Thornburg Income Builder Opportunities Trust – 1st Quarter Update 2023

Thornburg Income Builder Opportunities Trust – 1st Quarter Update 2023

Adam Sparkman:        Good afternoon, everyone, and welcome to the Thornburg Income Builder Opportunities Trust update call. My name is Adam Sparkman, and I’m the client portfolio manager at Thornburg Investment Management. A point of housekeeping before we get started. At this time, all participants are in listen-only mode. However, you can ask questions at any time by submitting them through WebEx or emailing us at questions@thornburg.com. The webcast is being recorded and a replay will be available in a few days. I’d also like to remind you that today’s presentation may containing forward looking statements, which are based on management’s current expectations and are subject to uncertainty in changes and circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. I’d like to quickly introduce our speaker today, Matt Burdett, portfolio manager on the income builder opportunities trust, as well as on other multi asset and equity strategies that the firm has to offer. For those of you on the call today who may be less familiar with Thornburg, we’re an investment manager based in Santa Fe New Mexico overseeing approximately 40 billion dollars of assets, a process suite of actively managed equity, fixed income, and multi-asset solutions. Whether the Thornburg investment opportunities trust has been your introduction to our firm or an extension of a long partnership, on behalf of everybody here, we’d like to say thank you. Amid a backdrop of elevated volatility and challenging levels of global uncertainty, the aim of the income builder opportunities trust remains the same. To provide investors with an attractive level of income today and into the future. Despite the challenges, by the end of this call we hope you’ll have a sense of how constructive we are for the prospect of this fund, both in the near and long term. So, with that, let me turn it over to Matt, who will kick off the presentation.

