that resonates with the end client. And what we've then done is taken those assets and packaged them in many different ways to deliver investment outcomes for investors, ARCC being one of them. Obviously, when we IPO'd ARCC in 2004 at $165 million, which is kind of hard to get your head around, that market was just developing, and now that asset class is not just large and growing, but performance has been substantiated, and the value proposition of delivering these illiquid assets into the liquid market is still resonating today. Wasn't quite so obvious 20 years ago when we launched ARCC. Every time we talk to investors or to the market, we talk about our culture. This is the hardest thing for us to actually demonstrate. It's days like this when you get to see the depth of our team, the relationships that exist, the friendships, the longevity of these partnerships, that you begin in a very small way to understand the importance of culture here at Ares. And the reason that culture is so critical, and it's a causation for success here, when you think about these competitive advantages that John referenced in origination and sharing ideas and sharing relationships selflessly, you need to have a culture that values trust and partnership and shared success. You cannot scale the way that we have scaled and perform as consistently as we've performed without a fabulous culture supporting it, without people approaching their work with a sense of purpose and humility and a focus on shared success. So looking back on 20 years, that's probably, for me, been, again, the most gratifying is just seeing the teams grow and build and watching that culture expand and cascade as the team has grown. Then maybe lastly, before I hand it over to Kipp, obviously today is about ARCC, but ARCC does not exist in a vacuum. It is integrated into the fabric of Ares Management. It creates value for Ares and other parts of the credit platform here in terms of idea generation and deal flow and client relationships, the ability to support the non-investment teams, but it is also a huge beneficiary of sitting on this platform. When you look at the broader fund complex that we've put together around the global private capital markets, there's a significant amount of symbiosis between that fund complex and what we deliver at ARCC. The reason is, if you believe what we're saying, that origination drives out performance. Origination and incumbency are where we create value. The more companies we touch in more markets, the more value we can bring to the table. When you're out originating, the idea is to provide a solution to your client. It could be a senior loan, it could be a minority equity investment, or all things in between. By being on the Ares platform, ARCC is benefiting from flow that they otherwise wouldn't see because we're getting phone calls from the highest quality companies, the highest quality assets, and the highest quality owners, and we've obviously, by leveraging our culture of collaboration, been able to monetize that for over two decades. So I'm just thrilled to see the progress. I agree with John's comment, that what's gotten us here has served us well. Our competitive advantages have never been stronger. It's showing up in performance. We've done it through cycles, and this is an incredibly, incredibly exciting time, both in the development of the private credit markets, but also the opportunity to deliver outperformance. It's my great honor to welcome Kipp deVeer, who is one of my closest friends, and the CEO of ARCC, to the stage to talk a little bit about the broader credit group here, and thank you for spending the afternoon with us. Thanks, everybody, and welcome. Yeah, Mike and I were just laughing a little bit, about what we would say here to kick this off. But, we were telling stories earlier in the day about Ares Management, and its growth as part of that Investor Day, and I think we were looking back and kind of remarking, it's actually mine and Mike and Mike Smith and, and Mitch quickly behind, 20th anniversary here at Ares. We were actually brought on board, literally right around this time in 2004 with the idea that we would help start and build this company. I'm looking over at Tony, who hustled for us and rounded up that $165 million IPO with Mike, and we appreciate that. Look, it's been an incredible journey for us, and we've continued to build what we think is not only the biggest and the best BDC, but the largest, most significant direct lending platform in the U.S. And we've taken a lot of those learnings to help continue to grow the credit platform more broadly at Ares. So I'm just thrilled to be here. Very proud of what we have and the people that we've done it with. And I'll just take you through and give you some summary stats before we jump into details on the BDC itself. So today, you know, Mitch and Mike and I are responsible for the credit group. We manage about $300 billion of AUM. We don't do it alone. We have 500 investment professionals across the globe, and we segment things into the five businesses. You see the five verticals there in the middle of this slide. ARCC obviously fits into direct lending business on the left. As a reminder, because I've gotten the question over and over again over the years: Do we care more about Ares Management, or do we care more about Ares Capital? The answer is, we care more about both. Just as a reminder, Ares Capital is the single largest fund that we manage at Ares. It's critically important to driving success of our single largest business at Ares, which is our direct lending business. They go hand in hand. And we're obviously pushing the platform along in a lot of interesting ways, but I think we've continued to invest in and build direct lending franchise with real enthusiasm and energy to make sure that somewhere we started when we were much smaller, but I think started the best, remains the best, and I think our competitive advantages are as strong as they've ever been. Mike mentioned this in his opening remarks. When we were going public, we actually had a saying that some of us will remember, where we said it's the four Ps, which was people, performance, the portfolio, and oh, the platform. That's what I'm here to talk about. We actually got a lot of questions early on when there were a couple really well-established, internally managed BDCs, which I'll footnote, we bought both of at discounts to book value, about whether being an external manager was actually good. And it was our strong belief that there were incredible benefits from being part of a large platform, not only in credit, but in other assets. This is what our credit franchise looks like today, and we emphasize and really focus on getting strong collaboration across all of these groups. And Ares Capital today is benefiting from information, from research and due diligence benefits, sourcing, for sure, benefits, and actually pulling assets, at least in the U.S., from some of these origination teams that don't spend day-to-day activities at ARCC, but can contribute to its success. And this collaboration is key to the culture and the way that we do things at our company. Mike mentioned this, too. We're all stepping on each other's themes, but we've always believed that this was a business that actually got better as it got larger. Folks ask us all the time, "Doesn't it start to be difficult to grow? Doesn't it present obstacles for you to deliver performance by being big?" Our square answer to those questions are, "No, it does not." We've raised more capital over the last five years than any other BDC manager. It hasn't had an impact, and I'd argue a negative impact. I'd argue it has had a very positive impact on our performance over the years. It's enabled us to to maintain consistency of approach, to recruit and attract talent, along with a wide variety of other things. So here's the direct lending franchise today. We have $190 billion globally. That number is about $120 billion in the U.S.. We have the most people, which provides us the most origination and the most deal flow, and we obviously spread them geographically across the world in the U.S., Europe, and in Asia. The bars to the right of us are some of our competitors, and we look at what we think is a disadvantage for them, lack of scale in terms of capital, lack of scale in terms of people, and lack of scale in terms of global reach. We've invested $142 billion of capital since inception. We have 500+ portfolio companies. We've done over 2,000 deals. I think the key here is, with Ares Capital Corporation, you're getting a cycle-tested team with loads of experience in loads of different market environments that we think have made our mistakes a long, long time ago. A key to this business is not making mistakes, and most of the lessons we learned, we learned when we were at least a little bit younger. Mike made this point, too, but I'll reinforce it. Folks are always saying, "Well, if you're the biggest, shouldn't we be getting the benefit of scale advantages?" You are, we think, in terms of, again, origination and investment, but the onus has always been on us, and the promise that we've always made to the shareholders in the BDC and shareholders at Ares is, as the business got larger, we would continue investing in the most important asset that we have, which is our people. So it's number of people, but it's also quality of people, retaining the best talent, most of which, as you'll see today, we've developed over the last 20 years. Most of the folks that you'll see here on stage have been at Ares for 10+ years and have worked as part of this team or with us for at least that long. So a little bit of a shift here to strategy and how we think about the company and how we look at ourselves in terms of Ares Capital versus the competitive set. If we look at all of our competitors, this is a little bit of an eye chart. On the left, the axis is size of manager, and on the right, it's a segmentation of where we play in the market. We believe, still to this day, that we are the only scaled player that still participates in lower middle market, the middle market, I guess, and the upper middle market, which is garnering more press as you're seeing these larger and larger deals getting done. Our ability to originate across this continuum is really, really important. Risk reward tends to shift to certain elements, to certain parts of the market, away from large cap unitranche and back to more traditional middle market. And then it switches again, where the scale of capital actually makes you more impactful, delivering returns in the upper end of the market. So we think we compare incredibly favorably. Having this very wide funnel to source from is key, and obviously, having that wide funnel to source from, supported by the largest team, is really what makes it all work. We built the business around sponsor coverage. You know, back when we were small at that IPO I started with, it really was calling on a host of probably 100 sponsors where we had developed those relationships, middle-market sponsors inside banks. We've broadened that out to a point where we still call on those mid-market sponsors. Sponsor proliferation has obviously occurred with the growth of private equity, and we've been able, with a more substantial capital base, to finance some of the largest sponsors, the deals that you guys are, we're all reading about in the newspaper. You know, so and so large cap private equity fund buys $15 billion company. We now are pretty relevant there. Another important vertical, a place that we've always played, is in the non-sponsored arena. But the reality is, as the sponsor business grew, you really couldn't keep up because the non-sponsored, sponsored deals are tougher to source, they're smaller, and it's just not as representative. So we've really put a lot of energy behind creating focused origination and non-sponsor. You see the increase here, 24% of the deals in 2023 that we reviewed, versus the 11% in 2018. So the good news is it's working, and the way that we've decided to come at it, finally, over the years, has take dedicated resources in specific verticals, where those verticals have no responsibility for covering sponsors, and go out and target this deal flow. And we found that the merits are multiple. When you take folks that are expert in specialty healthcare, which is a very technical part of the market, we're talking about devices and biotech and pharma. And before I run out of time, I'm not gonna go through every example, but when you put people with specialized expertise out originating direct to company, you represent yourself very differently and your conversion rate goes up, and your ability to, again, widen the funnel, increases and improves. The track record's been phenomenal. I'm gonna keep this short because we do have a section on performance later on. I'll be back up on stage for that. But needless to say, over a very long period of time, we've seen 400 or 500 basis points of outperformance, both in our senior lending and in our junior lending. I think with that, I'm turning it over to Mitch and to Jim. So thank you, and I'll see you guys later. Thank you, Kipp. Like those before me, I want to welcome you