Pension fund: What about the potential that defaults will render the investment unsuccessful? HM: Well, our average default rate over the last 26 years in high yield bonds—which are junior in the capital structure to loans like the fund holds—has been about 1% a year (and bear in mind that there are recoveries in the case of default, meaning our credit losses have been less than a percent per year). Thus defaults at our historic rate would do little to diminish the fund’s promised return in the 20s. Pension fund: But what if it’s worse than that? HM: The worst five-year period we’ve ever had
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