Matt Burdett:  Thank you, Adam, and thanks to everyone for joining the, the call today. I’ll be referencing some slides here, which should be available on our, on our website. So, starting off on, on Slide 2, just a reminder of the Thornburg Income Builder Opportunities Trust and what we’re trying to achieve with, with this strategy. some, some of our listeners, may know if the Thornburg investment income builder fund, which is an, our, open-end fund, with a similar, similar mandate or, or, you know, solution to provide income and growing, growing income overtime whilst capital appreciation. and, you know, the closed end fund, the income builder opportunities trust, it’s, it’s similar in nature to solving the income problem. But we get, we get at it a slightly, a slightly different way. So, so again the objective is to pay an attractive yield today and offer long-term capital appreciation over time. And we, we build this portfolio using, global dividend paying stocks primarily as well as global bonds and hybrid securities. as well as we utilize an option overlay on a part of the equity portfolio to help generate, premium that helps, helps, shore up the distribution. Key pillars in this strategy are, are, focusing on companies that have an ability and willingness to pay dividends. So, an ability means strong cast generation, a competitive business model of good competitive position within its value chain. Willingness means, that company, you know, management team and the board share our philosophy of wanting to, to, you know, distribute some of the income that gets generated and some of the cash that’s generated to shareholders. we do supplement this portfolio with some, some companies that do not pay dividends. And it’s a smaller part of the portfolio, but the reason why we do that is to, to help balance the growth value style. differences that happen when, most income-producing equities are, tend to be more value oriented and so we try and balance out the style. And also, by having some of these growth names, that helps us to generate premiums by writing options, on some of those names. To advancing to the next Slide No. 3, there’s a lot of text on the slide that’s highlighting some key macroeconomic considerations. I’ll, I’ll just touch on, on what I think are the, probably the most important ones. with respect to the COVID-19 pandemic, it, you know, I think it, it’s fair to say now that, that the world is moving beyond this. China was, was the last country to really open up and that is just starting now. And we would expect China to be, a positive and acceleratingly positive growth contributor for, for the world economy, as it does open up throughout, throughout 2023. You know the key debates, I, I think, there’s several that are all kind of interrelated, and center around inflation and, and the path of inflation. Inflation is moderated. we’re seeing that in, in the U.S. and other parts of the world, but it’s, it’s way too early to call, to claim victory versus inflation. So that will be, something that is closely watched, and this will have, you know, obvious impact for, for monetary policy. Given inflation is well, well above, what central banks around the world, are targeting is, is a target inflation rate, which is mostly 2 percent. You know, labor compensation is probably the biggest, contributor to watch for core inflation. the Atlanta Fed Wage Tracker was 6.1 percent in February and 6.4 percent year over year, for March. So, that’s a pretty strong number. Now, maybe just touching a little bit on, on the banks, which, which has obviously got a lot of attention, from the market, and has moved, you know, bank stocks and other securities, as a result. just, you know, as a point of reference, U.S. commercial bank deposits increased from 13.3 trillion in March of 2020, so, so right around the, the onset of the pandemic, to 18.4 trillion as of, April 2022. Okay, and, and during most of that period, the effective fed funds rate was, was a mere eight basis points, okay?  So, there was a whole lot of deposits, massive, massive deposit growth, all happening while the federal funds rate was, was effectively zero, right?  And so, as a result of that many, many banks, were investing, investing these deposits into long duration securities, which had yields that were very, very low. mainly because the monetary policy was set at a zero percent interest rate and was also purchasing some of the very same assets, and then when the fed rose, the fed funds rate 475 basis points in 53 weeks, that resulted in obviously, losses in some of the security’s portfolios as, as the interest rates rise and those values fall, and that has, has led to deposit flight and, and some risk with some banks. Now, you know, it’s tough to quantify this, but I think it’s, it’s fair to say that given the banking situation that’s acting as an additional form of tightening to, to the economy, and, you know, likely the federal reserve and other central banks will consider this when, when they are, meeting and, and deciding on whether or not to raise rates again next, next month. The other takeaway is it’s clearly, this is, like I said, a form of tightening, so it is likely, it is likely to, to result in tighter credit conditions, so less credit extension, happening, and, you know, you can imagine if you’re a bank and a, and a loan gets repaid to you, you can now deposit, you know, those funds at the fed and get, you know, close to 5 percent on that money, versus making a new loan and, and understanding that you’re taking risk in doing so, and then having to obviously, you know, provision for, for accepted losses there. So, pretty clear, I think, that, that credit conditions will be tighter, and look, this has all resulted in, in pretty historic, volatility within the rate market. you know, the 10-year treasury was 1 and a half percent at the end of December of 21. It rose to 388 basis points, in December of 22, and now it sits roughly at 3, 3.4, so, credit spreads have widened, they’re not as wide as they were, earlier, you know, last year, but they had widened. So, so a lot of the rate volatility had, or a lot of the volatility has that in the, in the rate market versus, versus credit. but you know, packing all of this together, I, I think it leaves, we believe we’re probably going to be in for more volatile times, as this, this digestion period happens and, and we’re all going to have to closely follow earnings and, and the real economy. Advancing to Slide 4, what we’re showing here, on Slide 4, I think is, is probably a, a simple graphic for everyone to understand that, that this transition, what, what we’re calling a, a cost of capital normalization, is, it’s a pretty meaningful one with respect to not only financial, the impacts on financial asset pricing, but on the real economy. so quickly describing it, both charts are the effected fed funds rate. this is dated just source from Blumberg. On the left, what you have is a time series from, 1982 to 2008, okay?  So, this is, you know, basically right at the onset of the financial crisis, and what you can see is that the average effected fed funds rate was 5.31 percent over that period. and if you look on the right, you then see from the end of 2008 until, now the average is 67 basis points, right?  With much of that period at zero. so, this cost of capital normalization, I think is, it’s an important one. and I think the implications are, you know, for one, the, the tightening of the fed is, is making its way through the real economy now. Right?  And it, it had hit certain sectors faster than others, so, let’s say housing, right?  As mortgage rates adjust pretty much instantaneously. but other parts of the economy will take longer. but I think there’s a couple takeaways is one, this is playing out over time so, so we will, this will play out through 23 and 24 and then probably even into 25. and the other takeaway is that, you know, look, the world’s has functioned okay on a 5, north of 5 percent effective fed funds rate. and although it feels terrible now, I mean going from zero to, to mid-single digit does feel terrible, but the point it the world has functioned with this level of, of cost of money, right?  