all, and thank you for spending time with us today. I have to tell you, I'm humbled and very proud of all that we've accomplished over the past 20 years, and having celebrated our 20th anniversary in ARCC. It's incredible what our team has done, and I'm really looking forward to what the team's going to do going forward. Now, this section, Jim and I are gonna spend talking about our market and the merits, lots of merits, the tremendous merits of our asset class. What's so exciting for us is we compete in a very large market, $5.4 trillion and growing, and we continue to take market share. Mike talked about it, Kipp talked about it. We go to market with significant advantages. Again, scale, incumbency, flexibility, et cetera. But importantly, we approach this market with a long-term relationship focus, and I'll talk about that theme again in a couple of slides. But our clients have come to depend on us to be significant providers of capital in all markets. And although the market that we find ourselves in today is a particularly good one, I think we've shown over the years that our asset class tends to perform through all markets, benign and volatile. Here's a little more detail on the size of our market. Again, on the left side of this page, you can see the traditional middle market, $3 trillion and growing. What's amazing is there are 30,000 companies in this part of the market, and research has shown that the revenue of these companies over the past 5 years has grown by approximately 50%, and they have an insatiable appetite for capital as they've grown. As our balance sheet has grown over the past decade or so, and our fund sizes have grown, we've obviously become much more influential in the larger end of the market. Again, what is so exciting for us is our relatively small market share, 2.4%. A leading market share, nonetheless, but small relative. In this size market, small increments of market share means tens upon tens of $ billions coming into our funds. How'd we get here? Why do scaled lenders like ARCC exist? Well, obviously, banks today don't do what they did decades ago, and that is lend to small and medium-sized companies. Obviously, there's been a ton of bank consolidation. There are 50% less banks in the U.S. and Europe than there were 10 and 20 years ago, and many of those small regional banks that used to lend to our clients have been acquired or merged into larger banks. And these larger banks, for either regulatory reasons or business model reasons, have no desire to lend to our clients. So we're often asked, "What happens if the banks change their mind? What happens if they want to get back into the market?" Obviously, there's been some press written about that exact theme in the recent months. Our answer is simple: Banks are heavily invested in this market. Over the past decade, bank lending to non-bank participants like ARCC has grown tremendously, almost 500 percentage points of increase, again, over the last decade. Banks are invested in this market to the tune of hundreds upon hundreds of $billions. They just approach it differently, right? They access this market through guys like Ares. What they've effectively done is outsourced origination, credit selection, and portfolio monitoring. And why do they do it? Because it's safer and more profitable. Lending to ARCC is lending to an investment-grade company. So banks are heavily invested in this. They just have decided to do it through groups like Ares. So Mitch just walked us through the fact that we're in the early stages of deployment into a large addressable market. We heard from Kipp, 30,000 companies. To put it in perspective, and we'll spend a few minutes on that market and what's gonna drive us going forward in the next 3, 5, maybe 10 years. If you add up those 30,000 companies, that would represent the third largest global economy. It would also represent about 33% of the private sector GDP, and importantly, about 40 million jobs. When we look at the middle market a little closer, what's often lost on people is the growth and health of the middle market is fantastic. So the growth experience, revenue, and employment in the middle market has far outpaced large cap companies. It's great to talk about what's in the S&P. It's great to talk about large cap deals. They make great media, but at the end of the day, this is the core to the U.S. economy, and it's performing extremely well. When we think about our business, we're largely driven by M&A activity. So private equity market is probably the most fundamental place to start. And when you look at the AUM under management, we'll often hear people say, "Well, there's a lot of capital formation. What is next? Is there too much capital forming?" Today, according to Preqin, about 20% of dry powder direct lending, and it's about 20% private equity today. There's about $1 trillion, just under $1 trillion of dry powder in private equity. If you think about a typical LBO, that's levered 40% or 50% relative to the total enterprise value. So there's ample capacity and room for us to grow and migrate as direct lenders into this market over the foreseeable future. The last year or so, we've seen real slowness, and you'll hear it from folks as we move forward in the presentation. It hasn't been as robust of an M&A market, but we've continued to grow. So we've outpaced the market, and we've been able to deploy into that soft environment, but that's changing, and we'll talk a little bit about that as well. So what's going on in the market today? A close look private equity funds is a good place to start. DPI is a very common topic right now. Investors want to get their capital back private equity funds. That demand is picking up over time. When you take a look at the amount of dry powder in private equity funds that's in its last year or two of its investment period, it's grown meaningfully over the last 3-5 years. That slow M&A market is starting to catch up to that investment period, and there's pressure and demand and desire to deploy that capital. So we've been talking about this for the last six, 12 months, but we're really starting to see it now. M&A activity is going to pick up. It's important for deployment, it's important for that DPI to use that capital, so that will be the biggest driving force as we look forward the next 12, 24 months. It's also. You heard from Kipp, this doesn't represent what we have going on in the non-sponsored side of the world. So this is one channel that we'll talk about. It's a driving channel, but we are also expanding and growing our business through the non-sponsor side, which is also an important part of the market, both of which rely on a healthy, active M&A and financing market for them to conduct business. So where we were the last year or so was dislocated. It was difficult to do transactions. A healthy, functioning market, both in the liquid and private markets, is, will lead to more transactions. I think we're seeing that today. Our pipeline, and we'll talk about it some more, you'll see it later in the presentation, is growing rapidly, and it's as healthy as it's ever been. So I'm often asked, "If you're more expensive and you have tighter terms, why don't your borrowers go elsewhere for their financing needs?" My simple response to that question is to show the consistent growth of our AUM over the past 20 years. We must be doing something right. Our clients continue to come to us year after year for their financing needs. And trust me, our clients are very sophisticated. They know the pluses and minuses of different financing markets. So why do they continue to use us? We talk about this all the time, certainty of execution. In an M&A process, knowing the exact quantum of debt, the type of debt, and the pricing of that debt is paramount to success. Confidentiality. Many of our clients don't want to be public. They don't want to issue K's and Q's as they would if they issued high-yield bonds. And then amendments. Our clients often change the terms of their financing. We have to go back and change the credit agreements. They're either growing, they have to make changes, they need more capital. And rather than negotiating, negotiating against an amorphous market that may be open and it may be closed, again, they come to us because they know how we behave in all markets, and we are a trusted lender to them. It may sound counterintuitive, but all the things that Mitch was just going through are ways private equity firms and owners of companies can increase the value of their business, which is critical to their returns. It's more critical than the cost of capital, candidly. Things like being able to deliver an M&A transaction in a dislocated market, all those things are actual ways to create returns. The cost of capital is less significant and will drive lower impact when you're in direct lending market relative to the liquid markets. We can charge more as a result. You look at the Cliffwater Index, which is probably the best index for us to compare direct lending. It far outpaces what you see in the high yield index and the leveraged loan index. Importantly, from a relative value perspective, the loss experience is quite similar, if not lower. You'll hear more from us on returns, but our loss experience at Ares and our returns exceed what you're seeing from the Cliffwater Index here. All of that is because we create value in other ways, and it's not the key, most important point, where it used to feel that way years ago. One more important point on returns. The left side and the right side here are points in time, the Great Financial Crisis, COVID. What you see direct lending is the returns have outpaced the broadly syndicated market. They've also experienced less volatility. Over that period of time, folks like you as our investors, get to experience lower volatility and excess returns regardless of where we are in a dislocated market or an economic cycle. So I think these are Jim and mine's last two slides. And so before we turn it over to Kort, we thought we'd talk about what's going on in today's market. And obviously, we are in a period of elevated all-in yields, but more importantly, the quality of the credits, the quality of the companies, and the quality of the documentation remain robust. And although we know in the last couple of years, there's been a muted M&A environment, recently, we've seen a significant increase in transaction volume and repricings. And while the leveraged loan market is now open, and trust me, that's a good thing, we want a functioning liquid markets. We continue to see significant loan-to-value, significant risk-adjusted return, and as we always have, premium pricing in what we do. With that, we're going to hand it over to Kort to take you through the rest of the presentation or his section. Thank you. Friends and colleagues, at this time, we kindly ask you to silence all and- All right. Good afternoon, everybody. I'm Kort Schnabel. Really excited to be up here today. I share all the same pride that my partners talked about, the success of Ares Capital Corporation. I've actually been at Ares 23 years, which predates Ares Capital, but switched over in 2004 at the inception of direct lending business, and have been along for this incredible journey. I'm excited about this section I get to present today, which is talking about the key elements of our investment strategy. I've certainly gotten the question a lot over the last 20 years: What are the things that you guys do differently at Ares that has allowed for this success? You must be doing things differently than your competitors that have driven this outperformance. The answer is, of course, we are doing lots of things differently, and that's what we're going to get into here today. So I'm probably going to spend the most amount of time on this slide. We've talked about origination a lot already today, but I'm really going to hammer it home here, because it probably is the single most important driver of our investment performance. We've talked from the very beginning, back in 2004, about the importance of creating a wide funnel, seeing as many different opportunities that come into the platform as possible. If you think about an example, if we are able to see 10 different companies in a given industry that come into our system to evaluate, and one of our competitors maybe sees 2 or 3 of those companies, we're going to be much better able to determine what makes a market-leading business within that industry than our competitor who's only seeing 2 or 3 of those. And we're going to be much better able to find and choose and select that market-leading company and invest in that one company versus just looking at a smaller sample set. So you multiply that by thousands and thousands of different industries and companies, and you get what you see on the page here, which is in 2023 alone, we saw over $0.5 trillion of deal flow that came into our direct lending platform. It's up from $300 billion in 2018. If you look over our history, you're going to see this nice, consistent growth in our origination strength. What that's enabled us to do is to grow the business while still being incredibly selective. You can see our selectivity rate has been in the 4%-5% range for a