MA Financial Group Limited ($MAF)

MA1, the Credit Income Trust and MA2HA, the Credit Portfolio Notes for the March quarter of 2026. Please take note of the important information and disclaimer on Page 2 of the presentation. My name is Frank Danieli, and I'm joined by Elliott Etheridge, who is Head of Portfolio Management in our Global Credit Solutions platform. As many of our investors know, I head our overall Global Credit Solutions platform, which our diversified private credit investing business here at MA Financial Group. You can see on Page 3, our private credit at MA financial update, which I won't spend too much time on, as I think most of you are aware. But MA Financial is an ASX-listed alternative asset manager based in Australia and in the United States. We are an institutional platform with about a $1.5 billion market capitalization, the advantages of scale, managing now over $15 billion in total assets and a substantial and highly experienced team that includes around 40 investment professionals focused on private credit supported by an asset management platform of over 200 people and the broader group at MA Financial. We always like to highlight and start these presentations by talking about the things that really differentiate us and they are our alignment, our focus on proprietary origination and our workouts capabilities. At MA Financial, we believe in co-investing in our funds with our clients. Today, we have about $240 million co-invested by the firm and staff in our credit strategies. And even where the firm invests the firm is about 30% owned by staff, so it's very close to home for us. As we're investors do, we really care about the types of loans we're originating and how we're putting them together. That's why we have created a lending ecosystem that allows us to see over $30 billion a year of deal flow opportunities that we can selectively curate from for the benefit of our funds. And finally, in credit, we always say, it's about avoiding losers and not picking winners. Our job is to, first, make sure we're not putting ourselves in a difficult position when we're making credit investments that we've got good asset backing, security, other downside and credit protection features. It's also important we construct our portfolio as well in a diversified way and that we're active on risk management. But you can't get everything right and that's why workouts capabilities are so important. Workouts capabilities means, do you know what to do when a particular loan doesn't quite go the way you plan, can you go in, roll up your sleeves and get your money back. And we've had a great experience there. The reason we've got that IP is because within the MA Financial Group, we have the Moelis Australia investment banking platform, which is Australia's leading restructuring adviser, and our strategic alliance partner, Moelis & Company has the same position globally. So that's MA Financial Group and particularly our private credit platform. For today's update, we're going to break it into 2 parts. We're going to have a portfolio update for MA1 and MA2, which Elliott will run through shortly. And then in part 2, I'm going to provide some thematic observations on the private credit market, and this comes from the GCS quarterly investor letter that we're releasing this week.