And, and, and although it feels bad now, this is probably good for everyone, at the end of the day to have this normalization happen, but it will create opportunities for us over time. Turning to the next slide, looking at, selected market portfolio returns, we’ve got, a number of years here as well as the first quarter of 2023. Generally speaking, it was pretty strong rebound, for many markets around the world. coming off of a really, really, a bad year for equities in 22, and a, and a historically bad year for bonds in 2022. So we got a little bit of that back, but I will say, you know, the returns at least in the U.S., are fairly concentrated into a small handful of companies, and I would say that over, over 90 percent of that, 7 and a half percent return for the S&P 500, only came, came from 20 companies basically, so, you know, the range is, is pretty wide with, information, you know basically the bank names coming back pretty strong, returning, tech and consumer discretionary, returning, north of 20 percent in the first quarter, and then financials kind of on the other hand being down. as well as energy and, and healthcare. So, so somewhat of a reversal of the performance in 2022. advancing to Slide 6. This is just a reminder of the investment mix that we, that we used in the Thornburg income builder opportunities trust portfolio, though kind of home base for us is, you know, roughly 70 percent eq, global equity, 25 percent, 25 to 30 percent credit, and then as, as I mentioned earlier, we do, use an auction overlay to help enhance the distribution. but we’re looking everywhere where we can find what we believe are, are attractive, risk adjusted yield that help us meet, meet the goals of the strategy. In turning to Slide 7, this is just an overview of and, of our allocation here. So on the far left you can see that the, the international stock portion is about 43 percent, of the portfolio. U.S. Stocks about 22 percent. U.S. fixed income of about 26 percent and, non-U.S. fixed income around 5.6 percent or cash balance of around, a little north of 4. it’s a little less than that today, but it’s probably higher than it normally would be, some of that is, is that we had, we did have some positions called away, and also were, you know, it’s nice to have a little bit of capitol in case some dislocation’s happening. Moving on to, to the next, slide 8, we can see here on, on the left side of the screen is the sector exposure. these rates are for the equity portion only, and what you can see here is, is financials, is, is the largest allocation at close to 22 percent. It’s a very diverse set of financials, followed by information technology, again that is a mix of semi-conductor related names, as well as software names. Followed by healthcare, which is predominately, pharma names, or, or medical technology names. Then we have communication services, discretion area and, and utilities, and materials that you can see, see the others on, on the slide there. Regionally for the entire portfolio, North America’s roughly half of the entire portfolio, followed by Europe ex-UK at about 27 percent. Asia Pacific, ex-Japan close to seven. Japan about 4.4. and then you can see the UK at 3 and Latin America at 2 and a half, and, and other at 2.2. Advancing to Slide 9, just a couple comments on our top 10 equity holdings. Which you can see here is the 2023 year to date price change, in U.S. dollars, as well as the 2022 price change in U.S. dollars, and then the far right you can see the weight of, of the holding, so, Enel this is an Italian listed utility, it had been global, mid-global leader. it has most of it’s business in Italy, and Spain, some other parts of Europe, but it also has, business in Latin America and a small part of their business is in North America. They are one of the largest renewable developers and, one of the largest electricity generating asset base within the world. So, 2022 was the top year given the energy crisis and, and that negatively impacted the, the stock, more so than the fundamentals, and so we, we added into that, over time as we felt like, the risk reward was very compelling. Generali is the second, the second largest holding. This is also an Italian listed company. this is a, what we call, a composite insurer. Peers would be Axa, Zurich and names like that in Europe. It’s a fairly diversified business. Somewhat 50/50 lives versus property and casualty insurance. Very good operators. if you were to look at the provisioning history, what you can see is that they’re consistently writing their insurance policies well, and you can monitor that by looking at, what the, what we call a prior year release. So, basically what this is, is they’d release a provision because they they over provision versus expected losses, and so that’s, you would rather have than have a company come out and report hey, we need to add to our provisions because we didn’t, we didn’t add enough to begin with. Pfizer is the third largest holding. Most people know who Pfizer is. this stock has been somewhat weak, not only for 2022, but also, for 2023 and I think it’s essentially just a COVID, a COVID victim, where it was a massive beneficiary. As this rolls off, it’s less attractive to investors just from an optical year over year earnings gross profile, but we think over the long term there’s some positive, real positives going on there, and, and eventually that that will be recognized by the market. Quickly going through some of the other ones. Cisco is next. This is the company probably familiar to everyone as well, as is kind of a networking, you know, large player. We think reasonable evaluation, good dividend growth, good cash generation, and we think relatively, reasonably valued still at this point. Novartis is another pharma name. This one is interesting to us in the sense that, you know, they’ve got an interesting pipeline where they got some interesting data recently on a cancer product, that I think was better than expected. the stock reacted positively to that, we also have, I mean, later in the year they will, they will spin off Sandoz which is a, a generic, a complex generics and biosimilar business. you know, remains to be see what, what valuation will be, but that is something that we think could be helpful for, for us, to have that happen, for, for the stock. Then we have Microsoft. Everyone knows Microsoft. a bit of recovery in 2023, following you know, near 30 percent, price decline in 2022. BHP is the Australian miner. This is a business that has been a very productive income generator for us. it also spun off a business, a while back which, which helped, with our distribution. Taiwan Semiconductor, I think most people know Taiwan Semiconductor. It bounced back some after having a pretty tough, 2022. We think the semiconductor chain is still normalizing and inventories are still clearing, but, generally speaking, you know, they reported, and, and the margins were a bit better than people expected, so, again, just a global leader in the space, and we think, we think interestingly valued. Meta Platforms, very strong performer in 2023 after having a pretty, oh, a meaningfully difficult 2022. We continue to like the fact that there’s a bit of, of, you know, expense, realization by management that, you can’t spend as much as you want for as long as you want. You, kinda, have to manage that. So, in simple terms, we think that, they found that light. and then lastly Mercedes Benz Group, at 1.8 percent. you know, this is a company we think that is in transition to be a luxury, a luxury player, in, in the auto space, but will be viewed slightly differently than a mass market car marker. They just pre-released their earnings about an hour ago, and so it’s well ahead of consensus, above even the highest, the highest estimate that was out there which is good because Tesla reported today and, and that stock has seen some pressure based on, on price reductions and margin pressure there. but those are just, just some tidbits in the top ten holdings. now I’d like to just turn it back to Adam who can walk for, through a few slides on, on performance, and then we can see if there are any questions out there, so, back, back to you Adam.