very, very long time. People ask us also, "When you're trying to be so selective, what are the things you're looking for? You see all these companies come in. What do you-- what makes you choose the companies that you choose?" Well, we've put some of the characteristics here on the bottom left of the page. There's certainly more than this, but definitely worth mentioning these, these four for sure. So resilient industries, and we're going to talk about our industry diversification later on in this section, but we're looking for businesses that are non-correlated with the broader economy, that are defensive in nature. You're gonna see a lot of healthcare. You're gonna see a lot of recurring revenue, software businesses in our portfolio. We're looking for market leadership, companies with dominant positions in their markets. Not only dominant positions, but high barriers to entry around those positions so that competitors can't come in and disrupt that market share. We talk a lot about this in investment committee. We ask our deal teams, "Does this business have a reason to exist, or could it go away, and would that demand just be soaked up by a bunch of competitors, and no one would really notice that much?" That's a good test for us as to whether there's good downside protection in a business. Experienced management team probably goes without saying. Maybe a better question is: how do we assess our management teams? Well, we get on airplanes, we fly around the country, we ask them a lot of tough questions. We look for reference checks, background checks. We try to make the best decisions we can about backing the strongest management teams. And then strong equity backing. Most people probably private equity firms are the number one source of our deal flow. We are looking private equity firms that have a lot of capital in reserve to bring to bear if a portfolio company's performance is not going according to plan. We're looking private equity firms that bring operating expertise in their industries, bring a lot of value add, and we're looking for firms that are good partners. Can be good partners with us over the long term. That's certainly our value proposition to them, and we look for the same back to us. Some interesting observations here on the bottom right. We've seen 37,000 opportunities have come into our platform since we started. We cover 620 sponsors. We've transacted with 450 sponsors, at least one transaction with 450, and multiple transactions with many of those. What this means is we're not overly reliant on any individual sponsor for the source of our deal flow, and we're not beholden to that sponsor if the performance of any individual investment is not going according to plan. You're gonna see in this section and throughout the day, diversification is a key theme across so many different attributes of our business. Sticking on the origination theme, not only is it important to see a whole lot of deals and companies, but we wanna see a wide distribution of company sizes, and that's what this chart shows. On the left-hand side, the last five years, this shows the breakdown of the company sizes we've been originating, and it might surprise you to see about 50% of the deals we've seen are in companies with less than $50 million of EBITDA. We are committed to that smaller end of the market, just as we're committed to the middle market and the upper middle market, as Kipp talked about earlier. Our median portfolio company EBITDA is $80 million, probably a little lower than most people might think. Our average is higher than that. It's about $162 million, but because we have so many of these smaller companies, brings that median down to $80 million. So pivoting now to the next topic, which is our team. This is absolutely one of the characteristics of our business that is unmatched. No one else has what we have here in terms of our team, starting with the leadership team on the left. All of us here on the investment committee have worked together at Ares for about 20 years. What that creates is a high level of consistency in our culture, in our investment philosophy, and we are able to embed that into our team and inculcate that into our team over a long period of time. Then you transition to the investment team. We believe we have the largest investment team in the industry. 185 investment professionals, compares to the average in the BDC peer group of 56. That team is also very long-tenured. You're gonna see a lot of people on that team have been here 5, 10, 15 years, so we've been able to, again, instill these key attributes of our business model into the team. What all of this enables, when you put it together, is success at scale, right? You build a huge business. How do you make sure it keeps working and keeps operating, keeps growing? You have long tenure, you have consistent philosophies, and you have deal teams that are able to kinda run on their own from an origination and execution standpoint because they know what they're looking for. They know how our business works. Benefits of incumbency. I'm sure you've heard us talk about this before as well. The bigger we get, the more advantageous this is for us. Our portfolio companies, today, we have over 500 of them at ARCC. Those portfolio companies are always growing. They're dynamic businesses. They're looking for more capital for all different kinds of reasons, and they come to us first because we are their incumbent lender. We have a relationship. We have a first look at those deals. It's very, very difficult for our competitors to come in and unseat us from these portfolio companies. We're super advantaged in terms of information. We've been following these companies for a long period of time, allows us to make even better decisions, and you can see about 50% of the capital we put out in any given year is into our existing portfolio companies. So again, the larger we get, the more of an advantage this creates for us. Flexibility is the next topic. From the beginning, this has also been super, super key to our differentiation, which is we go to market as a solution provider, not just as a senior debt provider or a junior debt provider. We provide all different kinds of solutions to our borrowers. At the outset of a deal, when it comes in, we might provide multiple different types of capital solutions. Then down the line, as they grow, we can change from a junior lender to a senior lender or vice versa. This much more deeply embeds our relationship with those companies, and is advantageous in terms of our reputation in the market. And then for our investors as well, it provides diversification, right? I'm sure you're familiar. A lot of other BDCs out there are 100% first lien, 100% floating rate. They like to brag about that. We don't think that's actually the right model. We prefer to be more diversified. We think through all different market environments. This gives us more balance, allows us to perform through all these different environments. We actually have about a third of our portfolios in fixed rate. Didn't feel great when rates were going up, but as we start to look forward to the future, when they start going down, that's gonna feel smart. So again, allows us to operate in all these different market environments. Another way we provide flexibility to our borrowers is through the use of PIK interest, and we added this slide for this presentation today because there's been a lot of attention in the market on PIK. What's happening out there, we wanted to hit it on the head. There are two different kinds of PIK interest, I think, to think about in the portfolio, right? The first one on the left there is when we structure PIK at the outset of the original investment, we call this PIK by design. We do this when we see very high-quality portfolio potential portfolio companies come into the system that are looking for a little bit of flexibility for a short period of time at the beginning of a transaction. Maybe it's a carve-out from a large corporate, and they have some stand-up costs to get through. Maybe it's a high-growth business that has high visibility toward getting to a higher cash flow position in a year or two. But it has all these characteristics you see on the left-hand side. Large company, weighted average EBITDA, $333 million. High loan-to-value, where we sit in the capital structure, lots of equity cushion beneath us. Performing companies, high-growth companies, 13% LTM organic EBITDA growth for these types of investments. And so we'll provide a little bit of PIK flexibility in exchange for a premium on rate. Again, we're doing this for a short period of time. We're doing it in these healthy companies. And this, if you look at all the PIK on ARCC's balance sheet today, or asset base, this is about 90% of the PIK interest, okay? The right-hand side is amendment PIK. This is when a portfolio company is not going according to plan, and we can be part of the solution to help with liquidity. We will provide PIK flexibility in this case as well. This is obviously the category, I think, as investors, you all should be more focused on and paying attention to. Today, it's a very small percentage of the PIK. It's about 10% of our total PIK. So there's 1.6% of our total income is this amendment PIK, and we are getting a premium, average 150 basis point premium when we provide this. Again, we're only doing it for a short period of time, and we're only doing it if the owner of the business, private equity sponsor, also kicks in capital. In fact, it's a little bit of a tool we can use to incentivize private equity firm to put in capital. We'll PIK a little bit if you put capital in, and we get a premium as a result. And so that is sort of the second category of PIK. Pivoting to industry selection. I teased this a little bit earlier. This shows our diversification by industry. Again, you're seeing the big industries here on the slide. Healthcare, number one, software, recurring revenue software, high free cash flow businesses, business services companies, insurance, wealth management. These are all very stable industries, generate high free cash flow, and it's extremely diversified after that across, I think, over 35 different industries. We have a chart on the right. This was a fun exercise we ran here. So just to highlight the importance of industry selection, we took. This was our internal quantitative analytics team, took the leveraged loan index on the left-hand side and the high yield index on the right-hand side, and went back 10 years and did one simple thing. They reweighted these indexes and reweighted them according to our industry selection at ARCC, our industry weighting, not the way that the indexes were weighted. They just made that one change, and it created a 480 basis points increase in the first lien in the leveraged loan index, and a 770 basis point increase in the high yield index. That's over a 10-year period, so that's cumulative, not annual, but meaningful change just simply by industry selection. So just highlights the advantages that we have as a BDC, not having to operate as a benchmark investor. I think this is the last slide in my section. Again, mentioned the importance of diversification. We're looking for diversification everywhere. By the way, that's another characteristic, wasn't even on the page, that we look for in our portfolio companies also. Diversified customer bases, diversified supplier bases. I mentioned the importance of sponsor diversification. These are just some additional statistics you can see at ARCC in our portfolio, our average investment is 0.2% as a position size. That compares to the BDC peer average of about three times that. Number of industries we have in our portfolio, 33 versus 27 in the BDC peer average. Largest position in our portfolio is 2%. It's about half the industry average, and then the same goes for the top 10 investments as well. So hopefully, that gives you a sense of, of how diversified we are across the portfolio. That's where I'll end, and now I'm going to turn it over to our next panel, which is going to talk more about the topic of origination and really dive more deeply into all the different things that we do to drive that broad funnel that I, that I talked about. All right. So today on our panel, we're gonna talk about the differentiated approach we have to sourcing and investing. My name is Jana Markowicz. I'm a partner at Ares. I'm almost 20 years tenure here at the firm. I'm also the COO of U.S. Direct Lending business in Ares Capital Corporation. Very pleased to be joined by my colleagues, partners, and friends, Andrew Kenzie, who's a managing director based out of our Chicago office. He covers our software industry, and he has been with the firm for 10 years now. Shelley Cleary, who is a 16-year veteran of Ares, also a partner, president, and head of Ivy Hill Asset Management, a portfolio company of Ares Capital Corporation that hopefully everyone knows a lot about, but you'll learn more from Shelley today. Dr. Doug Deeter, who is a partner based out of our Los Angeles office and 8-year veteran of Ares, and Mark Affolter, who is a Partner, Co-Head of our direct lending business, and has been with the firm also for 16 years. So to get things kicked off