Thanks Frank. I'll start with a quick recap on how to think about MA1 and MA2 on the slide, the overview of MA1, MA2. MA1 is our listed investment trust, provides exposure to MA1's or MA's, full spectrum of private credit. That's $7.1 billion of assets across asset-backed lending, corporate lending and real estate credit what we call direct asset lending. MA2, on the other hand, is a listed note structure. So it's designed to be more defensive with a capital buffer. MA2 provides exposure to a narrower subset of credit, asset-backed and corporate only with no direct real estate exposure. The other way to think about these products is how returns are generated. MA1 is a total return product so it can outperform its 425 bps target over the cash rate. Whereas MA2 is more straightforward. It looks to deliver a fixed margin of 325 over, and that's over 1-month BBSW. The lower return reflects a more defensive structure. In fact, there's added protection from a capital buffer and income priority. And what does that buffer mean in practice? What it is, it's the underlying portfolio would have to decline by more than 5% before noroholder capital is impacted. That's the protection, the buffer affords. It's -- and look, we view that protection is extremely valuable, especially in the context of a portfolio where a lot needs to go wrong before you see those types of declines. So you can see here on the next slide, in a little bit more detail on how the income priority and capital buffer features work. On the next slide, we have a brief snapshot of the underlying portfolios. At a high level, both portfolios are well diversified. MA1 has now over 240 positions with a very low average position size. That means no single exposure can materially impact overall outcomes. MA2 is slightly more concentrated, but still highly granular with an average position size of less than 1% of the portfolio. Across both portfolios, credit duration is relatively short at between 14 and 15 months. And importantly, capital loss experience remains very low. Across MA1's underlying strategies, this sits at about 3 basis points. And for MA2, which is minus the real estate exposure, capital loss experience is 0. That's really a reflection of the underwriting quality and the structural protections that are embedded in the portfolio. Turning to trading performance for MA1. On average, since inception, MA1's price has traded broadly in line with NAV, and that's despite periods of volatility in broader equity markets. More recently, you can see MA1 has traded at approximately 2% to 2.5% discount to NAV, which in the context of current levels of uncertainty, we see is relatively resilient. In fact, we'd characterize the discount more as a reflection of market sentiment rather than anything specific to the underlying portfolio. We remain confident in the net asset value of MA1 -- and so I think view any discount is potentially not reflecting the underlying asset value. MA1 continues to deliver on its objective of delivering a consistent monthly return for investors. And the creative portfolio continues to perform well. We'll talk more later about what credit performance indicators are showing. Those indicators are how we really zone in on the underlying credit performance. Investors should also take comfort and the fact that we have a third party reviewing our asset valuations quarterly. This helps ensure all assets are reviewed at least annually and even more frequently when needed, really just giving additional confidence in that NAV. So that's on the investment side. Delivering performance is clearly important and supporting trading outcomes. We're also focused on other levers within our control, including capital management and investor engagement. As investors will have seen in the prospectus, we have 3 tools, 3 capital management mechanisms that we can look to use for MA1. These include on-market and off-market buybacks. And as investors will have seen announced, we have put a framework in place to undertake on-market buybacks in light of where the unit price has been trading at a discount. We're confident in the NAV and view that this buyback mechanism as sort of in the best interest of investors, in particular, as it goes to being accretive to NAV for those remaining unitholders. Switching over to trading performance of MA2 trading has been relatively consistent since issuance last year. Actually, in fact, over the first quarter to 31 March, the notes have been trading at around par. It's only recently we've seen some weakness in that trading price moving as low as $0.96. But similar to MA1, we view this as a deviation from the fundamental value of the note, in particular, given the capital buffer and the pull to par dynamic given the note structure with a hard maturity in December 2032. As those notes move closer to maturity or the call date, price should naturally converge back to par assuming underlying credit performance remains stable. Most importantly, we're not seeing any signs of stress in the underlying portfolio. Credit performance remains strong and there are no workout positions in this portfolio. And we talked about the buffer structure, which is designed to provide a high degree of capital protection for noteholders. So from our perspective, the recent price movement is really reflective of broader market dynamics rather than any change in underlying fundamentals. Looking at returns now. On this slide, we've set out a summary of returns to 31 March across both MA1 and MA2. Starting with MA1, the returns you see here are presented in line with FSC guidelines, which means they include the impact of reinvesting distributions. So they'll appear slightly higher than a simple noncompounding view. If you were to look at it on a simpler basis, the return since inception is running at roughly 460 basis points over the cash rate. Looking at MA2, this continues to deliver a margin of 325 basis points over BBSW, and that's consistent with its regular coupon. And that's really the key distinction between these 2 products. MA1 gives investors exposure to total return, so there is potential for some outperformance in margin over time. With MA2 is designed to deliver a stable fixed margin. And of course, investors benefit from that capital buffer. Looking now at portfolio diversification. I see here on the left, MA1, both portfolios, MA1, MA2, very well diversified. You can see those charts on the bottom really show the granularity of the book. An average position size of under 1% for both portfolios. 