Good morning, and welcome to Sixth Street Specialty Lending, Inc.'s Second Quarter Ended June 30, 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Thursday, July 31, 2025. I will now turn the call over to Ms. Cami Senatore, Head of Investor Relations.

Thank you. Before we begin today's call, I would like to remind our listeners that remarks made during the call may contain forward- looking statements. Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Sixth Street Specialty Lending, Inc.'s filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. Yesterday, after the market closed, we issued our earnings press release for the second quarter ended June 30, 2025, and posted a presentation to the Investor Resources section of our website, www.sixthstreetspecialtylending.com. The presentation should be reviewed in conjunction with our Form 10-Q filed yesterday with the SEC. Sixth Street Specialty Lending, Inc.'s earnings release is also available on our website under the Investor Resources section. Unless noted otherwise, all performance figures mentioned in today's prepared remarks are as of and for the second quarter ended June 30, 2025. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Joshua Easterly, Chief Executive Officer of Sixth Street Specialty Lending, Inc.

Good morning, everyone, and thank you for joining us. With me today, our President, Bo Stanley; and our CFO, Ian Simmonds. Before we get started, I want to take a moment to express a profound sorrow following the tragic events that unfolded in our city earlier this week. On behalf of our entire company, our hearts go out to the victims and their loved ones. Our thoughts and prayers are with the families, first responders and local firms affected by this senseless and random act. After market closed yesterday, we reported the second quarter adjusted net investment income of $0.56 per share or an annualized return on equity of 13.1% and adjusted net income of $0.64 per share or an annualized return on equity of 15.1%. As presented in our financial statements, our Q2 net investment income and net income per share inclusive of the accrued capital gains incentive expenses were $0.54 and $0.63, respectively. As a reminder, any differences between the adjusted and reported metrics is a noncash expense related to accrued fees on unrealized gains from the valuation of our investments. The difference between adjusted net investment income and adjusted net income of $0.08 per share in Q2 was largely related to net unrealized gains from the impact of tightening credit spreads from the valuation of our investments and positive portfolio of company-specific events. I'd like to frame an important shift we are -- we see unfolding in the sector following the mini credit cycle that took place over the last few years beginning in mid-2022 with the rapid rise of interest rates. Through that cycle, public BDCs, including SLX, experienced idiosyncratic credit issues, putting downward pressure on net asset values. While the average public BDC saw its net asset value per share decline by 10.1% from the…

Thanks, Josh. I'd like to start by sharing some thoughts on the M&A environment and how that's impacting activity in our portfolio. As we've discussed for several quarters, the M&A market has yet to deliver the meaningful rebound that many had anticipated in 2025. This muted transactional environment is clearly reflected in the leveraged loan market where M&A-related loan volume was down approximately 31% in the second quarter compared to the first, and second quarter loan volume marked its lowest levels since the fourth quarter of 2023. From our perspective, a meaningful reacceleration and M&A requires a catalyst for 1 of 3 areas: economic growth, interest rates or time. Given the prevailing uncertainty around trade policy, a surge in near-term growth appears unlikely. And the forward curve suggests rates will remain higher for longer. This leaves time as the most important factor. In an environment of slower growth and elevated rates, sponsors and management teams need a longer runway for portfolio company earnings to grow and generate an appropriate return on investments. While we can't predict the future, we estimate maybe the timing of M&A activity taking an inspiration from the Hubbert peak theory, which was used in the 1950s to estimate when U.S. oil production would peak. Utilizing data sourced from PitchBook, the [ medium ] buyout multiple at peak levels in 2021 has declined roughly 3 turns compared to the medium for closed buyout deals year-to-date. If we assume no multiple compression from the peak in 2021 and an average annual EBITDA growth rate of approximately 9%, consistent with historical S&P earnings growth, it would take approximately 4 to 5 years for a buyer to earn an appropriate multiple of money on their investment. If we apply the same assumptions, but including the rerating of multiples since the…

