Tim Buckley: Sarah, before this crisis started, your fixed income team was conservatively positioned. You guys talk about having dry powder. You didn't like where the markets were. You were conservatively positioned. But what's your team up to now? Are they deploying some of that dry powder?
Sara Devereux: That's right. For the better part of a year, we've been underweight in credit. Our feeling was that valuations were too tight based on where we were in the cycle. And for that reason, investors were not getting compensated for the risk they were taking on. Now, however, that has changed. In our investment approach, we start by looking at two different sleeves of risk. We start by looking at liquidity risk and then we look at fundamental credit risk. In terms of liquidity risk, there are several very high-quality asset classes that are currently trading under fair value. We like agency mortgages, off-the-run Treasuries, and TIPS, inflation-protected securities. When it comes to credit risk, it is absolutely a good time to be looking at the market. Valuations are much wider and more attractive. However, I would say selection is critical.
Tim: So, the baby's being thrown out with the bathwater but it doesn't mean you should go for anybody.
Sara: That's right.
Tim: There will be companies that they could very well fail in this crisis.
Sara: I totally agree. And so our fundamental credit process is to start with the best names, consider them from a liquidity perspective and a credit perspective, and then there will be certain names we won't be involved in as a result. We try to stick to the most clean names.
Tim: So your team's been busy.
Sara: We've been busy.
Tim: And having walked the floor and talked to a number of them, a number of them are excited about the opportunities they're finding, a lot of the names they're finding out there.
Sara: That's right. We do feel like there's a very rich opportunity set in the market right now.
Tim: That's great. Well that should be great for our investors.
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