Our Process

Pearl Diver Capital has pioneered a rigorous methodology for identifying investment opportunities, and fundamentally analyzing each asset of the underlying collateral pool and the bond’s structure:

Uncover Investment Opportunity

Broad and deep relationships with sell-side contacts
Extensive relationships with banks and other holders looking to exit structured credit
Significant market presence in niche structured credit markets
To date PDC has rejected approximately 8 out of every 10 investments considered

Initial Analysis

Test relative trading value of opportunity
Initial top-down fundamental credit anaysis
Evaluate initial underlying portfolio credit metrics
Model returns on conservative, broad-market assumptions
Evaluate overlying credit protections and cushions

Detailed Fundamental Credit Analysis

In-depth credit analysis of "tail-risk": industry, company, structure
PDC re-rating algorithm, proprietary algorithm that tests & adjusts underlying ratings
Credit analysts methodically re-rates each underlying asset based on algothithm and experience
Credit analyst takes a view on manager/servicer and portfolio outlook including default rate probabilities

Detailed Quantitive Analysis

Detailed cash-flow and stress test analysis using portfolio specific PDC assumptions obtained from fundamental credit analysis
Detailed review and analysis of indenture documentation

Approval & Purchase Process

PDC internal Investment Committee, investment opportunity 1-pager which includes Credit and Quant conclusions
Debate, does the investment meet goals: Capital Preservation & Superior Risk Adjusted Returns - opportunity may be rejected (8 in 10 rejection rate)
Execute buy/sell investment

Ongoing Monitoring

A proactive approach is taken to monitoring each investment on an ongoing basis
Is the investment meeting goals: Capital Preservation & Superior Risk Adjusted
PDC quarterly report is produced for each investment
Investments are, at least quarterly, marked-to-model and marked-to-market