Thank you, Bo. For Q2, we generated adjusted net investment income per share of $0.56 and adjusted net income per share of $0.64. Total investments were $3.3 billion, down slightly from $3.4 billion in the prior quarter as a result of net repayment activity. Total principal debt outstanding at quarter end was $1.8 billion, and net assets were $1.6 billion or $17.17 per share prior to the impact of the supplemental dividend that was declared yesterday. Our average debt-to-equity ratio was 1.2x, up from 1.19x in the prior quarter, and our ending debt-to-equity ratio decreased from 1.18x to 1.09x quarter-over-quarter. Average leverage was higher than ending leverage, driven by the timing of repayment activity, which predominantly occurred towards the end of the quarter. We continue to focus on maintaining leverage within our target range of 0.9x to 1.25x. And since the regulatory change in late 2018, we have operated with an average quarterly debt-to-equity ratio of 1.03x. Leverage remains within our target range and above our historical average, providing ample capital for new investment opportunities. In terms of balance sheet positioning, we had approximately $1.1 billion of unfunded revolver capacity at quarter end against $159 million of unfunded portfolio company commitments eligible to be drawn or coverage of approximately 7x. Our quarter end funding mix was represented by 71% unsecured debt. As a reminder, we proactively completed several capital markets transactions during Q1, strengthening our balance sheet. Following these transactions, our capital, liquidity and funding profile remain in excellent shape. Further, we have no near-term maturities with our nearest obligation being $300 million of unsecured notes not occurring until August 2026. We did not issue any shares through our ATM program during the quarter. Pivoting to our presentation materials, Slide 8 contains this quarter's NAV bridge. Walking through the main…

Thank you, Ian. It's a tricky investment environment driven by the imbalance between supply and demand of capital. Competition is elevated and it's increasingly difficult to generate outsized returns. However, Sixth Street was built to navigate such complexity. We have a long and proven history of delivering for our shareholders through challenging backdrops including the emerging -- the energy market volatility that started in late 2014 and continued in 2015 and '16, the global pandemic in 2020 and 2021 and most recently, the interest rate hiking cycle of 2022 and 2023. Through past dislocations, we have consistently proven our ability to protect capital and generate value. During these years, SLX generated an average annualized return on equity of 13.7%, a significant outperformance compared to the 7.5% average for our public BDC peers over the same years. While today's market presents a different set of challenges, our core strategy remains unchanged. Leveraging a deep bench of talented individuals who work collaboratively to source and underwrite investments that differentiate our return profile. This investor-first approach is not just a guiding principle, it is deeply embedded in our firm's culture and business model. To appreciate our strategy, one must first understand the framework of our industry. The path to outperformance in the highly regulated BDC sector is exceptionally narrow. First, there is little to no opportunity for differentiation through leverage or financing as the liability side of the balance sheet offers no real source of excess return. Second, most industry participants operate on a similar cost structure of fees and expenses. Consequently, outperformance must be generated almost exclusively on the asset side by sourcing differentiated investments and just as importantly, minimizing investment losses. This is ultimately accomplished by the team, which becomes the real differentiator. This is the core of the Sixth Street model where our platform has consistently shined. For over a decade as a public company, the human capital advantage has delivered strong risk-adjusted returns for our shareholders. Looking forward, we will lean on these proven capabilities, remaining steadfast to our promise to be an investor-first firm dedicated to building a robust business that compound value over the long term. With that, thank you for your time today. Operator, please open up the lines for questions.

[Operator Instructions] And our first question comes from Brian McKenna with Citizens.

Josh, I'm curious how you think about portfolio diversification as it relates to risk. Some of your larger peers have average position sizes of 20, 30, 40-plus basis points. I look at the average position at TSLX continues to be around 90 basis points. So how do you balance managing risk through diversification but also sizing positions appropriately in order to match your conviction in an investment?

Yes. It's a good question. Look, we are -- I think we've done a really good job of managing risk on an idiosyncratic basis. At the end of the day, this is all about idiosyncratic underwriting. And when you look at SLX's loss history and the inverse of that NAV growth over time compared to the rest of the industry, I think it speaks for itself as it relates to our risk management -- set of risk management parameters, to be honest with you. At the end of the day, this is about -- this business is about originating and underwriting credits that have an asymmetrical SKU where you cut off the left tail and minimizing losses. That is your -- as we mentioned in the script, that's the only path at the end of the day to outperformance. Because of the regulatory framework in the industry, you don't have the ability to do it through capital structure or financing costs. It's just about your portfolio yields compared to your losses and your risk management, and I think we have the best-in-class track record of that.