here, you heard from Kipp earlier about our differentiated industry verticals and our sourcing expertise, particularly from a non-sponsored angle, is what he was talking about within our industry verticals. But we thought we'd spend a little bit more time diving into some of the different industries that we cover and the expertise that sits resident within our team, within our platform here at Ares. You see the, the number of different verticals here on the slide. We're gonna spend the most time on software, specialty healthcare, sports, media, and entertainment, and then we'll talk about how Ivy Hill fits in as well. But Andrew, why don't I turn it to you first? Tell us a little bit more about how we cover the software space and, and the areas of expertise that we have within the software team? Yeah. Thank you, Jana. So Ares was one of the first direct lenders to invest in software, and we focus on software companies with mission-critical products, high degrees of customer retention, and strong growth prospects. And to us, software is a product. It's not a vertical itself. So we'll partner with Mark, Doug, and our other verticals across the firm as we get smarter on new opportunities. And we also look at software beyond just the numbers. So in addition to seeing strong KPIs, high retention rates, everything you'd wanna see on that front, we need to be confident that a software company we're providing financing to is mission-critical to its end customers and absolutely vital. And we're very proud of the track record that's resulted from our focus in the space. So we've invested $28 billion in the sector to date with no losses. Because we've been in software for so long, we have very deep relationships with the largest and most sophisticated software sponsors, and we've also been able to source deals and close deals from family offices, founders, and public companies. We think we've created a really unique and differentiated funnel in software, and it's going to continue to be an area of emphasis for us going forward. I think I saw on the pie chart on that last slide in the Kort's section, 23% of the portfolio, but important that you mention the differentiation of end markets- Absolutely. -software portfolio. Yeah. Doug, I'm gonna turn it over to you. Tell us more about our specialty healthcare team, how we're organized around this business, and some of the differentiated sourcing angles- Sure. that you're able to explore. Thanks, Jana. So, obviously we think healthcare is an overly, very attractive market. It is a $6 trillion market between the U.S. and Europe. It is a sector that's been growing in excess of GDP for the last 30 years. And one area of the overall healthcare market is the specialty healthcare market, and how we define that is the medt ech space, pharma, and tools and diagnostics. That would be the life sciences portion of the specialty healthcare area, and then you'd have specialty services and healthcare IT. These areas of specialty healthcare have lots of barriers to entry. They're more technical. Oftentimes, they're more sophisticated in terms of their science, that you have to be able to understand and understand the healthcare system. That creates barriers to entry. They're typically less competitive processes that results in, oftentimes, better economics and better structures. Importantly, this is a market that we've seen very attractive and growing sponsored origination opportunities, but we've also been building capabilities and have been working heavily to grow our non-sponsor capabilities, going out to publicly traded companies, late-stage commercial businesses. We're obviously very focused on commercial-stage businesses only in the specialty healthcare market, where we have multiple ways to get out. They're often creating multiple revenue streams, have multiple products in excess of the value of the debt that we're providing. In order to do all of this, we've built a 12-person dedicated team, and growing. And to complement that team, focused mostly on non-sponsored origination opportunities. We have a 13-person advisory board, and that advisory board is across the 5 different sub-sectors that you see on the screen. And they help us source opportunities and obviously help us due diligence. We're quite proud of our origination capabilities. Obviously, we're the largest healthcare private lender in the market, and we have a 20-year track record, and we've seen the opportunity set only grow as we've focused more and more on specialty healthcare origination. Thank you. Moving over to Mark, in an area that Ares has certainly been very active, and we've seen a lot of, media attention on, why don't you tell us about our sports, media, and entertainment franchise? Well, what you're gonna hear is some of the similar themes to what Doug just described in terms of how we organize the business. We obviously have the advantage of a large scale, very direct lending team, and we try to draw resources from that team. 190 very experienced, well-tenured investment professionals across our direct lending business. But what you find in this strategy is it tends to be a little more cross-platform. We involve our Real Estate team, we involve our Alternative Credit team, Private Equity teams, but it also has some geographic diversity associated with it as well. Even though probably 40%-50% of our flow, maybe a little bit more, comes from North America, we see a lot of flow in the European markets and Asian markets and increasingly South America. So you find that it's a little more geographically diverse, but again, it draws from other resources across the platform where specialty lending and expertise makes sense. Similar to Doug's business, we also benefit from what I think is a top-tier industry advisory board. See the individuals on this page. They're. They've been incredible- -in terms of sourcing what I think is unique deal flow, proprietary deal flow. Oftentimes, we're not competing with anybody. I think that's really unique, and I think a lot of it stems from, again, the individuals on this page. I think a lot of it stems from the experience that we have embedded within the team. I think what's unique also is that a lot of these structures, they're different counterparties. They're not necessarily private equity firm. It's usually an individual or it's a family office. Makes those deal dynamics a little bit different. Having a brand where we've sort of traversed the barriers to entry, the relationship barriers to entry, I think is incredibly important. I think, again, it allows us to see some pretty unique, oftentimes proprietary deal flow. But then we really do try to leverage the experience of our team, whether sub-sector experience, let's say, in European football or, you know, hopefully in the NFL. Those are the individuals that we try to leverage in those situations to run our deal teams and run our processes. Fantastic. So, Shelley, switching gears a little bit over to you. While Ivy Hill isn't an industry, it's certainly a highly strategic asset for Ares Capital Corporation. Tell us a little bit more about Ivy Hill. Absolutely. Thanks, Jana. Sure. Ivy Hill is a senior loan asset manager. We manage about $13 billion of AUM that we're investing across 21 different vehicles. Now, at Ivy Hill, we don't directly originate any of our own assets. Instead, we rely on the vast relationship networks throughout Ares that you heard a lot about already today, relationships private equity sponsors, other market participants, the relationships cultivated by the, the guys up here as well. And instead, we purchase our assets both directly from ARCC, as well as from other direct lenders and the banks in the lightly syndicated market as well. At Ivy Hill, we have a team of 17 really exceptional investment professionals, and there's also been a lot of talk today about culture. Very similar culture at Ivy Hill, and our team's been with us for quite some time as well. Our senior professionals have been with us on average for over 13 years. We have a cradle-to-grave mentality at Ivy Hill. The team underwrites every credit that comes into our portfolio. They then monitor it from a portfolio management perspective. Overall, our approach to investing is really very similar to that of ARCC. We're selective, given our broad deal funnel that results from the relationships, consistent, credit-focused, and it's resulted in really strong performance at Ivy Hill since our inception. I'd like to hit on two stats that are on this slide that the team at Ivy Hill is particularly proud of, and then, Jana, I can hand it back to you. The first is our default rate, which has been just one-third that of the loan index since 2007. The second is our IRR, which has been in excess of 20% on ARCC's equity for over 15 years. Those are great statistics, Shelley. Thank you. So now I asked each of you to think about something thematic in our industry and in the industries that you spend time in, that you wanted to share today with the audience and with those online. So, Andrew, within software, what, what's topical today? Yeah, so AI is, of course, very topical. It's at the front of everyone's mind, and we're certainly focused on how it may impact our software portfolio. And to develop a framework, we polled 100+ portfolio companies, as well as our largest software sponsors, and then we also worked with BootstrapLabs, which is our in-house center of expertise on the topic. And we're of the view that AI is an additive, predictive technology, but not a substitute for most core enterprise software systems. And the areas of software that we expect to be most impacted by AI are areas that we've naturally avoided over time, in large part because they didn't meet the threshold for vitality that I spoke of earlier. And so within our portfolio, we actually see great opportunity for AI. We see many of our companies using AI to develop products with greater speed to market and cost efficiency. So we're going to continue to use the framework that we've developed, refine it over time as well, hold ourselves to our conservative underwriting standards, and see what comes of the developments within our portfolio as they use AI to increase their customer stickiness and hopefully grow faster as well. Doug, how about you? Within healthcare- Sure. -what's topical? Sure. So, when asked to pick a theme, you know, of the five subsectors, especially healthcare we focus on, we picked the pharma market. But to be clear, this is just one example that the opportunity set exists across these five subsectors. But we picked the rare disease market. There are 10,000 rare diseases. A rare disease, by the way, is defined as a patient population less than 200,000. So, there's enough diseases that effectively there's one in every 10 people in America is somehow affected by some rare disease, which is pretty staggering stat. A bigger staggering stat is that there are less than 5% of these rare diseases that actually have one treatment option available to them, which just demonstrates the white space and the opportunity set for pharma to create new therapies and treatments for patients of rare diseases. I would point out that there are also many other diseases that are not orphan drugs, that maybe have one or two therapies that are suboptimal or not the highest safety profile. So there's so much opportunity space just left in the pharma space from an R&D and investment perspective, and there's a lot of great commercial businesses that are investing in this space that we wanna support to continue that momentum. I would also point out that we're talking about pharma companies, but the reality is to get a drug to market and to commercialize it, there's an entire ecosystem around just the pharma companies themselves. So you have contract manufacturers that have to make the products for them. You have contract research organizations that run the clinical trials for them. There's various other pharma services around payment structures and things like that, that support these businesses. So when we just say the pharma space, it's actually a much broader space than just the drug space. So this is just one area. I think we could give the same examples in the med tech markets and tools and diagnostics markets as well. I think unlimited examples- Wide -of interesting places to be within healthcare. Mark, within sports media and entertainment, what did you wanna share with the group today? Tough transition from rare diseases into- But I got there. Maybe a little less thematic and a little more thesis in orientation, a little more foundational. Look, we identified the strategy now going on five years. We identified some things that we thought were gonna hold up. First of all, a lot of activity, growth in valuations, growth in commercial revenue. But probably most importantly, when we looked at the ecosystem for capital provision, it was really imbalanced. Supply-demand imbalance, barbelled. Banks at the top end of the capital structure, wealthy individuals, family offices at the bottom end of the capital structure. And that funding gap is what we do all day long, what we've made so much money doing and have such a legacy in doing in direct lending business, and that's the ability, with