jackson confirmed Q1 activity but noted it can be inconsistent. He added that the market for policies is increasingly competitive due to broad investor demand, not just from carriers.

Crispin Love inquired about the deployment status of capital from the recent equity and debt offerings in Q4 and Q1-to-date, and the expected timeline for full deployment. He also asked about the strategy for holding policies on the balance sheet and whether the value of these holdings should be expected to trend higher.

Answer

CEO Jay Jackson explained that a significant portion of the newly raised capital was deployed late in Q4, and the company entered Q1 with a strong capital position, supporting the 2025 guidance without needing further equity raises. Regarding the balance sheet, Jackson stated the goal is to turn policies about twice a year, with an average holding period of 4-6 months. He expects the total value of policies held to hover between $370 million and $450 million as sold policies are continuously replaced.

Crispin Love of Piper Sandler inquired about business trends and seasonality in the fourth quarter and requested the specific originated face value figure for Q3 2024.

Answer

CEO Jay Jackson confirmed that the historical trend of a stronger Q4 for originations is expected to continue, driven by policyholders aiming to close transactions by year-end. He noted that a very strong Q3 also signals a bullish outlook for continued origination growth. CFO William McCauley provided the Q3 originated face value figure of $471.6 million.

Crispin Love of Piper Sandler inquired about business trends in the fourth quarter, specifically regarding historical seasonality, and requested the originated face value figure for the third quarter.

Answer

CEO Jay Jackson confirmed that the historical trend of stronger originations in the fourth quarter appears to be continuing, driven by policyholders looking to finalize transactions before year-end. CFO Bill McCauley provided the originated face value for Q3 2024, stating it was $471.6 million.

Crispin Love inquired about the demand for loans, leverage expectations given the large pipeline, the current state of credit quality, the strategic plan for the nonaccrual loan #9, and the company's latest outlook on federal cannabis rescheduling.

Answer

Managing Partner Peter Sack stated that while the profile of loan demand has changed, it's been offset by the industry's maturation, and the company does not plan to increase leverage beyond its current facility. He confirmed credit quality remains stable. Regarding loan #9, Managing Partner David Kite explained they have taken operational control and are working to remedy issues to restore value before deciding on a final action. Peter Sack added that the company's investment strategy assumes rescheduling will not occur, treating any such reform as an upside catalyst.

Crispin Love questioned if Mr. Cooper can continue to drive its servicing expenses, currently 5.3 bps of the portfolio, lower through scale and technology, or if that metric is expected to flatten. He also asked for clarity on whether the company is comfortable hitting the midpoint of the new 16-20% ROTCE guide for 2025 and what major factors changed in the last three months to warrant the guidance increase.

Answer

CEO Jay Bray stated the company is in the 'middle innings' of what's possible for cost reduction, with ongoing AI-centric investments expected to drive costs down further. President Mike Weinbach added that increasing tech investments are yielding results. Regarding the ROTCE guide, CFO Kurt Johnson explained that they are comfortable in the 16-20% range for the two-year period, noting that incremental services business and operational scale will likely cause the ROTCE to climb over time.

Crispin Love of Piper Sandler asked about the key assumptions underlying the 14% to 18% ROTCE target for 2025, specifically what factors could drive performance to the higher end of that range. He also inquired about Mr. Cooper's positioning on recapture rates in the current cycle compared to the past, and how technology and AI are expected to impact those rates.

Answer

CFO Kurt Johnson explained that reaching the higher end of the ROTCE range could be catalyzed by higher originations volumes, increased subservicing wins (which are capital-light), or a scenario where interest rates remain high, suppressing prepay speeds. President Mike Weinbach added that the company is operating with momentum from its balanced business model. Regarding recapture, CEO Jay Bray stated he expects performance to improve due to investments in process, technology, and analytical capabilities. He noted the company is carrying additional capacity and has enhanced its marketing models, expressing confidence in maintaining and growing recapture rates in any cycle.

Asked for more detail on the strong fund launch market in the Americas, specifically whether it's an industry-wide trend, what's driving it, and if it's sustainable.

Answer

The company confirmed it's a broader regional trend driven by capital deployment into the Americas and away from APAC. The launches are concentrated in strategies that benefit from volatility (macro, multi-strat) and private credit. While Enfusion is capturing this trend effectively as a 'de facto default system', their primary strategic focus remains on the larger institutional asset management market.

Speaking on behalf of Crispin Love, an analyst asked about the ongoing shift in portfolio exposure from multifamily to Life Sciences and inquired about the drivers behind the recent decrease in the debt service coverage ratio (DSCR).

Answer

Matthew McGraner, EVP & CIO, explained that the portfolio mix shift is due to both new Life Science investments and capital repayments from the residential sector, noting a long-term target of 25-33% for Life Sciences. Paul Richards, VP of Originations & Investments, attributed the minimal DSCR dip to specific assets in lease-up, like the '[A life]' loan, and minor slippage in multifamily, expecting future stabilization. Mr. McGraner added that an easing Fed policy should improve property balance sheets and coverage ratios.