Okay. That's super helpful. And then one of your partners was speaking in a public forum recently. He talked about how an investable theme typically lasts about 1 to 3 years at Sixth Street. So what are some of the more attractive themes you're investing into right now? And really, what areas of the market are the best return opportunities per unit of risk? And then what are some of the sectors or scenes you're shying away from?

Yes. So look, I think that the most challenged, although we still pick our spots, is the on-the-run sponsored finance business. That tends to be the most crowded at the moment, although we still pick our spots in that space if we have industry overlap. But generally, we like more off-the-run nonsponsor stuff today, most definitely harder to source and harder to underwrite for sure and -- but has generally led to a whole bunch of excess return. And so that could be spec pharma, that could be asset-based lending, that could be energy. Those tend to be less picked over spaces with less capital. And generally, they tend to have less kind of traditional private equity sponsorship. Bo, do you have anything to add there?

The other thing I'd say is we continue to build out sector capabilities across the platform. And our shareholders are beneficiaries of that as they source deals across the capital structure. And we still are active in the sponsor space, but it's going to be where our themes overlap. And we're not competing with commodity providers of capital.

Our next question comes from Mickey Schleien with Clear Street.

Josh, a high-level question to start about the sector in general. The growth of nontraded BDCs and other funds investing in private credit continues to broadly pressure loan spreads, and we saw a little bit of that in your portfolio. Do you think that process is a secular trend? And do you expect spreads for debt liabilities in the space to also compress or maybe for fee structures to come down and allow listed BDCs to maintain their arbitrage? Or do you think investors need to begin to accept lower ROEs in the sector? I realized Sixth Street may not be as exposed to these trends, but I think everyone would like to hear your views.

Yes. By the way, Mickey, congrats on the new seat. Glad you joined the call. You are an important voice in this, so thank you. Look, I wrote extensively about this last quarter. So I would point people to my letter on this subject last quarter, about 90% of asset growth, which I think you're referring to, and flows came from the perpetually offered nontraded space. And I would include interval funds, emerging interval funds in that category as well. So I think the challenge you have is in this particular time, the -- and we talk about this in this letter -- I mean in this earnings script, if there is complacency, which is we think investors are looking at the historical return backward-looking LTM, which is higher than the forward, given both the combination of the higher spread in the back book compared to reinvestment spreads today plus the difference between the downward sloping SOFR curve. And so you have spot SOFR, which is somewhere between 80 and 90 basis points above the SOFR swap curve. And so as people do, they kind of look at things and say, what's the return profile been? But we think the return profile is going lower. And that is a -- that needs to shake out. I would expect that, that will shake out and the flows will change, flow get reallocated to those managers that have been able to continue to produce in the new environment and attractive ROE. When you historically look at balance sheet, when you sort of look at balance sheet-heavy financials, we were hard to find a balance sheet-heavy financial that had an ROE requirement less than 9%. And so if it's banks or FinCos or BDCs -- so I'm not super hopeful that the market…

Yes, I agree, and I share all of your concerns. That's why I asked. A couple of more questions, simpler ones. There was some migration in your internal risk ratings from 1 to 2. At a high level, can you tell us what drove that decline?

There were -- so we had a couple of names that actually were lower rated that came off nonaccrual and moved up or were refinanced out. And then we had 2 specific names that went from 1 to 2. Those are businesses that are not performing to our original plan. However, they have strong interest coverage, and so we moved them to 1 to 2. But the general trend was down a bit, but it was 2 specific names.

But not -- I mean you're not seeing sort of that trend across the portfolio based on what I heard at the beginning of the call.

