In its recent second-quarter conference the corporation answered some important questions by the analyst which sends out a clear message to the shareholders in terms of what to expect from the corporation. The first major question that the corporation answered was about its hefty management and performance fee. The recent terrible performance by the company does not justifies its fee which is only warming the pocket of its managers well while the shareholder get only meager earnings.

The corporations’ future COO answered this question and said that this was not true. He said that the corporation has maintained a constant fee for quite some time, and while the corporation’s performance is low, its performance is better than its peers. However this statement by the future COO can only be limited to a specific time as there has been an increase of 18% in the management fee as compared to the last quarter. The management fee went up by 28.6% of the total investment income, which is 1.6% higher than last year.

But it would not be wrong to say that the fee has benefited the management more than the shareholders as the fee doesn’t amount to dividend and as far as the benefit to the shareholders is concerned they get $1 for every $0.62 which the management gets. Second question which was raised was regarding collateralized loan obligations (CLO). For the last quarter the corporation sold four CLOs at a loss whereas in the quarter before that, it sold the three CLO at a premium.

This decision has made its investors doubtful regarding the company’s future. The analysts consider CLOs different from average loans which is why they think that it is justified to sell them at a premium. Some analysts consider that the investors must know that the CLOs are generally 10% less than what is usually quoted in the balance sheet. Thus investors should be careful before investing in CLOs. Another issue which was raised was regarding the display energy exposure in corporation’s CLOs that has been stuck at 3.9%.

This is something that the corporation wants its investor to know, that CLO will remain stuck at 3.9%. This is because of the poor performance of oil loans in recent times. This performance has been below the average of the loan market i.e. 4.7% which means that the corporation is underweight. Furthermore the issue of spin-offs was raised. The corporation said that a spin-off for the CLOs would only be partial in amount. The future COO also pointed out that only the Prospects REIT’s and peer-to-peer loans are likely to be completely stripped in a spin-off while CLO is there to stay.

The spin-off would be partial because the corporation has assets of $1.2 billion. Thus it is unlikely that suddenly the whole CLO book will spin in mass. The last question that was raised was regarding profits. In today’s times, the middle market is much closed to the upper top of the cycle.