246 positions across MA1. You'll see here MA2. MA2 is focused on a narrower subset of credit. And as a result, the portfolio is slightly smaller, 137 positions versus 246. And now that -- the reason for that is when you dig in and look at what MA2 is exposed to, it's minus the direct asset lending exposure. It also has a narrower subset of global assets, and it doesn't invest in a small portion of high-yield strategies that MA1 is exposed to. And so look, that's really done intentionally, MA2 being a more defensive product with the capital buffer and MA1 offering that total return with the ability to outperform the target. Looking now at how those portfolios are comprised across the 3 different credit segments. You can see the core of both portfolios is asset-backed lending, which we like for its granular collateral in the underlying loans. And you can see here, MA1 does have that 20% subsegment of direct asset lending, which is the real estate that MA2 is not exposed to. Looking now at a few key metrics in each of the underlying portfolios, starting with asset-backed lending. A big focus of why we like asset-backed lending, in fact, is that granularity in the book. You can see here 1.4 million underlying loans in the MA1 cohort and then just over $800,000 for MA2. A key part of how we underwrite asset-backed is actually asking -- that's asking ourselves in the underwriting process, how much has to go wrong in our assumptions for that position to lose money. A key metric we look at to measure that is this credit enhancement to loss rates. And you can see here at around that over 16x credit enhancement to loss means a lot has to go wrong relative to what we've seen in the past for loss rates in these assets. Looking at direct corporate lending, our core thesis here is really making moderately leveraged loans to high-quality businesses with senior secured and with covenanted protections. Senior secured, really important. Being first in line to get your money back when things go wrong is critical in terms of maximizing recovery. A big part of controlling those situations appropriately and being able to step in at the right time is actually having financial covenants. And 90% of our book, whether it be the corporate underpinning MA1 or MA2, 90% of those loans have at least one maintenance covenant as it goes to those financial covenants. And here on direct asset lending, a few key metrics on the real estate book, which is only relevant again to MA1, 91 investments, average loan-to-value ratio of 70% and you can see an average position size of $25 million. Looking here at portfolio composition and some of the various credit subsegments, 38 different subsegments for MA1, 28 for MA2. There's a real high degree of diversification even when you dig into those various credit subsegments. Private mortgage warehouses and RMBS to auto loans and then stepping into some of the more specialty areas of legal disbursements, medical financing, supply chain finance, which really give you a broad exposure to different return drivers across the real economy and those asset-backed exposures. Briefly on security and ranking, the vast majority of both portfolios are focused on senior secured and structured secured lending and that forms around 98% of each book. Looking at geographical and development exposure, MA1 sits at around 7% of the book with development exposure. MA2, of course, doesn't have that real estate exposure. Therefore, development exposure is 0. And then looking at geographical exposure, MA1, 17% of the book is exposed to the U.S. really broadening the opportunity set of investments and adding to the diversification of that book. For MA2, that geographical focus is a lot narrower and sits at about 7%. Turning now to credit performance, arguably the most important part of the update. Overall performance remains strong across both portfolios with the vast majority of both portfolios performing as expected. In fact, MA2 has no exposure to workout or enforcement positions. And for MA1, that exposure is very small at under 2%. And of course, that workout bucket is the primary focus for us in terms of actively managing those positions. On the next slide, we can see here that around 5% of the MA1 portfolio is in 90-day plus arrears with default. But it's really important to be clear here. These arrears don't necessarily correspond to losses. In fact, a large proportion of these exposures relate to real estate loans where the timing of repayments can vary, but there's still very strong asset protection in terms of recovering value. In many cases, what you've got with those real estate projects are things like timing delays rather than deterioration in the actual asset quality. An interesting statistic here is indirect lending positions in those direct asset lending positions where you've got 90-day plus arrears or defaults. The weighted average loan-to-value ratio sits at around 80%. So really offering a substantial buffer of asset protection. So looking at credit ratings now, we often say we don't invest on the basis of credit ratings, but they do give an indication of broad-based risk. You can see MA2 there on the right with a more defensive portfolio, skews closer to that BBB end of the range, whereas MA1 with a slightly different underlying portfolio exposure sits in between BBB and BB. And that makes sense when you look at the ability for MA1 to earn outsized returns above its 4.25% target. I'll hand over to Frank now to take us through war games, which is our quarterly portfolio stress testing exercise.