No. In fact, earnings for the quarter across the book were actually very strong quarter-over-quarter. I think, [ Cami ], the earnings growth quarter-over-quarter. So when you look at Q1, our Q1 earnings for 2025 over last year's earnings, they're up in the mid- teens, low to mid-teens on an earnings basis. On an LTM basis, they're around 8%. So the portfolio is in very good shape. These are 2 idiosyncratic names. And again, still performing, still have strong interest coverage. They're just -- they're not performing to our original plan.

Look, Mickey, I would say, generally, one of our big themes is we think we've been pretty good about calling stuff, by the way. I just want to point it out to the team. But I think our -- the theme is that credit quality, we talked about this last quarter, probably quarters, have kind of bottomed out. It probably slightly gets better, it slightly got better for us, at least on the nonaccrual line. And that now the focus is going to be to dividend coverage and which we think, for the first time between the combination of reinvestment spreads and the SOFR swap curve that there might be some dividend cuts in this space. Our dividend coverage happens to be really, really strong due to, a, we have excess economics in our book, and two, we size our dividend and we think about the liability. But like we think credit quality should -- like the economy is growing, credit quality should be pretty good. And so we feel pretty good about credit quality, but we think the shift should be focused now on ROEs and ROEs compared to the promises people made as it relates to the dividend.

Yes, I agree with that as well. And I do expect to see some dividend cuts. My last question, just a housekeeping question, maybe for Ian. What was the nature of the increase in the prepaid expenses and other assets on the balance sheet? It moved pretty meaningfully. I suspect it might be a receivable for investments you sold?

Yes, that's right, Mickey. We had one name that paid off on June 30, but the cash didn't come in until post quarter end. So it was shown in the receivable rather than kept in the SOI.

Our next question comes from Finian O'Shea with Wells Fargo Securities.

I guess going back to the high level, Josh, I was interested in some of your opening remarks on credit. You described them as idiosyncratic, but also likely behind us. So I was wondering why. Idiosyncratic can mean a few things, basically one-off, but I would kind of think of it as coming from looser underwriting and seeing if you think that's something that's changed.

Yes. Look, I always look at our book and say, things are mostly behind us or we think behind us. I would also say that when you look at the shock of the rate hike cycle in mid-2022, it takes -- there's a lag as it relates to defaults. That lag is a function of historically that companies have cash on their balance sheet and some flexibility to manage things. And so although there's a shock, there's a shock absorber, but that absorber gets worn out over time and shows up 2 years later. And so if you think about 2022, we're in mid-2025, I think generally, my feeling is like a lot of the credit issues have shown themselves. As it relates to what we call idiosyncratic, when you look at what we got wrong, what we got wrong was the -- specifically on Lithium was it was a business where it benefited from COVID. We clearly did not see that. And as the COVID kind of ran off and the industry structure in that business changed, we missed it. And so it wasn't generally because of high rates. It wasn't generally because of commodity prices. It was a very idiosyncratic credit issue with that business model.

Yes. And Fin, the only thing I'd say, we never compromise our underwriting standards, as you know, but we sometimes get things wrong. That's something we missed.

Yes, no. Absolutely. And I was referring to the industry at large. I was interested in that. That makes sense to me. The answer is helpful. Just as a small follow-up, can you touch on the changes in the latest co-investment order and if the BDC still have priority on direct lending origination?

Yes, they do. They do. I mean the co-investment order just made co-investment slightly, quite frankly, easier and more manageable. But yes, you will see nothing different.

Our next question comes from Kenneth Lee with RBC Capital Markets.

I think in the prepared remarks, you mentioned that about 30% of the originations in the quarter were driven by nonsponsored transactions. Wondering what your outlook is for the so-called Lane 2 or Lane 3 investments over the near term. Are you seeing more opportunities just given the macro backdrop?

Bo, go ahead.

Yes, sure. I'll take that. So yes, this quarter, it was about 70% sponsored and 30% nonsponsored. That's fairly close to where our historical levels have been over time. It's usually about 65% sponsored and 35% nonsponsored. Some quarters like last quarter, you'll have more thematic nonsponsored coverage. We're -- I think, generally, we're generally positive in second half activity being stronger than it was last year given last year, the election cycle probably paused some demand. The pipeline feels pretty robust. Now it's a competitive environment, we're going to continue to be thoughtful on how we allocate capital. But we're seeing pretty strong demand across both sponsor and nonsponsor activity. So I'm not going to make a prediction on what that's going to look in the second half. It generally follows over the long arc of these -- that 65-35. But we seem to be seeing good activity across each of our thematic areas.