Adam Sparkman:        Thanks, Matt. So as we flip, here to Slide 10, you’ll see the performance of the portfolio as well, as well as of our benchmark which is a blend of the MSCI world and, and Barclays AG. Over the first 3 months of the year, markets have continued that strong rebound what truly began, early in the fourth quarter last year. during the first quarter, the fund returned more than 11 percent versus roughly 6 ½ percent for a blended index with some of that outperformance driven by a narrowing on the, the current discount. Generally, I think it’s constructive to consider the fund’s performance both in terms of current market price as well as on the actual NAV. as you can see, on a price basis, the portfolio is down roughly 7.8 percent since inception with the majority of our negative return being driven by that 10 percent discount to the NAV. But on an NAV basis, trailing 1-year performance to the fund has been roughly 500 basis points ahead of the index, and since inception performance, is nearly 300 basis points, ahead of the blended index on, on an annualized basis. Importantly, the, the current price to NAV dislocation that we’re seeing in the fund, I don’t think it’s specific to, to this portfolio, but more broadly reflects, the closed-in fund market, kinda, continuing to be oversold during a period of, of pretty prolonged volatility here. Now, flipping to Slide 11, it’s a bit of a similar message to the previous slide. As you can see, it was a persistently challenging environment over those, first, first three quarters of, of 2022, but we’ve seen a strong rebound in both equity and, and fixed income markets, with strong gains over the past 6 months. The rally has primarily been driven by renewed hopes that inflation, pressures, you know, hopefully finally peaked, and that’ll eventually lead to slower pacing of additional rate hikes by, by global central banks. I think I’ve mentioned on previous calls, but the month that I think really sticks out here is, is that September 2022. The actual NAV performance during the months was about 6 percent better than that negative 13.6 percent, market price, so that month alone really counts for, you know, more than half of the discount NAV that we’re seeing today. Flipping to the next slide, so you can see the price-to-NAV premium and discount history here. Price and NAV traded in line through much of 2021, but as liquidity in the marketplace, you know, became challenged, the fund is traded away, from intrinsic value more recently. If you think about a period, like, the end of 2018, early 2020, you know, those were other, other periods that the broader closed-in market saw pretty similar dislocations to what we’re experiencing today, and both of those, time periods, the gap closed pretty quickly once market sentiment improved. I think we saw, you know, some of that improvement during the first quarter. As I mentioned, I saw the fund, narrow the discount by about 3 percent, but with that discount in mind, I do think that the fund provides a pretty attractive entry point, for would-be buyers today. we’re certainly, you know, we certain want this fund to trade near NAV. We’re happy to see that, that gap closing a bit, more recently but definitely still a way to go, and that we hope by earning and paying a substantial distribution, as well as engaging in, in communication like this, we can continue to help guide, current and perspective shareholders. flipping to the next slide. So, one of the things that we can control is our monthly distribution and, we paid another one today of a little bit than 10 cents. Since inception, you’ll see that the fund has paid 20 distributions now at that same 10.4 cents per share, for total of $2.08 per share, since inception. when we, when we declare that initial distribution on August 25, 2021, it was at an annual distribution rate of 6.25 percent, on the IPO price. For an investor buying today, that same 10.4 cents represents a yield on costs of a little bit more than 8 percent day. So, again, you know, something we think is a very attractive proposition, for would-be buyers. slipping to the slide in the deck, so this table really just highlights the important of dividend income over time. Looking back over the past 150 years and segmenting the S&P 500, into 10-year periods, you’ll see that over time dividends have accounted for about half of your total return. in periods where price appreciation is obviously very high, dividends account for less, but you can also see that in a period, like, 2001 to 2010, you know, dividends accounted for more than 100 percent of your total return over the decade because price appreciation was actually negative. we saw a bounce back last decade, 2011 to 2020, where dividends only accounted for 16 percent, so depending on your outlook for, for the next decade, if prices, if price returns aren’t as strong as what we saw during the 2010s, we would expect dividends to, to be, to account for higher percentage of your total return. So, with that, why don’t we, Matt transition to a few of the Q and A, questions that have come in. So, let’s start with the first one from the audience. Matt are you confident that you can continue the current distribution as it is?

