OUR PROCESS

HOW WE WORK

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.

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

The Team