Great. Very helpful there. And just one follow-up, if I may. I think you touched upon this briefly. You mentioned the covenants and some of the documentation on the new investments. Just curious, for the more recent and new investments in the current environment, have you been seeing any kind of changes in terms and documentation?

We have not seen a change over the last few quarters. And in fact, probably the last year in the document standards or covenant packages. They remain stable. I think in part because of how we source deals away from some of the more combed-over areas, but we have not seen a change in that.

Our next question comes from Arren Cyganovich with Truist Securities.

I was just wondering if you could talk a little bit about your thoughts on the push to open up retirement vehicles to private investment assets and if you have any expectations to how that might impact the direct lending market.

Yes. I mean I think it's a little too early to tell. I think it is -- I think it's a very complicated issue. I like the idea of giving access to returns and alternatives to individual investors. They've obviously had some of that through the BDC sector on the private credit side. To be honest, I'm a little concerned that the incentives are not exactly right and that there was a decent prophylactic around alternative where you had either super sophisticated individual investors or institutions that could do the work. And I'm a little concerned about their ability to do the work and individual investor protections. Hopefully, that gets cleared through and people are responsible in that way. I mean I can tell you, roll back 15 years when we started in the BDC industry and you talk to individual investors, I think this is not supposed to be snarky at all, but there was -- the vast majority did not understand the difference between return on capital and return of capital and dividend yield and ROE. And so there was a whole individual investor that was chasing high dividend paying stocks, not realizing that it was return of capital, not return on capital. And by the way, some of that still exists. And so the -- and the people on this call, which has been significant upgrading contribution to this space, have been doing that work for -- on the research side to make sure that people understand that. But -- so I have mixed feelings, I'm concerned. I understand why GPs want access because it's a big TAM and big growth. But at the end of the day, we got to take care of our clients, and our job is to provide something of value of clients and not -- that focus still needs to be -- should remain, which is everything works well when you provide value to your customer, and the entire ecosystem takes care of itself. And I would urge the space to keep that at the most -- as their North Star.

Got it. That's helpful. And then just a quick one on new investments. There was an 8% stake in -- it looks like a structured credit. Can you maybe just talk a little bit about what that is and what kind of the underlying assets are in that?

Yes. I'll hit that real quick. On occasion, we buy a structured credit portfolio, which is of corporate loans, the underlying of corporate loans and probably -- typically broadly syndicated loans. Those securities or rated securities, typically BB or BBB. They offer competitive risk-adjusted returns with subordination. And so we've come in and out of that market through the years. So I think in -- and we sold 8 structured credit investments in Q2 that we had bought for a price of [ 97.5 ] and had a whole bunch of carry that we sold for [ 102, ] I think. And so we've come in and out of that market.

Okay. So these are just more opportunistic then?

Yes.

Our next question comes from Melissa Wedel with JPMorgan.

I appreciate the context that you provided around sort of second half activity levels that you might expect to see. I'm curious if you're also expecting sort of repayment activity to remain elevated in the second half to sort of match that? Just note, looking at the net repayments over the last couple of quarters, they've been pretty sizable, and I know you don't manage to that necessarily on a quarterly basis, but just trying to put a framework around that.

Yes. I mean, look, the good news, I think for SLX shareholders is that we have outsized exposure to vintages post '22 rate hiking cycle. So those were higher spread assets. As you know, how our accounting works is we don't recognize any of the upfront fee day 1, unless there's a syndication involved and they typically have call protection. So as those get called away from this early, they produce excess income. And so you have activity-based fees when repayments pick up. And so I 0would expect on the margin repayments to stay elevated, given that exposure that we have that others do not have or don't have as much of because we kept on investing through that rate hiking cycle. And so I think that, in the short term, is good for net investment income because there will be excess returns and fees. And then we're going to -- as I said at the end of our script, we got to like -- we do it for a living. We have a large top of the funnel, and we'll go replace it with stuff we really, really like.

