Robert Dodd: Got it. Got it. Yeah. One more, if I can, it relates to this. On Rocade, I mean you made a, I think, $15 million incremental investment. I’m sure this platform made more, but in that business, I mean is that — was that opportunistic that was a big case or whatever it is, however I should turn that? Or is that kind of a temporary increase? Or should we expect it to continue to potentially grow at that pace? I mean, it grew about $30 million during 2023. Is that the kind of growth that platform could add and it’s income producing in a good return as well. So not criticizing, just trying to scale the growth opportunity there.
Elizabeth Murray: Yeah, Robert, good question. And on Rocade, when we initially made the investment, the platform as a whole had a $250 million preferred equity target. And so they’re able to draw on that. And so the $15 million that you’re referencing was just a preferred draw. And I believe we have about $17 million left on that draw. We don’t anticipate much to be drawn in 2024. It was just, say, we’re ramping in 2023 and getting a credit facility in place. But you can just know that once that unfunded amount has been drawn, we are not going to make any additional commitments at the BDC level.
Robert Dodd: Got it. Thank you.
Operator: Thank you. The next question is coming from Casey Alexander of Compass Point. Please go ahead.
Casey Alexander: Hi. Good morning. And thank you for taking my questions. First off, there’s been some off-hand criticism of the BDC of surrounding the degree of complexity that the BDC has. And a good for instance here in this quarter, is the puts and takes from forward currency contracts that it costs about $9.5 million or about a $0.09 per share swing that had not happened at all. This would have been a fabulous quarter. So I think investors would benefit if you could explain why these puts or takes are there, what the foreign currency contracts are covering? Are they doing what they’re expected to do relative to the investments that they’re covering? And what should we expect from that in the future? Because that’s a pretty big swing to earnings that could have made this a good quarter, a really fabulous quarter.
Matt Freund: Yeah. Thank you for the question, Casey. And I certainly agree that there are layers to our strategy and to our structure based on kind of a historical makeup that had just clouded some of the picture. We’re working to simplify it, and we will continue to do so. Specific to your question, and so let me just, at a high level, describe why these are in place and then give you some perspective in terms of how to interpret it this quarter as well as where we expect it to go in the future. And so as I think our investors know, we have a global focus at Barings and historically speaking, whenever the public vehicle was acquired in 2018 and then subsequently ramped, we used a fair percentage of European assets to do that.
And so, as we think about the non-USD-denominated portions of our portfolio, we are not in the business of taking FX risk on those par and principal positions. And so what we do is, we are rolling FX — we maintain rolling FX hedges on a quarterly basis that actually insulate kind of the portfolio performance from the FX movement. Admittedly, as you have appropriately noted, that will — that can have the capacity to create volatility if the FX movements are happening within the quarter and then whenever the FX hedges are themselves rolled. And so that did happen this quarter that also coincidentally happened last quarter. If you look at the movement between the USD, EUR FX rate from October 1st to December 31st, you’ll see that the euro strengthened meaningfully.
As part of that, whenever those contracts were rolled, there was a meaningful FX gain that was kind of recognized with respect to that position. In terms of the go-forward strategy, I’m confident in telling you that foreign transactions, non-US-denominated transactions will be a lower percentage of the portfolio as we continue moving forward. And we are also actively working to kind of figure out ways to mitigate the severity of the movement that we see on the FX line, because we agree with you that it creates a little bit more of a cloud that actually intended to be a net neutral impact to the underlying shareholder.
Casey Alexander: All right. Thank you. Secondly, in the originations and repayment schedule, there was a significant amount of repayments that were actual sales, not to the JV, but outside the platform. And I’m looking at the net debt to equity ratio that you’re reporting on the last page of your release of 1.15 times. I mean should we think — I mean, it clearly looks like you’re trying to manage to a particular level. Should we be thinking about that as kind of the sweet spot of where you’d like to stay? Or do you think that you’ve calmed things down in the portfolio a little bit as you get rid of some of the non-income producing equity, you can take that number up a little bit and generate a little higher ROA. How are you thinking about managing to that level?
Matt Freund: Yeah. I’ll start and then want to make sure that Elizabeth has a comment — has an ability to comment on the leverage targets generally. So our stated target is 0.9 to 1.25 times. We will and intend to operate within that range. As a theme for us this quarter, I think that we wanted to demonstrate flexibility. So we were focused on kind of the senior unsecured issuance, which gives flexibility to our capital structure. We appreciate that historically, we’ve run a little bit higher in terms of our leverage ratio than perhaps we really wanted to. And so I think that there was certainly an active — there was a very active momentum around freeing up some capacity for possible investment opportunities here moving into 2024.