Matt Burdett:  Yeah, sure, thank you for the question. Look, I feel, like, at the current level, we feel pretty, pretty confident about, about the current level, and a couple of reasons why. So, for starters, when we launched this strategy or we funded it, at the end of July of 2021, high yield to worst was less than 4 percent, and now it’s over 8 ½ percent, so we have a fixed income market that’s notably better than it was when we first launched, and when we set the distribution then, you know, we did so with, with conservatism in mind for what we could, what we could really generate. so that’s one very different element, with respect to what we can do for the distribution. The other one is, you know, look, there’s still, even though markets, you know, have sold off some, they, you, you know, they’ve, they’ve recovered a bit this year, but, you know, when you look, when you look at the index level, that’s not telling you everything. Right?  So, the S&P at 19 times doesn’t tell you that everything is at 19 times. Right?  It’s telling you that’s what the index is based on the weights within the index in the, of the constituents. We can still find attractive equities, mostly internationally, to be fair, that have very strong distribution, dividend distribution profiles that not only are offering a high yield today, but the ability to grow the dividend over time. Now, you know, you always have to do your analysis and make sure that that growth is backed by, by cash generation and a strong balance sheet, but, we, we feel, like, you know, right now, based on the menu of options we have, we’re, we can, you know, that, that it’s supportive of the distribution at, at the current level.