Thanks, Elliott. We've always stress tested our portfolios at MA, and we now do this on a quarterly cycle, looking at all 246 of those underlying assets and how they might perform given different economic factors in recessionary scenarios from moderate, severe through to crisis scenarios, looking at historical data for those benchmarks. And then we also look at investment-specific and discrete risks. And why we do that second phenomenon is that some of the risks we face aren't macroeconomic in nature. They are things like the nuances of particular industries, the nuances of the structures we're investing in. They could be company or asset-specific risks, evolving real-world risks, whether that's AI, tariffs, the impact of trade wars or even real wars, oil and energy price shocks, supply chain inflation, things that happen in lifetime. And then, of course, we look at more esoteric risks, things like what happens if there's a fraud in the value chain. We look at all these risks and we prepare our teams for what happens in these scenarios so that we don't need to predict the future. We can be prepared and have a break the glass here plan in respect of all our assets just in case the cycle does turn. What you see on the next page, we actually show the illustrative stress testing outcomes for the different portfolios. So for MA1, that's for the entirety of our credit income fund suite there you can see. In a really stressed scenario and severe sort of recessionary scenarios, mid-1% levels of principal impairment risk in crisis scenarios up to 4. That compares to an income yield at the moment exceeding 8%. Now of course, in these scenarios and given we're heavily invested in these strategies ourselves, we'll be doing whatever we can to mitigate these risks, but the important thing is that we're preparing ahead of time. What I'd highlight, in particular, in respect of MA2, that narrower subset of a fixed income replacement product in the portfolio as well as the benefit of the capital buffer, the buffer 5% actually is in excess of where we see that principal impairment risk. So it does, we think, provide the capital preservation features that it's intended to. On the right-hand side of the page, we also show -- we look at 27 different discrete and investment-specific risks, and we show the range of outcomes there that you can see. I think it's really important that fund managers undertake this kind of stress testing and communicate to their clients about it. We can't get everything right, but our job is to deliver consistent income with an element of capital preservation and make sure that we're prepared for different conditions. And that's what this stress testing that we do is all about, and we do it now every quarter. All right. So now let's turn to some thematic observations on the private credit market. These come from the quarterly investor letter that we've released this week in respect of our Global Credit Solutions suite, which we've been doing for some time. We always like to talk to investors about what we're seeing lifetime and how we're thinking about the market. The title of this quarter's letter is what do you mean private credit? And it comes from a discussion that I had while traveling recently with one of our investors. The investor asked me about what's going on in private credit, in particular, is the tide going out with all these loans to software companies. And it sparked a really interesting conversation, which is private credit doesn't mean just sponsor-backed lending to technology companies. It's a much broader ecosystem. In fact, as you can see on the next slide, sponsor-backed lending, which is sometimes called leveraged corporate credit, is only about 15% of the total private debt universe. But in global discourse about private credit, it's almost become synonymous with the term. But private credit is so much more than that. 85% of the private credit opportunity is not just providing loans to help finance private equity buyouts. I think Australian private credit is a good representation of this. As you can see on the right of the slide, we show the diversity of all the different things that we do in private credit. Now a few years ago, when people were talking about Australian private credit, they also use private credit for a term that was essentially synonymous with just the development finance component of real estate credit. Again, that's just a really small part of the overall ecosystem. And the important thing is that you have a broad-based capability with a diverse investable universe. Now why this is so important is that if you don't -- if you have growing capital base, but only a narrow sector focus, you can only fish in a small pond, then what do you tend to do as a manager? What's the incentive? Well, usually, fund managers are in the business of giving money back to their clients. So what they do is they keep lending. They keep investing. And so first, they'll trade off their pricing, then they'll start giving up on terms, which is why in some narrow part of the market, again, you see things like 85% covenant-light loans. And then finally, they'll give up the sacred rights of lending the structural protections. If that's all happened because you're only again fishing in a small pond, then what do you do? You say, well, if my terms are sort of looser and I don't really have the right pricing, then I better just lend to quality. And what better than of a quality business to lend to than a software company. Think about it, mission-critical system of record, recurring revenue, high switching costs, cash generative capital-light business. I mean that sounds actually like a good borrower, especially if you're doing it a low loan-to-value ratio. But in credit, you can't have too much of a good thing. In credit, you need to have broad-based exposures with portfolio exposed to many different things that correlate differently to each other. A case in point is what you see globally around the exposure of some private credit funds, especially these things called BDCs in the United States, to software and technology borrowers. BDCs have about 22% exposure on average to this cohort of borrowers. And it's not that lending to this cohort is bad. In fact, in our MA1 suite, for example, we have about 3% exposure to software and technology borrowers. You can find good quality borrowers. But if you have too much of one thing because your incentives have not been structured properly and you don't have a broad enough investable universe, then actually you're not doing credit well. In credit, you need to have robust investment selection. You need to have empowered portfolio management, to have a range of different things in the portfolio and balance your concentration and exposures, and you need to have active risk management like what we've talked about today. That's really what's going on. That's what we see in the market. We think there's going to be a big change in the way investors look at different types of private credit funds and really what's under the hood. But to know what's under the hood, you have to have good disclosure. And so that's why we've been doing what we can to put out really good quality disclosures across not only MA1 and MA2, but our entire private credit suite. We think that transparency is in 3 layers. What's in your portfolio, like what Elliott talked about earlier. Where are the risk-adjusted returns coming from? So these are some of the disclosures Elliott had around things like security structures, the credit quality of the underlying portfolio, the performance dynamics of it, the true drivers of each of the underlying asset classes as well as disclosures around things like leverage and liquidity and so on. And then finally, you need to have structural and governance transparency. That's talking to investors about how you do what you do. That's why we spend time doing thematic observations like this, while we put out a lot of collateral about not only our funds, but our investment process, so investors can understand what we're doing. And of course, that also goes to disclosure around the governance environment of us as a manager and things like fees. We think there's 3 simple questions that investors need to ask. Firstly, do I have sufficient visibility into the portfolio to make an independent assessment of my exposure? Next, am I earning a genuine private markets premium? Is that premium sufficiently above what liquid markets would offer for an equivalent risk? Private credit is about a fixed income replacement where you get a premium because of proprietary origination and yes, trading off some degree of liquidity, although structures like MA1 and MA2 do help because they trade on an exchange and provide that element of liquidity. And then finally, can I trust the manager to act as an empowered fiduciary aligned with investors in making their decisions, generating their returns and protecting capital. And that's really what we try to put out in our materials. That's why we do things like I've shown on the next slide, around our governance and risk management transparency, talking about how we do our valuations, having independent reviews of not only valuation, but things like our credit rating frameworks and of course, putting out good fee and structure disclosures. I won't go into this in full detail, but the point is we think this is really going to be something that investors focus on from here. On the next slide, I've also shown something that we've had in our updates for some time. But this discussion highlights why they're so important. We like to talk to you about our investment process, things like our RED team, our analytics, the governance structures that we have, the team structure where we split our investment and our portfolio management teams into 2 distinct cohorts and why as well as things like our what you have to believe fundamental approach to credit. We want you to understand how we're doing what we're doing. We've also been doing this in respect of events. We recently hosted our MA Alternatives Summit talking about thematics that we're seeing across the alternatives landscape as well as a private credit webinar for a range of clients. Similarly, we're hosting this quarterly update, as we always do, for MA1 and MA2 investors, and we're putting out a range of not only monthly reporting, but more detailed quarterly reporting that as you see in the reporting goes line by line into what's actually within the portfolios, a range of other publications, investment insights and then these thematic events and presentations. We really want to be communicating with you and talking to you about what we're actually seeing out there on the ground, and we're always open to feedback. Please do feel free to reach out. Or of course, as it's now time in the webinar, feel free to ask your questions now, and we'll share our views.