Right. Okay. And then I just wanted to follow up on sort of looking across the portfolio. Now that you've had a few more months after some tariff announcements. I'm just curious if you're still seeing low exposure across the portfolio. Has your view changed on that at all?

No. I mean, look, I'll let Bo hit it. I think the answer is no. I think our tariff exposure is actually reduced post quarter end. But go ahead, Bo.

That's exactly right. If you remember right, we had very low exposure, less than 1% of the portfolio on a fair market value basis. It was really 3 names that we thought had direct exposure. We didn't know exactly what the impact was going to be. Since last recording, actually one of the names -- one of those 3 names has actually been paid off. So we -- business was performing well, paid off into cheaper financing. So it's down to 2 small names at this point.

Our next question comes from Paul Johnson with KBW.

Congrats on the good quarter. Can I just ask, so what drove the higher other income this quarter versus last? Was that just the repayment activity in the quarter?

Sorry, Paul. You cut out. I think the question was, what drove higher other income?

Yes. Correct.

Yes. This is Ian. I'll take that one. It's really just a number of miscellaneous exit fees that were embedded in transactions that paid off during the quarter. [indiscernible]

And sorry if I didn't catch it, but did you guys disclose what the prepayment income was, the accelerated prepayment income per share this quarter?

From a per share basis, the prepayment income was about 1/3 of activity-based fees or around $0.06 per share was specific to prepayment fees.

Yes. I mean, Ian, correct me if I'm wrong. In the other income line, there was exit fees, which is like a very close cousin to prepayment fees. So the other income line was, how much?

Other income was about $0.07 per share.

Yes. So I think it's fair to think of like prepayment and excess fees being pre -- on a gross basis, somewhere between $0.11 and $0.13 per share. They were pretty close cousins. The question -- the difference is technically is a prepayment income was existed in the contract from day 1 where an exit fee might have existed in the contract along the way, right, Ian?

That's right.

Okay. Got it. That makes sense. Very helpful. And then in terms of -- sorry, go ahead. Didn't know if I cut someone off there.

No, no. I'm just saying they're the same thing. Go ahead.

Okay. So in terms of the structuring fee income though, I mean, from the kind of sponsor portfolio optimization that you mentioned with some transactions or add-on activity there. Is there any sort of structuring fee income that would come along with that?

No. I mean I may take a little bit of a deep dive on this because I think people in the industry do it different. So there are people in the industry that take some of their upfront fees and split it between a structuring fee and OID. And the issuer doesn't really care if the 2 points you get upfront and half of the structuring fee and half of OID. And ultimately, then what happens is, is that you have smaller OID that gets amortized over time. So something -- if -- you take more of the income upfront. And when something prepays, you have less accelerated OID because you've already taken the income. And that is not how we do our accounting. How we do our accounting, unless there is a syndication fee, we don't take a structuring fee. It all goes into OID. And so when the portfolio churns, there's more accelerated OID and there is -- than would have been a case if we took a structuring fee. So all of our fees are effectively deferred and put in OID, at least from a structuring perspective. So people do it different. It's a really important nuance. So in the former case, new activity will drive NII on a marginal basis. In the latter case, our case is that repayment activity and portfolio churn will drive NII. Sorry for the deep dive.

No, I got it. That makes sense. And again, helpful answer there. Last one for me, just on the Lithium restructuring positive. It seems that, that was done without any additional write-down or loss on the investment this quarter. But can I just ask, just on the earn-out securities. So what exactly, I guess, is kind of triggering the payout there based on revenue or EBITDA? Or is there any sort of sales that are taking place within the company? And also just kind of what's maybe the expected kind of realization time line there? And that's all for me.

Yes, sure. So again, this was split into 2 securities, which was an interest-earning debt security that is smaller and then an equity participation and all cash flows that are generated beyond that. The expectation is that the duration will be about 3 years to fully realize the value on that equity and there's a chance that we can overperform that. We took a view of what those cash flows would look like over the 3 years, and that's how we valued the equity security.

They're loan amortized, right, Bo?

