24 | 2023 Investment Outlook | December 12, 2022 ƒ For context, that figure is almost double the great financial crisis of 2008, and about five times the deep (albeit short) COVID recession. By contrast, the current default rate is below 1%. Though we expect annual levels to rise somewhat, it’s clear to us that the market is oversold. ƒ Historically, starting yield has been a good guide to total return. With a floating-rate load yield starting at 9.4% in November 2022, we believe returns that include capital appreciation in excess of coupon income may well be in store. We’ll never “call a bottom,” and prices may be unpredictable in the near term. That said, we think loans trading at a deep discount elevates the opportunity for investors. It’s a chance for high income, capital appreciation and participation in the rising rates that may lie ahead. “With a floating-rate loan yield starting at 9.4% in November 2022, we believe a ‘coupon-plus’ total return in 2023 may well be in store.” The index performance is provided for illustrative purposes only and is not meant to depict the performance of a specific investment. Past performance is no guarantee of future results. See Disclosure section for index definitions. Risk Considerations: Loans are traded in a private, unregulated inter-dealer or inter-bank resale market and are generally subject to contractual restrictions that must be satisfied before a loan can be bought or sold. These restrictions may impede the strategy's ability to buy or sell loans (thus affecting their liquidity) and may negatively impact the transaction price. It may take longer than seven days for transactions in loans to settle. Due to the possibility of an extended loan settlement process, the strategy may hold cash, sell investments or temporarily borrow from banks or other lenders to meet short-term liquidity needs. Loans may be structured such that they are not securities under securities law, and in the event of fraud or misrepresentation by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. Loans are also subject to risks associated with other types of income like high-yield bonds described above. Investments in foreign instruments or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical, currency exchange rates or other conditions. Changes in the value of investments entered for hedging purposes may not match those of the position being hedged.