Excellent. We've had a few questions come through so far. But just to remind everyone, you can use the Q&A function on the Zoom if you'd like to type in your questions, and Frank and I will answer them. Let's start off with what we've got so far. So the first question here, why didn't MA1 undertake a buyback in the March quarter? So this one is on our capital management tools. Look, the short answer is that when we made the decision, it was in early February, MA1 was actually trading at or above NAV. And so taking a step back, there's the 2 capital -- there's the 2 buyback mechanisms that we have, the off-market buyback and the on-market buyback. Now although the off-market buyback happens, there's a quarterly cadence to it, that decision is actually made every quarter based on a range of different factors. It is an ASX process. So the formal offer goes out to investors. And there's a time frame of about 6 to 8 weeks between the quarter end and when we make that decision. And it so happens that for this quarter, for the March quarter, the NAV of MA1 was trading strongly in the months leading up to and actually at the time we made that decision, it was trading at or above NAV. And I suppose in that scenario, I mean, unitholders really are -- they have the option to sell on-market. And therefore, the buyback really doesn't give them any real extra value to selling on-market.

I would say, obviously, later in the quarter, there was a lot of volatility, but we can't predict the future. And we don't know if there's going to be volatility, market wars, things happen. And so we made that decision at that time. I would highlight earlier this week, we've announced an on-market buyback framework. And part of the mechanisms that we put in the prospectus is that we have a range of tools, mechanisms that we can look to use where appropriate and where it's in the best interest of unitholders to be able to support the liquidity and trading dynamic of our listed vehicles, in particular, MA1 as a listed investment trust depending upon the market circumstances. And so what we've done now, given the volatility that is out there in markets is to enliven that on-market buyback framework. I would highlight, I think that the overall trading and certainly the performance of the underlying credit of the vehicle has actually been very strong, and we're actually pleased with that. I think there's been a lot of volatility out there in things that trade on stock exchanges. And these vehicles have actually held up relatively well when you take a step back and have a look at that. But obviously, we think that the net asset value is correct, and we have a whole set of processes around reviewing that. And given the performance of the credit, we would hope that there'd be that gravitation to net asset value over time, and we'll continue to do things beyond simply the mechanisms, including investor engagement, things like this, meeting with investors, talking with investors, talking with research firms and so on that cover the vehicle, it's a lot broader than just the mechanisms.

