Core Insights - Eagle Point operates two funds, Eagle Point Credit Company (ECC) and Eagle Point Income Company (EIC), both focused on generating income through credit exposure, with ECC primarily investing in CLO equity and EIC focusing on BB-rated CLO tranches [4][8][10]. Fund Overview - ECC is one of the largest funds globally that owns CLO equity, which is a misunderstood asset class that generates significant cash flow and allows for strong monthly distributions [5][6]. - EIC targets the BB tranche of CLO transactions, which generally carries less risk than equity due to its position in the capital structure [8][10]. - The underlying loans in CLOs are typically senior secured corporate loans, which have historically shown low default rates and positive returns [12][15][18]. Market Dynamics - The CLO market represents about two-thirds of the $1.4 trillion U.S. loan market, with significant involvement from private equity firms [19]. - Recent inflows into CLO ETFs have created demand for CLO AAAs, benefiting ECC as it seeks to maximize equity distributions [32][34]. - The management fee structure of ECC is designed to be shareholder-friendly, charging fees only on common and preferred equity, not on assets purchased with debt [83]. Investment Strategy - The company actively manages its portfolio, directing refinancings and resets of CLO debt to optimize cash flows and reduce costs [71][72]. - A joint venture with a BDC focuses on venture loans, providing exposure to high-yield investments with interest rates between 12% and 16% [77][80]. - The company emphasizes the importance of consistent cash flow from interest income to cover distributions and operational expenses [41][42]. Future Outlook - The company remains optimistic about the corporate credit market, anticipating continued low default rates and tightening spreads, which could enhance investment returns [105][106]. - The management aims to maintain a steady distribution rate while adapting to market conditions, with a long-term focus on shareholder value [66][92].
Eagle Point Credit CEO Tom Majewski On Funds And Income