Adam Sparkman:        Thanks, Matt. Kind of related to the same, the same question, with regard to, kinda, source of the yield, return of capital versus regular income. do you have any estimate on what percentage of the yield, you know, might come from both sources, through the rest of the year?

Matt Burdett:  Yeah, no, that’s a great question. I think it’s a, it’s also a question that helps to, I believe, to differentiate, the Thornburg Income Builder Opportunities Trust. So, let me just tell you a little bit about how it works. So, in calendar 2022, so the full, first full year of, of the strategy, our qualified dividend income was slightly over 50 percent. Okay?  So, so QDI, which is the best kind of income you can get, right, because it’s tax, the tax benefit is pretty meaningful. So, we try and target, you know, what we said was we would try and target 30 to 40 percent QDI, that’s what, that’s what we said when marketing the fund. So, we came in at slightly more than 50 percent. It, there are, you know, there are variables out there that, that will change the, that percentage, and we had no return of capital in 2022 calendar year. Now what happens is throughout the year, we’re generating income at different times throughout the year. Right?  There are, there are ex-dates that happen at different times in the year, and so when you, when you fast forward and get to the end of the year, you know, you, you’ve been able to build up QDI and ordinary income, you know, through fixed income interest, as well as through, through the option overriding, right, which, which is, is basically treated, like, from a tax basis, like, like, fixed income interest, so ordinary, ordinary income. So, it’s, you know, I think we’re comfortable stating that, you know, we stick to what we said, trying to, to minimize return of capital to the extent that we can. given it’s April 20^th, it’s very hard for me to give a, a point estimate now. I will say, you know, as we proceed throughout the year, our income character generally will improve, meaning more QDI, more ordinary income. So, that’s what we’re trying to do is provide, you know, we think, a high-quality differentiated income stress, so hope, hopefully that helps.

Adam Sparkman:        Yeah, great. Thanks, Matt. maybe pulling to a little bit macro, question here. What impact do you think recent pressures on the banking system will have on the broader market moving forward? And do you think that, that the events we saw in March, will ultimately push that, that towards a more accommodative posture?

Matt Burdett:  Yeah, look, I think that’s the key question, in terms of, you know, what – and, and like I said, I think in the, in the, the prepared remarks, yeah, this has an impact on the real economy. It’s not, it’s not just financial, asset, prices and, you know, the market has been absolutely obsessed with what the fed will do, and when I saw the market, I mean, you know, everything, fixed income, obviously, but equities, currency markets. And, you know, look, I think, I think the bank stresses that we saw, in, in particular Silicon Valley Bank, right, was, Silicon Valley Bank is not a normal bank. Okay?  It’s not you know, me and, and, and the questioner bank, most likely not the questioner, I don’t know that, but, you know, it’s not our deposits. These are, these are venture capital, and private equity firms depositing very large chunks of money into Silicon Valley Bank. Right?  This is you know, I would say a fairly privileged group of people or, or entities, I’d rather say. And so they come, you know, deposits come in chunks, but they also leave in chunks, and, unfortunately, for Silicon Valley Bank, you know, they, they, they mismanaged their balances. Right?  So, they took all these deposits and they bought long-duration bonds and, and did not hedge away interest rate risk which is, is somewhat surprising. So, I would view this, honestly, this is, this is not a regulatory failure. This is, this is the supervision failure, and, and an idiosyncratic management issue. Now it’s, there’s no denying that deposits, have been, have been declining, as people, you know, it’s more money floods into money market, you know, funds. but generally speaking, we’ve had, we’ve had most banks report in the U.S. so far, not all, but, but a good chunk of them. And look, some of the bigger banks, I think, are taking advantage of this, and it’s the smaller banks in the U.S. that are likely to, to face tighter and higher capital requirements. And, and as I mentioned earlier, I think it’s pretty clear that credit will, credit extension is going to be, tighter. Right?  Because, you know, it’s just a, it’s an added dimension of risk and, and, therefore, the propensity to make a long, is going to be lower and, and the bar to overcome to get their credit committee and whatnot will, will be higher. does it change the fed’s view? Look, it really still, it goes back to the, to the center of the universe, which is inflation right now and what happens with, with inflation. You know, the UK had inflation this week, and I think it came in at 10.9 percent if my memory is correct. That’s a really high number, and, you know we’re not there now, but, again, core inflation is still running, you know, nearly three times the target, so, you know, if I had to guess, outside of another, event, you know, banking event or other, that that probably raises rates 25 basis points, and then waits to see ’cause, again, all of this tightening happened, you know 475 basis points at 53 weeks is really, really fast, and all of that is gonna start working its way through the economy, and so the real effects will, will take time. So, long answer to your question, but it’s, it is complicated and, you know, what we’re watching this is to see how the real economy adapts to this new, this new, cost of capital normalization that’s happened. History shows that it can function just fine, but given we were at stuck at zero for so long, and there was so much capital sloshing around in, into, somewhat, you know, speculative areas, I think this will take time to work itself through, you’ll probably see other volatility events happen, and the good thing about the, you know, Income Builder Opportunities Trust is that, look, it’s a closed-in fund, so we don’t have worry out outflows. We can take advantage of these, of these situations, be it credit or, or equity, so, anyway, that’s all, I’ll stop there.