Right. Next question. The 90-day arrears and defaults figure looks high at more than 5%. Should we be concerned? I suppose first to clarify that this figure does relate to MA1, 5.9% and 90-day plus arrears or default. MA2, in fact, doesn't have any positions in that group. But I suppose importantly, as we talked about a little bit earlier, just because a position is in that bucket of 90-day plus arrears or default, it doesn't necessarily mean we expect to lose money. In fact, only a small portion of that 5.9% is in what we call workouts and enforcements. What that means is that the positions that aren't in that bucket, while we're watching them more closely, we really should expect to recover those positions through the normal course or through the passage of time really. The other thing to point out is the composition of that 5.9% makes the big difference. In fact, the vast majority of those positions, as we pointed out, they are real estate related. Very different, we'd say, from a corporate position in default where the real estate -- real estate in real estate, often there's things like project delays, sale process takes longer than expected. And so it pushes that position into a state where repayment does take longer. But because there's asset protection, hard asset value from the property, the recovery we expect -- we would expect full recovery. And that's very different from a corporate position where the real intrinsic value is tied to how the business is performing from a cash flow perspective. I mean in corporate defaults, it usually means something has happened that severely impacts the cash flows and therefore, your ability to recover. And so when we look at our book, there are -- today, there are no corporate positions in that bucket of defaults. They all relate to asset-backed or direct real estate positions.

Well, asset-backed is 0.7% in MA1, 0% in MA2. It's actually all in the direct asset lending, which is, again, that real estate credit and relates to the nuances of that asset class and the collateral there. Probably one final thing on that specific asset class, I think we had on the slide, but you see historically, I think we've done 367 loans since inception over I think $6.7 billion of lending in that asset class since inception. The vast majority of those loans returned. I think 15% or 4% of them did, in fact, default in the principal capital losses we showed in there in that asset class at 5 basis points. So actually, the performance has been very strong. That's just a function of the nuances of the asset class.

Another question here around the market and deployment. The question is, given continued growth in private credit, how do you think about pressure to deploy and investment discipline?

I might say I've always thought that if we were right about our thesis on private credit, which is that the -- what you should be doing is a fixed income replacement. I don't like when you hear the idea of equity returns through debt. That's not really our brand of private credit. What we're trying to do is to create products that have characteristics like traditional fixed income, where there's sectors of the market where it's not efficient for banks to be the lender and where a private solution can be better than what could be provided in the bond markets or things that publicly trade. And so that's what we're trying to find, and we want to capture a premium for doing that. So that's kind of our model of private credit. That's a very, very large opportunity set. Depending on whose figures you believe, it's trillions, it's tens of trillions of dollars of opportunity set. So if you believe that, the problem is not capital, like AUM gathering. The problem is good quality origination. That's why we've invested in our lending ecosystem, not only the depth and breadth of our team, 40-plus investment professionals across all private credit, but also the platforms that we have that are there to originate assets, the financial infrastructure we own, which is a very powerful source of data intelligence and has a halo effect for origination, the strategic partnerships we do to access deal flow on an exclusive or otherwise very difficult to get basis. They're the kind of things you need to do. We have this really wide funnel. We're always investing and growing that funnel to see more opportunities, and then we can be selective from there. And I think that we mentioned in the thematic section, but the idea as well that you must be able to look broad-based I think that monoline credit, like only being able to do one thing as a firm, in my view, is dangerous in credit. You actually need to be able to take a broad-based view to balance out your portfolio to change your exposures. If you look back, say, in MA1 since listing, the portfolio composition has changed, and that's intentional. It's part of delivering that consistent low correlation income for different conditions.