scale, to go up and down the balance sheet of the entities that we're investing in. It served us extremely well in our direct lending business. It's serving us very well in sports media and entertainment. We're seeing outsized relative value, strong yields, great LTVs in terms of where we're investing in the capital structure, and no shortage of opportunities. It's a combination of those factors that we looked at five years ago, and if anything, I think we've been pleasantly surprised by just how they've manifested themselves. That's great. Shelley, for Ivy Hill, we talk a lot about Ivy Hill within Ares Capital Corporation, and I know our investors have been focused on it as well. Share with the group here some more information, some of the things that you're most proud of- Sure. within Ivy Hill. Yeah, very, very happy to do that, Jana. You know, very similar to ARCC, and it was hit on throughout the day, and Mark just mentioned it, and as did Andrew on the diversification point. But at Ivy Hill, we believe scale and diversification are really important factors to driving strong performance. So from a scale perspective, I mentioned that $13 billion of AUM and our 21 funds. That allows us to be really meaningful participants in each of our transactions at Ivy Hill, while also maintaining that diversity at the investment level. Now, we're also diversified by fund structure. You can see on this slide, we manage loan funds at Ivy Hill. We also manage middle market CLOs, as well as separately managed accounts. Now, I could see how an investor might look at the slide behind me and potentially, particularly the slice of the pie that says CLOs, and expect Ivy Hill funds that are CLOs to have leverage of 10x plus. That's not the case for any Ivy Hill funds. All of our funds are very modestly levered, and on a weighted average basis, all our funds have a leverage of just 2.5x. Even with that very modest leverage, Ivy Hill is generating extremely strong earnings in excess of the dividend that we're paying to ARCC. You can see on this slide, our dividend coverage over the last twelve months has been 140%. To wrap it up, I'm very comfortable with how Ivy Hill is currently positioned, and I'd say the Ivy Hill team is really excited for continued strong returns. Fantastic. Well, I think that's all we had planned for today. Thank you for joining me up here on stage. Thank you to everybody in the audience, and I'd like to invite up our next group, which is a trio of partners here, Mike Dieber, Phil LeRoy, and Adam Fer rarini. Please join us. Hello, everybody. I'm Mike Dieber. I lead our portfolio management team. Been at Ares for 16 years, and I sit on our investment committee. I'm joined by Phil LeRoy to my left, and Adam Ferrarini. Phil has been with me for 14 years. He's a partner, and he heads up our core portfolio monitoring group and leads our valuation efforts. Adam, he heads up our special teams, and he's also been a partner and been with me for 14 years. Let me finish the formula for good, direct lending, risk-adjusted returns. You've heard a lot about from others, selectivity, a broad funnel, underwriting, incumbency, diversification. The last piece of it is active portfolio management. We live in an illiquid asset class. The bad news is you can't trade in and out of positions when you like. The good news is you get lots of information. We get lots of information from our borrowers. We get access to our companies, our management teams, and our sponsors, to be really smart as to what's going on at our portfolio companies. Our job is to use that information, all the time, in good times and in bad times, when companies are doing well and when things aren't going according to plan. Admittedly, I'll tell you, this team spends probably a disproportionate amount of our time focusing on those names where things are not going according to plan, but fortunately, that's not a lot. You can see on the slide, you know, the team. We made a decision early on at Ares, where we were gonna invest, invest in systems. Phil will talk to you about our portfolio management system, Wolverine, as well as process, and we're gonna talk a lot about process here, but, but most importantly, people. Today in our portfolio management team, we have 44 people, 29 dedicated to core portfolio monitoring, along with analytics as well as valuation, and 15 dedicated to special situations, workouts, companies we might, we might own. I'll let Phil talk a little bit more about process. Thanks, Mike. Portfolio management at Ares is a firm-wide responsibility, but we have built this team to augment the deal teams and really focus on the monitoring and risk management aspects of the portfolio companies. On a weekly basis, our core monitoring team is receiving financials from the borrowers. We're entering them into our portfolio management system, Wolverine, which we, we developed internally. It's a proprietary system. We're able to do analysis versus budget versus prior year. We're organizing calls with private equity sponsors, with the management teams. On a monthly basis, we'll have internal review. We will then summarize those trends, what's going on in the portfolio, and share with the senior management team, the investment committee, so everybody understands where we stand in terms of health of the portfolio. This leads to our quarterly portfolio review and valuation meeting, which is attended by direct lending professional. We go about four days to talk about 500+ portfolio companies and get in depth to really understand what's going on in the portfolio. One of the key parts of this, you know, of our monitoring process is this high-frequency cadence. The other big piece of it is collaboration. So we're making sure as a portfolio management team, to talk to the deal teams on a regular basis. And then I'm also coordinating with Adam and his team to make sure the special situations team is fully up to speed on what's going on in the portfolio. As we see troubling trends, we'll add portfolio companies to what we call the extra monitor or watchlist, which is exactly what it sounds like. At that point, a member of the team that I'll talk in more detail about in a minute, gets added. On a weekly basis, that team is going through that entire list of companies, making sure we're up to speed on, you know, most recent developments, what's going on. We're holding a monthly watchlist call with senior management, the entire partnership, again, ensuring that everyone's profoundly informed and up to speed on the latest with respect to each of these situations. Quarterly, we're doing deep dives into performance, thesis, exit strategy, et cetera. I'll note that getting lots of information at our fingertips, having the Wolverine system in place, also enables us to do special projects, things that pop up, whether it be inflation, interest rates, tariffs. We're able to quickly jump onto the portfolio and understand how it-- how those things may impact our portfolio companies. Turning on to the valuation process, this is, this is where my background is, and my job is actually made a lot easier because valuation is not a check-the-box process at, at Ares. This is something that we've built over a 20-year period and really had the input and support from senior management. So that valuation is very much a part of our business. At investment committee, you'll hear discussions on valuation. Deal teams will reach out to me, trying to understand a change in performance or a change in market, how will that impact valuation? It's something that is very much ingrained in our culture. As a refresher, we have a two-pronged approach to valuation, both internal and external. Internally, we drive towards that quarterly valuation meeting. The portfolio management team leads that internal effort, but it's done very much in collaboration with the deal teams. We are also engaging third-party valuation firms, five of them, who are doing their own independent work, putting together their own ranges of values. We then come together to make sure that our concluded mark will end up within the provider range. Finally, we'll be approved by the valuation committee. Sharing a couple of stats as a result of our valuation process, we did some backtesting on our 2023 exits, and 98% of the time, our exit value was at or higher than our marks one quarter and four quarters prior to the exit, just showing that we are driving a pretty accurate process. Another thing I'll note is our average exit value of 101 versus the average fair value mark of 99, showing that our process, again, pretty accurate, but I think this also points to the strength of our underlying portfolio companies. I'll quickly hit on a couple of stats on portfolio health before we let Adam talk a little bit more about how we deal with our watch list and challenging credits. But if you were to ask me a year ago, when interest rates were, base rates were rising and inflation was stubborn, you know, would we have the stats we have right now? I probably would have said, no. The reality is, the stats across our portfolio today are actually very good. A couple of key stats I look at, one, not on the page, the weighted average leverage of our portfolio at ARCC, 5.9 times. That's below where it's been for quite a while. EBITDA growth of our portfolio companies in terms of over the last 12 months, over the prior 12 months, 10%, very healthy. That's ticked up over the last couple of quarters. Interest coverage, 1.6 times. While it's come down, it's actually stable now. Nonaccruals, an important stat, 1.7% at cost. That's below our historical average, as well as below our peers. Last thing I also talk about is our grade one and two investments. Today, they're less than 5% at fair value. That number continues to come down. One stat that I want to double-click on is our loan-to-value, and you've heard that a lot today. You think about 43%, you do simple math on a typical company. What that means is, for one of our borrowers with 43% loan to value, if they have a one-third reduction in their EBITDA, as well as a one-third reduction in the exit multiple relative to the entry multiple, we're still covered on our debt. Let me hand it off to Adam to talk a little bit more about challenging credits. As we approach trouble credits, our mantra is, "Be early, be smart, be flexible." We've already talked a bunch about the ways we put ourselves in a position to be early. In terms of being smart, you've heard about the quality of our upfront diligence. You've heard about the strength of our relationships, which give us a level of access and transparency that gives us an edge in these situations. We've talked about the tremendous access to data and information that we have across the portfolio that helps us inform our view and make the best decisions. In addition to all that, we add what I think is the biggest, most experienced special situations team in our space. This is a group of 15 dedicated investment professionals, focused exclusively on troubled credits and restructured equity positions. It's a mix of different backgrounds, from private equity, crisis management consulting, traditional bank workout. And we add that pool of resources to the deal team as we're approaching a problem, to bring a fresh perspective and initially to re-underwrite each situation that we're getting involved in. As we reapproach the negotiating table around a covenant or a liquidity issue, this team will dig back in, take both our fundamental view of the underlying business and industry, add to that and look at our position in the capital structure, our experience with the behavior and motivation of the sponsor, the other participants in the capital structure, and our knowledge of the in-court and out-of-court restructuring process and tactics to work through the game theory and come up with a strategy that best fits the situation. So it's this breadth and depth of resources that allows us to be patient and flexible, which is really one of the key foundations to our success. I won't go through the details here. We've laid out a handful of representative case studies that you all can read at your leisure. The key takeaway here is similar to what I was just saying, there's no one-size-fits-all approach to these situations. Sometimes we dig back in, something fundamental has changed in the business or the industry, our view is more negative. We'll focus on de-risking, using the leverage that we have to force a refinancing or a sale of the business, taking control of a company, or simply negotiating with a sponsor to contribute equity and de-risk the situation. Other times, you know, our fundamental view is intact. We view the issue that we're encountering as more of a bump. We'll lean more into extracting incremental economics, taking additional upside. We start every negotiation looking for some combination of all of these things, but we'll use our fundamental view of the underlying situation to prioritize where we want to land in the negotiation. And again, having this breadth of resources allows us to be flexible, gives us all of these plays to run in the playbook. I want to spend a minute talking about our experience and approach to owning companies. As I just said, sometimes the right