Correct. Correct.

And our last question comes from Robert Dodd with Raymond James.

Congrats on the quarter. If I can go to -- back to the repayment issue briefly, and then I've got a different one. To quote Ian, expect full year NII ROE and obviously [indiscernible] to be in the top half of previous guidance. But if fees remain elevated, could be above that, to quote Josh, expect repayments to remain elevated. And then if we look at your fair value to [ core pro ], which ticked up fairly meaningfully, this quarter tends to imply that you're expecting less core protection in certainly Q3, maybe the second half than you got in the first half or less of that's built into NAV. So can you reconcile, like you can have high repayments without having high repayment fees, depending on the vintage of the asset, et cetera, et cetera. But can you kind of reconcile those bits? And like if the repayments are elevated, why wouldn't fees be elevated, too? But that doesn't seem to be factored into your fair value to [ core pro ] ratio from the presentation.

Yes. So what I would say is, look, my comment as it relates to repayments as a Q3 look. Ian's comment was a full year look. So let's start with that, right? Like there is a -- Ian was talking about full year guidance. I was talking about in the next quarter. That's kind of what we have as much visibility as we have. And then obviously, fees and the amount of fees is a little bit of a function of what vintage, and we don't control that. But -- so I'm not sure there's a huge disconnect of what we all said. We're just trying to round it out.

No, no, no. I appreciate that. And that will breakdown those for me. On the second question, if I can, I mean, I was going to ask you about the retro peak oil model, but something simpler. To your point, Josh, typically, balance sheet financials, you need an ROE greater -- balance sheet heavy financials. You need an ROE greater than 9% to trade at book or better. If institutional investors are the primary ones driving valuation. I think that's my addendum to that. So how do you think -- given a huge amount of capital raised, obviously, as you're well aware, these evergreen funds, which aren't -- it is not institutional capital. So -- and obviously, those are, for a lot of the market, the actual kind of drivers of spreads and volume more so than the public vehicles are. So how do you think to that point, like that 9%, is that what the industry is going to be satisfied with given what the evergreen funds are doing and who the primary capital comes from on that front?

Yes. I mean I'm a big believer that markets are typically not very efficient in the short term but very efficient in the long term. And what I would say is if you have an individual investor or an RIA who's sitting in front of that, an individual investor, they should, at some point, are going to pick their head up and say, I can earn -- I can buy something at a discount to book in the public markets and earn a 9% versus buying something at par and have daily liquidity versus buying something at NAV and rebuying something at NAV because I'm not redeeming, that I'm earning a 7% and that I may or may not have liquidity when I put it at the end of the quarter. Like that will work its way through if people are doing their job as fiduciaries. And so in the short term, that disconnect might exist. But in the long term, my hope and belief, if markets are doing their job and people are active fiduciaries, they will put their clients on the best risk-adjusted return on capital and look at alternatives and look at liquidity premiums and optionality and discounts to book and all that stuff. So I think ultimately, it will come out in the wash. You would, I think all things being equal, want to own something where you have daily liquidity versus not and where you might get [ gated ]. And that -- people have to experience that firsthand to kind of realize it. But at some point, they will and will work its way through.

At this time, I'd like to turn the call back over to Josh Easterly for closing remarks.

Look, two things have gone -- look, we live in -- the teams in New York City, most of us live in New York City, except for Fish and Cami. And I would say, it's hard not to end any type of call this week without saying that it is -- life is fragile and random. And like what happened this week was on nobody's bingo board and people should make sure they are present with the people they care about and give them lots of hugs. So I will say that because that's top of mind for me. Another thing that's top of mind for me is I look back at what Sixth Street Specialty Lending has accomplished, prepublic and postpublic since 2014. And it's about the team. The team has just done an incredible job over market cycles, navigating difficult times, and I couldn't be prouder of the people that I work with, and the platform is a special place where we have the ability to really find unique investments for our investors with the big top of the funnel, and it's a pleasure working with the people I work with. So those 2 things are top of mind to me. And I thank everybody for attending the call, and I hope people have a peaceful rest of the summer.

Thanks, everyone.

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.