Lachlan Pullar: Can you give us a sense as to why within all of the kind of span of the umbrella of private credit, why PIMCO thinks asset based finance is such an attractive entry point today?
Chia-Wen Teoh: Yes, and I think the best way to frame it is the starting conditions of the borrower in the current point in the market. If you think about the asset base finance being geared to Main Street everyday life, the profile of the consumer is very important. And the consumer is actually in a very strong state today for a few reasons. I think firstly, the consumer in the U.S. in particular have delevered since the global financial crisis. So debt to income ratios today are at 20 year lows. And that's a really good starting point as I think about asset based finance. In fact, from an interest coverage ratio perspective, the data shows that the U.S. consumer has roughly around 8 to 9 times interest coverage ratio. Again, very strong data. The U.S. consumer is a very large cohort. And naturally there will be different types of consumers that we need to take into account. And we focus on the upper 50%, typically homeowners, typically high income and high wage earners. And this allows us to de-risk the types of loans that we invest in because the counterparts, particularly homeowners, would have seen their wealth increase over the last five, ten, 15 years, given home prices appreciated and financial assets have also appreciated. And this cohort also consistently sees stronger wage growth. And therefore we would focus on that cohort of consumers.
Lachlan Pullar: Where are we leading into within specific thematics under the umbrella of asset based finance?
Chia-Wen Teoh: Yes, we like sectors where we see really strong fundamentals and fundamentals that are true cycle. So you touched on aviation finance as an area that we are very constructive on, primarily because we are currently in a market where there is a significant supply demand imbalance. Air travel demand are at historical highs. But aircraft supply, new aircraft supply is significantly backlogged. So if you were to go to a manufacturer today and order new aircrafts, you’ll find that the wait could be five years or eight years long. So that creates a really constructive environment, for aviation financiers or leassors who have aircraft to put out on lease. The structure of these leases tends to be fixed rate, and fairly long term, 8 to 10, 12 years. So an opportunity today to lock in some of these higher yields when the fundamentals are constructive and continue to enjoy the economic benefits of that for some time to come. The second sector that we like, and we touched on it earlier was the residential market. We think that the residential market in the US particularly has benefited from very strong home price appreciation. If I think about the total residential mortgage value today against the total residential assets stock, the implied loan to value is around 30%. And that is a very healthy market, that investors should look into. Obviously mortgage rates today are high and the transaction volumes are as a result muted. We're still able to get really good deal flow in these circumstances and again, thirty year fixed rate mortgages in the U.S., that longer term duration can be quite helpful as well. And then finally consumer finance, we're really selective here but we have seen pockets of opportunities where we can clearly stay high in quality. There is data that shows that prime consumers have very low default rates and very stable. We don't see big wild fluctuations during economic cycles. And we focus on this group, the homeowner cohort, the upper 50% of the consumer cohort.