Equity Discount RateVolatility in returns requires a high equity discount rate, potentially impacting investor confidence and stock valuation.
Leverage RiskCLO equity is inherently highly levered, typically around 9x to 13x, and Sound Point intends to use additional leverage, which increases risk.
VolatilityROE for Sound Point’s previous fund, Harbor, averaged 16.9% from 2019 to 2023, but had two years close to break-even, indicating volatility.