answer in these situations is to take control. This is typically when, you know, we would otherwise be impaired, number one, and number two, and most importantly, we see a path to improvement, either ways to improve the underlying business, you know, patience through a difficult time in a specific industry or market. And while this doesn't happen a lot in the, you know, in the context of the thousands of companies we've invested in over the last 20 years, given how long we've been doing this, given the size of our portfolio, our team has a significant amount of reps, experience, and most importantly, successful reps in doing this. And it's a big point of differentiation. You know, in terms of our approach, it starts with a heavy amount of upfront, you know, investment of time, and this goes back to having the available resources. Members of my team- -are flying into businesses, you know, spending an intense amount of time on the front end with advisors and the existing management teams to identify the key challenges, key opportunities in the business. We're simultaneously leveraging the power of the platform, to, you know, do everything from take cost out in leverage buying programs, you know, combining the collective buying power of our portfolio, to leveraging the Ares's network and relationships to find the right talent, the right industry expertise, the right operating executives to bring into a situation mapped against those challenges and opportunities that we identify on the front end. We're aligning the economic incentives of existing and new management with ourselves, and then we're having the patience to allow them to execute on a turnaround of the business. And then ultimately, we house the experience in-house, to really know our way around an exit. These are oftentimes trickier situations in businesses. You know, we have the experience going through many processes to construct, you know, the right process, position the company in the right way, hire the right banker, conduct the right process to get to the best outcome. You know, the proof is really in the pudding. We've generated over $350 million in realized gains in a number of these situations. And to put that in context, this is, you know, above and beyond the original cost basis. So positions that, you know, had we not gone down this path, we would have realized a loss on our debt. We've recovered that and generated gains in excess of that. And so while it doesn't happen very frequently, these are really needle-moving outcomes in terms of overall performance, and again, an area I think we're particularly differentiated. I will conclude quickly. The reality is, our team never rests. We're gonna defend the portfolio. You know, while we keep improving our processes, we keep adding to the team, the approach hasn't changed. It's always been be early, be smart, and be flexible, and I think our approach has made a difference. As Adam mentioned, $350+ million in gains on restructurings, but the reality is, we also help avoid losses, we minimize losses, and with these gains, we contribute to the overall returns of the book. Thanks. And with that, I'm gonna hand it over to Kort again. All right. Hello, everyone. Not sure what I did to earn the job of coming back up and talking through our results, but I think it's the best job of the afternoon, 'cause the story is such a good one. So let's dive in. We get asked a lot of times, "What's happening in direct lending market with the yields? Are yields going up? Are they going down?" We're seeing in the press now all the direct lending yields are being compressed, et cetera, et cetera. The answer is, they go up, and they go down all the time, depending on what's going on in the economic environment, the interest rate environment. And you can see here, we have got a couple charts that go back to our inception in 2004, and you can see we've, we've put money to work in all these different environments and, and generated different yields over the period of time. But what's more important than the absolute yield is the relative yield, specifically the relative yield to the broadly syndicated indexes, right? That's our, our core mandate, be putting money to work in all market environments and generate a healthy premium to the liquid markets. So you can see the first lien premium going back over 20 years has been pretty darn consistent. We've generated a 200-300 basis point premium to the liquid markets. This is the leveraged loan index, first lien index. And on the junior debt side, it's been equally consistent, sometimes even 400-500 basis point premiums to the junior debt market, depending on what's going on in the overall environment. There's lots of ways that we capture and generate this premium. We capture it through the upfront fees on a transaction, where we're not sharing those, obviously, with the banks, so we're able to take all that in. That contributes about half of that premium. Obviously, the benefit of speed, and certainty, and relationship orientation allows us to charge a premium. We get more call protection on our deals than liquid market charges. That contributes to the premium. All those things go together and drive this outperformance. At the same time that we're generating a premium to the broadly syndicated loan market, we're doing it with much lower losses. So you can see on our first lien business, we put out $67 billion since inception. We've realized 64% of that back, and we've generated a loss rate of less than 5 basis points annually. That compares to the leveraged loan index of 100 basis points annually. On the junior debt side, $17 billion invested, a loss rate of less than 10 basis points. So, you know, double the loss rate, obviously, on the junior debt side than the senior debt side, but still very de minimis. And when you think about the excess yields that we're getting by investing in junior debt securities, usually that's a 300 basis point or 400 basis point premium that we're getting to do junior versus senior, and we're only taking 5 basis points of extra losses, so that math works. Relative to the high yield bond index, our loss rates are dramatically lower. We thought we'd spend a little time talking about what we look for in our second lien investments, and we're gonna do this with a few different asset classes in our portfolio mix because, again, we do have a more diversified mix. So in the second lien business, we're looking for much, much larger companies, right? $403 million of average EBITDA in our second lien portfolio. 55% of our second lien investments were made into companies that we were already invested in, incumbent companies. What happens often is we get in with a company when it's small, we finance that company through multiple stages of its growth, it gets to the point where it can access the broadly syndicated markets, takes a broadly syndicated first lien product, and then we can still continue to support that borrower with a second lien product. We might have been financing that company for 5 or 10 years. You can see here the average time in our portfolio of our second lien investments is 6 years in the portfolio already before we make our second lien investment, and we're still making second lien investments high up in the capital structure. 49% loan-to-value. So it actually compares pretty similarly to what we're doing on the first lien side. So it's not that we're really investing further down the capital structure. We're just taking that same risk and doing it junior behind a lower-levered first lien security. Very diversified, like the rest of our book, 0.3% average position size. We obviously went through the math on the bottom of that page already. Wanna do the same thing for our preferred equity strategy. This is about 10% of our portfolio now at ARCC. It has grown a bit in the last several years because the opportunity has been there to create really attractive risk-adjusted reward for our investors. What we're looking for in these preferred equity investments is kind of the same thing on the junior debt side. Larger companies, you can see even bigger here, about $500 million average EBITDA. High loan-to-value still, so we're still in that top half, just stretching a little bit past the top half of that capital structure when we're doing these preferred equity investments. Lots of common equity cushion beneath us, high growth companies, and oftentimes, in fact, most of the times, we're making these preferred equity investments when we also have an opportunity to invest in the debt ahead of us in the capital structure, and we're taking a strip. We're just stretching out our exposure a little bit more in the capital structure, but getting paid very well for doing that. On the common equity side, this has been a part of our strategy dating back again to our inception. What we're looking to do here is make small common equity co-investments alongside our financial sponsor partners when we're also providing the debt in the capital structure. You're not gonna see us. Extremely rare we would go in and just make a straight common equity investment. We're already doing a debt investment. We might be making a $500 million debt investment. We'll take a small common equity investment, $2 million-$5 million, something like that. Builds a very diversified book of common equity investments. We don't do it in every company. We do it when we think there's asymmetric upside, and it's paid off. So we've put out $1 billion in these common equity co-investments over the last 20 years, and we've gotten $950 million of return back, so we've almost doubled our money. That's in excess, obviously, of the principal that we invested. In the last 10 years, we've generated a 40% asset-level realized IRR on our co-investment strategy on the equity side. So obviously, what you can see this does for us on the bottom left chart is it offsets our losses, right? So if we only had a debt investment strategy, and we didn't employ this common equity co-investment strategy, that loss rate that you'd see there would exist, and we'd have a negative loss rate because of our common equity co-investments. Also, because of what our portfolio management group does, they were just up talking about a lot of times we're able to own companies through cycles, and come out and make gains on those as well. But through all of this stuff, we've been able to more than offset our losses, such that at ARCC, over a 20-year period, we have a positive loss rate. We actually have a 1% loss rate. It's truly a gain rate, that's offset our losses over that period of time. As a result of all of this, the selection that we talked about earlier, the origination, the strong underwriting that we employ, we've been able to enjoy portfolio companies that grow faster than the rest of the economy. So you can see here we mapped it out, our portfolio company LTM EBITDA growth versus the Russell 1000 Index, and we've outgrown it. There's a line chart on the left, a bar chart on the right. Both show a lot of outperformance relative to the Russell 1000. And this really helps us, especially in today's environment, right, where everybody's focused on rates being higher. What's happening to your underlying portfolio companies on interest coverage? Are they able to service their interest? Well, it helps a lot when you're growing your EBITDA at this kind of pace. And I think that will do it for the results section, and now we're gonna bring up Scott. Great. Good afternoon, everyone. Thanks for sticking around for my section, which I think is the most important section of the, the day today. Very honored to serve as Ares Capital's newest CFO. I just passed my three-month anniversary, so new to the role, but certainly not new to Ares. Going on 20-plus years now at Ares, and almost that entire time, I've worked in direct lending and in Ares Capital Corporation, helping to build the business, and I very much look forward to continuing that growth into the future. I couldn't help myself but look at the time allocation. I'm as an accountant at heart, my section is 10 minutes. The entire, prepared materials are about 2 hours and 5 minutes, so that's about 8% of the time. Now, that is not any indication at all of the relative importance that we place on the left-hand side of the, or sorry, the right-hand side of the balance sheet versus the left-hand side. On the contrary, we actually spend a lot of time as an entire team focused on balance sheet management. Now, clearly, there are some teams, such as my own team, that may spend more time working on it, but it's really a team effort. So whether it's legal, tax, compliance, investor relations, we also work very closely with portfolio management and the investment teams. It's very much a collaborative process to manage our balance sheet. Now, some of the themes in terms of how we manage our balance sheet. Now, we currently benefit from the success and track record of our investment portfolio. But we realized pretty early on in our life cycle, in order to have the best business possible, you need to have a really strong balance sheet, and we also need to be there for our clients at all times. It's not possible to do that without having capital on hand. So for us, having consistent access