Jeff Schwartz

And the emergence of more and more non-bank private credit funds have been lending very aggressively to smaller businesses or businesses in the middle market.

That goes back two, three, five years and more leverage in this part of the marketplace

should create opportunities for distressed and special situations investing.

So I think the next three to five years will be an important time for funds of that ilk.

Exactly.

So we raised our first distressed special situations fund coming out of the pandemic.

We came to the conclusion and we weren't entirely right because we didn't realize that the government was going to infuse so much capital into the capital markets to support these businesses.

But we thought there'd be a number of businesses that would be challenged coming out of the pandemic.

And our primary investment vehicle was our SBIC direct lending vehicle.

So we didn't want to put more challenged companies, more challenged credits in a levered, licensed SBIC fund.

It wasn't what we told our investors we were going to do, and it wasn't what we told the SBA we were going to do.

That fund was intended to invest in healthy, growing, performing businesses, not businesses facing challenges.

So we went to our LPs.

We hired a former bankruptcy attorney by background to help us run that fund.

And we went to our LPs and said, we think there's going to be a very significant opportunity here for distressed and special situations investing.

And that was in 2020.

That fund has performed very well.

We've made money.

Twelve or so investments have generated north of 30 percent gross and mid 20s net IRRs and have made some investments as distressed buyouts, some investments as secondary purchases of loans from from banks.

And we think that that marketplace is really ripe for continued investment activity.