Pearl Diver Capital has pioneered a rigorous methodology for identifying investment opportunities, and fundamentally analysing each asset of the underlying collateral pool and the bond’s structure.
  • 1Uncover Investment Opportunity
  • 2Initial Analysis
  • 3Detailed Fundamental Credit Analysis
  • 4Detailed Quantitative Analysis
  • 5Approval & Purchase Process
  • 6Ongoing Monitoring

Uncover Investment Opportunity

  • Broad and deep relationships with sell-side contacts
  • Extensive relationships with banks and other holders looking to exit structured credit
  • Significant market presence in CLO markets

Initial Analysis

  • Test relative trading value of opportunity
  • Initial top-down fundamental credit analysis
  • Evaluate initial underlying portfolio credit metrics
  • Model returns on conservative, broad-market assumptions
  • Evaluate overlying credit protections and cushions

Detailed Fundamental Credit Analysis

  • In-depth credit analysis of “tail-risk”: industry, company, structure
  • Proprietary Pearl Diver re-rating algorithm, that tests & adjusts underlying ratings
  • Credit analysts methodically re-rates each underlying asset based on algorithm and experience
  • Credit analyst takes a view on manager/servicer and portfolio outlook including default rate probabilities

Detailed Quantitative Analysis

  • Detailed cash-flow and stress test analysis using portfolio specific Pearl Diver assumptions obtained from fundamental credit analysis
  • Detailed review and analysis of indenture documentation to accurately model cash flow waterfall

Approval & Purchase Process

  • Pearl Diver’s internal Investment Committee, evaluates investment or divestment opportunity with unanimous vote required for decisions
  • Debate, does the investment meet goals: Capital Preservation & Superior Risk Adjusted Returns – opportunity may be rejected (8 in 10 rejection rate)
  • Execute buy/sell investment

Ongoing Monitoring

  • A proactive approach is taken to monitoring each investment on an ongoing basis
  • Is the investment meeting goals: Capital Preservation & Superior Risk Adjusted Returns
  • PDC quarterly report is produced for each investment
  • Macro hedges considered to protect downside from time to time