That's right, Frank. And that really goes to portfolio strategy and portfolio construction. We've got 3 types of private credit that we can go across, asset-backed direct asset and corporate, not having to deploy in any one vertical is really important. I've got another question here on market conditions. How do we think about the impact of a recession, ongoing conflict in the Middle East, supply issues? I suppose the question is what is the impact -- what do we think the impact is on the portfolio? Are we worried? I think we'd probably start off by answering that. Key thing for us is portfolio construction, not being too concentrated in certain areas and being well diversified to not be overly correlated to the same factors. And so I think that's probably the first point. The -- and then I mean just directly answering the question, when we look across our portfolio, the range of exposure or positions that have exposure or direct exposure to oil prices, so industries like logistics, transport, chemical manufacturing, we just -- we don't have any direct exposure to those commodity price movements. And so then what it really comes down to is the secondary impacts or the impacts on the broader macro as it goes to what we see. And I suppose a real key part of our underwriting process as we talk about is what do you have to believe. We really underwrite on the basis of understanding how much do things have to go wrong, how much does unemployment have to go? How much does GDP have to come down before we actually see impairment or losses in the portfolio. And so when we design the portfolio, we underwrite these positions, we create -- we make sure there's enough buffer there. And that's a real critical piece of how we protect ourselves in these situations. So we're not really trying to predict what's going to happen in the economy. It's more making sure that regardless of what happens, there's enough buffer there.

There's always something. So you can never predict it and you're just going to make sure you prepare well, which is what Elliott is talking about.

The next question here. There have been some recent fraud cases in private credit. How does MA think about these types of risks in the funds?

I think we've always said that there's 3 risks that we face when we lend. There is credit risk, structure risk and fraud risk. The credit risk is what everyone talks about. In fact, it was like the last question, it's about what happens quantitatively at the macro level as well as qualitatively in respect of individual assets, businesses, borrowers that drives their performance. And if you do -- there's lots you can do there. You look at historical data, you can assess and lend on certain terms that make sense. Most people stop there. They stop with the credit risk. We spend a lot of time on structure risk as well as fraud risk. The structure risk is making sure that you've got the right terms and features in your documents that give you exposure to what you think you have and that they're robust. We referred to earlier in one of the slides around the idea of sacred rights of lending. That's really important in protecting your position. We're in the business of avoiding losers, not picking winners. The structure is very helpful there. And finally, fraud. Fraud is a spectrum. So fraud is a spectrum from misrepresentation, overstatements of things, all the way to absolutely egregious behavior. And fraud, you can manage credit risk, you can control structure risk, but you must avoid fraud risk. That's the idea. And so we try and have a range of things that we do to put ourselves in a position where hopefully, that is mitigated. But there can always be bad actors out there in the world. The bigger that you get, the more diversified you get that risk is real out there. What you want it to be is a very small exposure as well even if something bad does happen. That's why portfolio management is so important, making sure that you control your position size and your different exposures where you have very different things in the book if you're in the business of lending. There are some things which we can talk about that we actually do practically around how you mitigate that particularly more egregious styles of fraud and some of the features of the underlying documents that we do. So they can include things like you want independent trustees, you want consistent independent trustees across all the -- if you're doing asset-backed lending across all the facilities of the business, you want to do things like audit, file audits, periodic audits, cash audits, things called AUPs or agreed upon procedures. I think people due diligence often gets overlooked a lot, knowing the backgrounds of people associated with companies, assets, borrowers, counterparties is really important actually. Using things like expert networks, having a broad-based network yourself where you can get real on the ground relevant intelligence about counterparties. And then it's not just work and inception, it's actually the ongoing monitoring. So using your analytics, data analytics, more broad-based research to make sure that you're continually testing and watching for these things. And we haven't always got it right, but where we haven't got things right, we actually have had a very good track record of rectifying our recovery.

Look, that brings us to the end of the questions that we've got in. But look, thanks, everyone, for joining, and we look forward to continuing to keep this dialogue open.

Thanks. And I'd say just finally, thank you for your time. We had a few slides on investor engagement. We really do feel very strongly about that. And if there's anything else that investors are interested in, would like to know, I think that we could include in future updates, whether our monthly reports, our quarterly reports and the portfolios or these webinars, please do reach out. We're always looking for that kind of feedback. Thank you for your time.

Thanks a lot.