Adam Sparkman:        All right. Thanks, Matt. yes, turning it a little bit more, back to the, back to the port, portfolio, can you touch on, on the fund’s overweight allocation, the financials, and how much of that exposure is in regional banks?

Matt Burdett:  sure. Yeah, so, we don’t, we don’t have a lot of exposure in regional banks. We, we own one regional bank which is Regents Financial. It’s about a 60 basis point position, so it’s, it’s quite small. this is a good investment for us. So, over in the history of the fund, where we, you know, it had appreciated well, and we wrote options, call options are, and so that got called away and, and, you know, that’s okay ’cause it was, it was, kind of, at a price that we felt that was fine. We don’t, you know, most of our, it, it’s a pretty diverse set of financials, right?  So, if I go through the largest holding which is Generali, which I touched, touched on earlier, that’s our largest financial holding at 2 ½ percent, as I kind of, explained that one, so I won’t cover it. The next largest one is NN Group, which is a Dutch insurer. You know, they’ll, they’ll generate roughly north of 10 percent cash returns to shareholders a year. Mostly through dividend, high single-digit yield, and dividends back, you know, that is likely to grow, right, which is pretty powerful, and then we have CME Group. It’s the next largest position. This is, an exchange and derivatives exchange. Most people are familiar with, the Chicago Mercantile Exchange. You know, CME Group is, is a business that makes more money with volatility goes up, so, in a way, it’s somewhat of a hedge, against volatility, ’cause they, they, actually, their earnings actually benefit. And then we have Mastercard, JP Morgan, Mitsubishi Financial, ING Group, Legal and General, which is a, a UK, asset manager/you know, annuity player mainly. And then we have BNP Paribas which is, our French bank, which we think is actually, you know, a very strong, strong bank which, you know, they recently sold their U.S. business, Bank of West to, BMO, a Canadian bank and, you know, they, they sold it at a multiple, more than twice their own multiple, right, and they had their collective cash, $16 billion euro I think is the number, that’s gonna be returned to shareholders, so, you know, we have some other ones, and then we have some, some fixed income positions also, and financials, but, generally, my point is, we have small positions in Regents, who, by the way Regents is a, is a southern United States, southeast United States bank. they manage their balance sheet very well. They weren’t, they didn’t fall into the fed’s trap of, hey, we’re, we’re pouring deposits into your system, and then we’re gonna, you know, trick you into go out buying long-duration bonds. They didn’t do that. They managed their interest rate very well or interest rate risk very well. So, generally, you know, it’s diverse set of financial and, and, you know, given the selloff, and if you do your work and you find, find out that, hey, that the cash generation and the income production is gonna be, be okay with these names, then, then they’re pretty good candidates for us, so, that, that’s why it’s a high allocation.

Adam Sparkman:        Oh, great. Thanks, Matt. Well, we’ve got one more question and then, and then we’ll wrap up. How do you view the environment with respect to the options writing aspect of the portfolio, and do you expect to materially increase or decrease that exposure this year?

Matt Burdett:  Yeah, it’s a good question, and it’s one that, you know, to be honest, we’ll, we’ll have to see what, what volatility offers us. it’s very hard to make a prediction. I think what we, what we try and do is, is focus on, on the dividend income and the fixed income interest where we can, you know, we can count on that. you know, if get more volatility or if the market, you know, continues to find some support to go higher, that’s, that’s helpful, but, you know, we’ll, we’ll do our best to be mindful, around what we’re doing with the options. You know, when we first launched, we had a lot more option writing given, given where overall equity market values were. Right?  They, they were, you know at much higher valuations, so it made sense to write more calls. So not a great answer for you, but it’s honestly because you have to just, kinda, see what volatility, off, offers us then, so, but we’ll utilize it in the same way that we have since we, since we launched.

Adam Sparkman:        All right. Well, Matt, thanks so much for the time today. With that, we’ll wrap it up. Everyone on the call, thanks for joining today, making it as interactive as you did. With any follow-up questions definitely feel free to reach out. We’re happy to, to chat, dive into the portfolio or address any, any other outstanding questions. Thanks so much.