to the capital markets, even in the toughest times, makes a big difference. One way to ensure that is having a diversity of funding sources. One of the lessons learned from us during the GFC, and we were running the BDC back then, was you cannot just rely on one form of debt capital. Up until that time, we've primarily been financed through the banks. So one of the game changers for us, and really, we think for the entire industry, was getting investment grade rated. We knew it was such an important market for us to get to. It will allow us to extend our maturities, as well as being a very deep market and probably the deepest debt capital market out there, particularly if we wanted to scale and grow our business. As a pioneer in the debt capital markets, we hope to be one of, if not, the first, BDC to get Triple- B rating with more than one agency. And so, yeah, one that I'll have that slide, as it says, "Maintaining," we're hoping it'll improve over time. We've got a very conservative leverage policy. Our stated target leverage for the business is 0.9-1.25 times, and it'll fluctuate depending on the cycle. But we're very comfortable with that amount of leverage, particularly when you look at that leverage compared to other structures and, and other businesses with, with similar risk. And lastly, in terms of our majority unsecured debt, we're certainly happy having majority of our debt capital in unsecured. It certainly benefits our secured debt pricing, given the overall collateralization of our balance sheet. And in the past, we actually may have been criticized for having too much unsecured debt, and this is back when 3%-4% debt was kind of expensive. Fast-forward today, we're certainly happy we, we stuck by our, our strategy and didn't stray from being majority unsecured. It's served us well to this point, and we believe it will serve us well into the future. Now, a couple of things I'd like to point out here on, on this slide. Again, our investment grade ratings mean are of a high priority for us. We spend a lot of time working on them, don't take them for granted, and it's, again, a team effort to make sure we maintain our investment grade rating. I will highlight, this is the first time in our history that we're positive outlook from all three agencies, which is a great accomplishment for the team, but we're not quite there yet. So our hope is that we'll get one, if not all, agencies, to convert those outlooks to a full-on upgrade. We think that'll further distinguish us as the best BDC out there, as well as hopefully improve our cost of capital. One more thing on here, and I, I'd be remiss not to mention the power of the platform in my section. It clearly matters for what we do as well. We have over 40 banks in our bank facilities. That's a large number, but what's not obvious there is that most of those banks, in fact, almost all those banks, also are lenders to elsewhere in the Ares platform. We're seeing more and more consolidation relationships with the banks. Banks are looking to partner with firms who have multiple touch points, multiple business lines, as well as the ability to scale and grow, and that's exactly what Ares is. And so it's not a coincidence we have all these banks in our bank group. Now, could ARCC possibly have this capital structure without Ares? Possibly, but it is certainly made much easier being part of the Ares platform. Carrying on that theme, too, we're also seeing more and more in terms of our debt capital transactions. Whether it's our convertible notes, our recent bond issuances, as well as our recent CLO issuance, we're seeing a lot of familiar names pop up on investor lists that invest with Ares Capital, who are also investors elsewhere on the Ares platform. Now, one last thing on here, I did mention the CLO, that little sliver of blue, on the left there. New for us, in terms of our new debt capital, but it just carries on the themes for us of being able to continue diversifying our funding sources. It's a small piece now, but we expect that to potentially grow over time. It's been very great to add the new investors, as well as being a very cost-efficient way relative to some other secured forms of financing available to us today. Now, in terms of liquidity, I think I talked about the debt capital and our ability to access the multiple debt capital markets. We've generally been able to carry a fair amount of liquidity. It's critically important for us to have that liquidity on hand as we grow our business. Today, pro forma, for some numbers, post quarter end, we're about over $6 billion liquidity. We believe that's one of the highest on a dollar basis, as well as a percentage of our portfolio. One of the things that's maybe not obvious from a liquidity standpoint is, given the size of our portfolio, as well as the vintage of it, there's actually a lot of natural liquidity that happens in the portfolio. Even in times when times are slow, particularly like last year we had around 20% repayment rate of our portfolio, and that can go as high as 60% in the more active markets. On average, we've seen that be close to 40% since our inception. So while not our primary source of liquidity, it's certainly a way to help enhance our overall liquidity profile. This page, in a perfect world, the dark blue box, which represents our term debt maturities, would be pretty evenly spaced in any given year. Thus far, we think we've done a good job of spacing that out. Now, anytime we issue term debt, the latter maturity is certainly a part of goes into thinking of when we issue the debt. And so we've been fortunate to be able to do that and have these pretty well spaced out. Now, the brown boxes represent our evolving credit facilities. Safe to assume that we proactively push these out on a regular basis, even well ahead of when they're maturing. It's definitely a sleep at night approach, where we'd rather have that capital as long dated as possible. In my world, I could, if I could push it out every single day, I would, but our banks wouldn't like that very much. Every year for our corporate facility, which is our largest facility, we actively push that out. And it's been 12 years in a row now, we've pushed that maturity out. And I will also mention that that's made possible because of the deep ties we have with our banking partners, both at Ares and specifically at Ares Capital. And lastly here, in terms of our term debt, again, the most we have maturing in any one given year is $2.2 billion, which is less than 10% of our current portfolio. And that compares favorably to the previous slide, where even on the low end, we had 20% repayment rate in any given year, and even more favorably against 40% on average since our inception. Now, to wrap up here, we believe we're not only the market leader as it comes to our investment portfolio, but we're also the market leader when it comes to our balance sheet. We've been at the forefront of the evolution of the BDCs when it comes to debt capital raising, and we look forward to continuing leading the way into the future. Our spreads and our debt continue to improve, particularly in the past nine months, but we believe there's still room to get better there, particularly when you look at our spread relative to other similarly rated financials. Our size and scale makes us a very relevant issuer in all the markets we access. And lastly, perhaps the thing we're most proud of, we have consistently accessed debt capital in all cycles, which we believe is a testament to the strength of the business and the team. Thanks for your time, and with that, I'll turn it over to Kipp. All right. What a bunch of great programming that was. That's exciting. It was great to get so many team members up on stage, participating, variety of topics. The room is thinning out a little bit, I see, which is not too surprising, but it's a pretty nice day out here in New York, finally. So I'm gonna just finish off with a few minutes before we open for Q&A on performance, some summary outlook for the company, and just, just hit a quick conclusion here. And I think I'm gonna save us some of the 15 minutes. A lot of people seem to get confused over the years about which BDC, how should I evaluate it? How do you think about different yields with different companies? And do I buy it as a multiple of book value? The answer to that is, you know, sort of. I'd focus on this. Ares manages hundreds of funds, and this is how our investors grade us in every other fund, but still people get confused about the BDC. We have built this company to deliver outstanding returns on equity over long periods of time. What you'll see here, a 1-year, a 3-year, and a 5-year, I love the remarkable consistency. We have kind of 350 basis points of outperformance relative to our BDC peers, and I'm sure if you took that back over 10 or 20 years, it would look very similar. This simply put is a focus on generating consistent income and appreciation to NAV over time in a very diversified and methodical way. So this is how we grade ourselves, and we think so far, so good. We, of course, also, with a lot of shareholders in the audience, say, are we generating good returns on the stock? As the CEO of the company, I try not to pay too much attention to the stock from day to day. And like every other CEO, I, I consistently feel that our stock is undervalued. That being said, it's done better than the average and better than most of our competitors. And the reason for that, of course, is because we've generated this 10-year annualized, NAV-based total return that simply outperformed the competition. One of the things that had been unfortunate in the space over my 20 years, you know, running and helping run the company has been, we've been comparing ourselves over the years, frankly, to some companies who haven't generated great returns relative to fees that shareholders have paid to get there. So, looking at the average of 6.5% feels pretty underwhelming, and I think the good news is, the BDC universe has really professionalized around us, and I think we've helped do that. We now have institutional sponsors of BDCs from large, sophisticated investment firms. My guess is they're, they're coming for us a little bit, but we feel pretty, pretty confident that we can keep up this outperformance. Portfolio management team made this point, just a reminder, we do actually generate gains in NAV at this company. Most of the time in lending businesses, you set up to collect income, and unfortunately, you're going to generate net losses. That's not been our experience. We're in a net realized gain position since inception. I made the point in my opening comments, longevity, cycle-tested team, this is all really important. Running a market value BDC is actually, at times, not that easy. A handful of us, as Kort mentioned, ran this company during the GFC. It was hard. We were presented with a lot of challenges, both on the asset side and the liability side. We ran it through COVID. That was also really hard. It was different, but we had companies, as you guys all appreciate, that all of a sudden didn't have EBITDA for months at a time. So I think you can take a lot of stock in the fact that this team's seen a lot of things over the years, and has been able to weather the storm, regardless of what type of storm it was. The last point I'm gonna make here is the dividend in the world of BDCs is obviously sacred to most investors, and we live in a strange paradigm where actually, unlike most other operating companies, we live in a world where you just can't cut the dividend. If you do that, you show this unbelievable weakness, or at least perceived weakness, to the Street and to retail. So we kept it pretty simple from the early days, and we like to say, we actually invented, maybe that's overstating it a little bit, but invented a concept called core earnings, which said, "Pay the dividend, not on gains, not on, you know, funny accounting. Pay it based on the income that you're collecting, and don't overshoot it, because your goal is never to cut it." And we have this very enviable track record of being able to balance that and get that right. And I get asked questions a lot, particularly today, because in this high interest rate environment, ARCC is substantially out-earning its base dividend. We wanna keep this picture in place. The way that we've handled excess earnings over the years is by special dividends, and we've done them in every way, shape, and size you can pay them out. We've paid them out over 4 quarters, 8 quarters, et cetera. We feel, frankly, we don't get as much credit for it, as we get potentially from raising the regular dividend, but we wanna have this picture stay in place, where we have a very diversified set of core earnings that are paying a growing dividend that's well covered. I think you guys all know the stock's done well. We don't need to brag about that, but if you bought the stock 20 years ago, you would have done a lot better than if you'd bought the S&P 500. That's pretty remarkable when you think about a single company generating that, generating that much outperformance, and we think it'll continue. The core ROE at the business today is around 12%. We think there's some upside as we get back