The Credit Investor: Credit Investing by the Numbers: Bonds, Loan Funds, BDCs and Private Credit Funds, Default, Recovery and the Real Yield, With the Models Supplied.
Julian R. Sterling
These are the companion files of The Credit Investor by Julian R. Sterling.The book on Amazon →
These are the companion files of the book. An investor puts $500,000 into seventeen credit lines: investment-grade and high-yield bonds, a floating-rate loan fund, three listed BDCs, a private credit interval fund and Treasury bills. On the day of purchase the portfolio displays 7.46 percent. Three years later it has earned 6.02 percent. The BDC that showed 14.67 percent earned 7.76 percent; the dull one that showed 10.11 percent earned 10.16 percent. Three workbooks reproduce every figure the book prints. No sign-up, no email is asked for, nothing is locked. Yellow cells with blue type are inputs; grey cells are formulas.
The archive holds the six files below, with 00_START_HERE.md at its root. No macros, no circular references, no external links in any workbook. They recalculate in Excel, LibreOffice or Google Sheets.
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Harrowgate Pneumatics from its 8.50 percent coupon and a price of 94.00 to a yield to maturity of 10.06 percent and an expected yield of 1.06 percent; the default and recovery assumptions; the high-yield sleeve by number of defaults and recovery; duration and convexity from the cash flows; the CLO tranche grid. Every computed figure is a live formula, and the Checks sheet sets each figure the book prints beside the cell that computes it.
The bond ladder, the high-yield bonds, the loan fund, the three listed BDCs with their income stacks, dividend coverage, NAV and discount, the interval fund's fee stack and NAV, the repurchase proration table and the gate, and the tax illustration. Every figure is a live formula, checked on the Checks sheet.
The seventeen lines at purchase, then every line's cash flows quarter by quarter in the base case and in each stress scenario, the IRRs by line, sleeve and portfolio, the line-by-line shortfall and the quarterly review figures.
A line ledger, a yield bridge for one bond, a fee stack for one leveraged fund or BDC, and a quarterly review with triggers you set in advance. Every input is empty and every output a live formula.
Harrowgate Pneumatics, 8.50 percent coupon at 94.00: yield to maturity 10.06 percent, expected loss 9.00 percent a year, expected yield 1.06 percent
One fund
The interval fund pays 9.00 percent; after interest, fees and credit losses it is expected to earn 7.19 percent, and its NAV falls from $25.00 to $23.497 in three years
The portfolio
Seventeen lines, $500,000: displayed 7.46 percent, expected 6.25 percent, earned 6.02 percent; 6.63 percent without the one default
The files are provided as they are, without warranty of any kind. The models are illustrative: the investor and every issuer, fund and BDC in them are fictional, and the figures are the book's assumptions, not market statistics or forecasts. Nothing here is investment, legal or tax advice.
Articles on this book
9 of the calculations in these workbooks, worked out in full. All articles.
Is a BDC trading at a discount to NAV actually cheap?Only if NAV holds. A BDC bought at a 20.0 per cent discount, yielding 14.67 per cent, returned 7.76 per cent as NAV fell 11.6 per cent and the discount widened.
How do you calculate yield to maturity on a bond?Solve for the rate that discounts every coupon and the principal back to the price: an 8.50 per cent bond at 94.00 with five years left yields 10.06 per cent.
What does a floating-rate loan fund actually return?Distribution yield less credit losses: a loan fund paying 6.65% with 3% defaults at 35% loss earns 5.72% a year as NAV slips to $9.69. In a recession, 3.68%.
How do you calculate the yield on a Treasury bill?Divide the discount by the price, annualised on 365 days: a 13-week bill quoted at 3.92% costs 99.009111 and yields 4.014% bond-equivalent, 9.4 bp above the quote.
How do you calculate the convexity of a bond?A 10-year 5% bond at par has a convexity of 75.00: it adds 0.37% to the duration estimate for a 100 bp move, taking the loss from 7.72% to 7.35%.
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