into leverage specific to the current state of play, and we think, you know, there's room with incremental fees in the business to drive that number higher. But I'm more focused on the bar on the left. We think generating a 12% ROE over 20 years has served us very, very well, and that's the goal for how we're set up to push forward. So I'm gonna close and just say thank you very much to everybody who was in the room, especially those who are still in the room. Thanks so much to the team. I know everybody put a lot of time and preparation into it. We think we have the absolute best people at this company. And just a final shout-out as well to our events team, who has been working tirelessly to put this Investor Day together, as well as the Ares Investor Day from earlier today. Thanks to everyone in the room. We have some time for Q&A, and I think I was gonna invite Scott and John to come up and help me with that. The lights are very bright, but I will try to see whoever would like to ask a question. Hey, Casey. Is that on? Can you hear? Okay, great. Yep. Well, first of all, I know you, you don't look at the stock that often every day. We look at it 10 times a day. Okay, so congratulations. It tagged the 52-week high today, so. I did see that. Yeah. It's not a coincidence. Mine is kind of a two-part question. Recently we've seen some yield compression coming in from the reopening, broadly syndicated market, from repricings. How much impact do you expect that to have over the next few quarters? And then from a larger perspective, look, you're, you're in an asset class that's generating S&P 500-like returns with investment-grade debt volatility. That's clearly going to attract a lot more capital, and shouldn't that compress down some of the illiquidity premium that you get from that market? Is that something that you would expect to see over time? Yeah, I mean, I think to answer your first question, we're seeing modest spread compression, and I think it's a result of two things. It's probably a recognition, a broader recognition, that maybe the economy is better than folks thought it would be at this point, and that's pretty typical. I think that could reverse if defaults go up. My expectation is for defaults to rise this year, but not rapidly or, you know, to get to anything other than maybe the historical average over the next little while. But spreads will only widen again, most likely, if defaults increase. The other thing that's contributed to the spread tightening has just been a lack of new deal M&A activity, right? So the capital that you're referencing in your second question, that does continue to come into the space, whether it's in private funds or in public BDCs, just has less deal flow to chase, that has to inevitably, I would guess, reverse itself, and that as well can help moderate some of it. We've been on a lot of 20-year history journeys today, I think your second question is a good question, and that we've seen a 20-year institutionalization of this asset class, acceptance as an asset class. And, you know, when we were doing mezzanine deals in 1998 at Indosuez, we were levering companies 4x with 18% coupons and 10% of the company in warrants. So things change over long periods of time as it institutionalizes. But I don't think that the continued capital flow into this arena is gonna dramatically compress returns. But they've been coming down for 20 years as the business institutionalizes. Do they modestly, you know, shift downward from here? Probably, but it's gonna take a while. Sure. Hi, Kenneth Lee, RBC Capital Markets. Thanks for taking my question. Just one on the remarks you mentioned about potentially expanding non-sponsor deal flow. Wondering if you could just talk a little bit more about implications, potential implications to returns, and how you think about the risk profile of such deals, especially since sponsor support is such a big benefit for the sponsor-side transactions. Thanks. Yeah. Yeah. To keep it simple, most of the time, your non-sponsor deals have materially lower leverage and higher return expectations, because you're coming in as the institutional capital, right? Your counterparty is non-private equity back, typically either family business or entrepreneur-owned company, where they've built up, to your point, significant equity value, either for the family or sweat equity for the entrepreneur and, and eventually their family. And it's our assumption in those situations that follow-on capital is unlikely to come from the equity, and if a follow-on capital need is required, it's probably coming from us. It was one of the reasons that we built all this industry expertise around it, because we felt that one of the other safeguards was to really, really know what we're doing in these situations. Not that we do more work or roll up our sleeves, but we take it a little bit more seriously, the risk position that we're potentially in, in the downside, in a non-sponsored situation versus a more traditional, you private equity-sponsored LBO. Finn, go ahead. Hey, everyone. Thanks, Finn O'Shea, Wells Fargo. So going back to the workout panel, and maybe, Kipp, tying in some of your comments at the end of the large institutional peers providing more competition, how would you differentiate your workout group versus those that you see in private equity firms? They call them different things, like group purchasing, operations. Is your function essentially similar, or is there something. Because you have a credit business, those are private equity businesses. What's sort of the pros and cons you see of your portfolio monitoring? Yeah, I mean, I think Adam said this well, but I think we have a very significant number, which makes sense relative to the number of portfolio companies that we have. It just requires more people. I think that's great. I think we also have a more talented, frankly, group of workout and portfolio folks, simply because we can provide Ares is a great place to work, and that group, in particular, is a really exciting place within Ares to work. I think the way that we really differentiate ourselves versus other, perhaps BDCs and direct lenders, though, is we have a skill set and a willingness to actually negotiate in a way with private equity firm, most of the time, who understands that we have the capabilities to actually own a company, and that we're not afraid to do that. A lot of our competition, I would characterize as afraid to own a company because they don't have the people, they don't have the resources, they don't have the skill set. We've developed a lot of confidence, and a lot of muscle memory doing that over 20 years as a team. And when you go into a negotiation saying to private equity client, "Our goal is not to own the company, but if the discussion can't be more reasonable than where we're starting, you know, we can be a little bit tougher." So it's a handful of different things, but that's, i t's an approach that you develop over a long period of time with a consistent group of people, and the more often you do it, and the more often it works successfully, the more confidence you have in actually deploying that approach, right? So hopefully that's helpful. In terms of the comparison to a GPO, I mean, I think of them very differently, right? That's just sort of shared service. We have all that at Ares, but, you know, our workout team is one of our crown jewels, and it's one of the key contributors to our success. Hi, it's Robert Dodd Raymond James. Kipp, can you give us some discussion on the Ares as the platform obviously has its fingers in a lot of pies. ARCC has also been extremely differentiated over the years. You do more second lien than the industry. You know, Ivy Hill is different. There's a lot of other differentiated approaches within ARCC, which contribute to that ROE. Are there more verticals that you'd like to increase exposure at ARCC to kind of preserve differentiation so you're not just budding it? You can compete in the large market, LBO market, but maybe you don't want to. So, I mean, can you give us some thoughts on what kind of assets ARCC is likely to see, or sub-asset classes as well? Yeah, I think, I think most relevant would probably be certain aspects of what we're doing in Alternative Credit, which we talked about earlier this morning. Certain parts of our Opportunistic Credit business, which is investing more in what I characterize as stressed companies and rescue, but with very high risk reward, in our opinion. And then there are probably aspects of the Real Assets business that can contribute to ARCC, in terms of what we can take from other parts of the platform as co-investment. So that could be either real estate or infrastructure. Those are probably the top three that come to mind. Derek Hewett, Bank of America. As a balance sheet lender, having a net realized gain is quite impressive. So of that stat, was there just one large gain in that number, or were there a lot of singles and doubles? It's a lot of singles and doubles, and we've incorporated this more into prepared materials, but it was in Kort's presentation. We're not a believer that we only do first lien to big companies because that'll assure that we never lose money, and we just don't believe in that model. We really believe that in lending portfolios, as we showed, you're going to generate losses. Having other contributors to the return at the company are important, and one of them is a broad, diversified equity portfolio. And it's diversified by sector, by type of company, and by vintage, and it's absolutely been singles and doubles all along the way. Okay, great. And then my follow-up is within the 10% of the PIK interest, that's amendment PIK, have you seen any sort of negative adverse trends in that stat? Not recently, no. I mean, there was obviously a period of time during COVID where that was a pretty significant tool that we had to use in the toolkit to get companies through a global health crisis. But no, recently, we're feeling pretty good about that. Hi, Giles Evans, DSM Capital. Thanks for the question. So, Kipp, in the past, you've talked about the $12 trillion opportunity on bank balance sheets. In fact, that was, there was a pretty thorough slide about that this morning. I think if we look back over the last 12 months, obviously, everyone would point to whatever final form the Basel III Endgame finally takes whenever we find out. But when we think more broadly in terms of regulation, in terms of, like, what you're hearing from banks you might be looking to do deals with, how should we think more about the pacing, the cadence, and the broader regulatory forces? When do you think we're going to see more of that or some of that opportunity actually come off the bank balance sheets? Thank you. It's a good question. I think it's a multiyear opportunity. I think it's going to go very slowly. The portion of our business that probably is most pointed at that is our Alternative Credit, because they're buying assets that tend to be more typical of bank balance sheets, right? So these are consumer, residential, i.e., mortgages and other things. For Ares Capital, we can participate in those, I think, with Alternative Credit, but I think it's a multiyear recalibration by the banks. On the corporate lending side, in terms of buying leveraged finance assets from banks, we think is unlikely unless you want to buy something that's low quality, because for the most part, you know, the large banks don't really hold leveraged finance assets anymore. I'm sure if we wanted to, we could buy some Twitter sub debt, but I don't, I don't think we're probably going to do that. So, but I think it's a multi-year opportunity, probably in assets that largely don't reside at Ares Capital, for the most part. I think we have time for one more question. Maybe related question. You've talked today in recent remarks, earnings call, on your non-sponsor vertical build-out. Is this, like, mainly a U.S. direct and I think you've tied it in with a lot of the industry research groups, seemingly. Is that mainly direct lending, or is that platform-wide? And sort of, what does this mean you expect non-sponsor to become a meaningful. I think you showed, like, the percent of opportunities you see, but, like, what does that translate to, and does that, even that number go up? Yeah, I mean, those resources are situated directly in the U.S. D irect Lending business for the benefit of that complex. That being said, you know, we have other parts of the credit business, and frankly, the firm, I think, where that calling effort will yield benefits. Certainly, our Opportunistic Credit business, which does a lot of non-sponsored transactions, both with public and private companies. I think it can help private equity business to the extent we're calling on firms that maybe actually are being shy about it, but want to pursue a change of control. Those are probably the most obvious two areas, but the resources are all housed here for the benefit of U.S. Direct Lending. With that, we thank you, everybody, for your commitment and time today and your ongoing support of Ares Capital. We're around to address any questions, should you have them, and thank you again for your support. Thanks, everyone.