Market & Topical Perspectives

Reflections: Breaking Ground in Search of Hidden Gems

Reflections: Breaking Ground in Search of Hidden Gems

After two years of declining net issuance and heavy investor outflows, the municipal bond market began to recover on both fronts in 2024. While the favorable tailwinds that emerged last year may continue in 2025 to support the market broadly, John Miller, head and chief investment officer of the High Yield Municipal Credit team, walks a differentiated path. As he discusses, this includes directing the team’s underwriting knowledge toward the large, diverse cohort of nonrated municipal bonds.

Supportive Muni Dynamics May Continue

As the Federal Reserve steadily raised its policy rate across 2022 and 2023 in the face of decades-high inflation, many state and local municipalities—their coffers generally well stocked thanks to Covid-era federal stimulus and a large post-Covid rebound in tax revenue—curtailed bond issuance in what was a volatile interest rate environment. As shown in Exhibit 1, annual issuance of new muni bonds during the two years of the rate-hike cycle was off about 20% from previous levels. With the Fed on hold and ultimately moving to cut rates in 2024, tax-exempt issuance bounced back to a record high last year, and we believe a healthy level of supply is likely to persist as the benefit of federal support wanes and interest rates continue to moderate.

Exhibit 1. With Interest Rates off Their Peaks, Muni Bond Issuance Recovered in 2024
Annual Municipal Bond Issuance in Billions of Dollars, 2013 through 2024

Source: Securities Industry and Financial Markets Association; data as of January 2, 2025.

Fed tightening also weighed on the demand side of the muni bond market, as higher yields on cash equivalents like money market funds lured investors away from other, riskier fixed income assets.1 Investors began to move back into muni mutual funds and ETFs in 2024, but inflows to date remain far from recouping all of the outflows from 2022 and 2023.2 In our view, the potential for lower interest rates in 2025 may provide durable support for inflows and help absorb renewed muni issuance.

Meanwhile, the fiscal positions of municipalities—unlike that of the US federal government—continue to be strong. The overall amount of municipal bond debt outstanding has not materially changed in the last 20 years; over the same period, total US corporate debt has doubled and federal debt has tripled.3 Total financial assets for state and local governments are at an all-time nominal high, with notable strength in reserve funds, and expenditures have begun to moderate.4 Ratings agencies maintain a positive bias toward muni bonds, as upgrades continue to outpace downgrades; moreover, most of the defaults we saw last year were idiosyncratic in nature.5

We believe both technical and fundamental dynamics may continue to be supportive of municipal bonds in 2025. While munis declined in tandem with Treasuries immediately following the outcome of the US presidential election in November, the market reversed shortly thereafter.6 There has been much rhetoric around potential policy impacts of Trump’s victory, but specifics remain to be seen. An extension of the individual taxpayer provisions in 2017’s Tax Cuts and Jobs Act seems likely given a unified Republican government, but narrow majorities in the House and Senate mean there are no guarantees. More importantly, ongoing economic growth and labor-market strength is likely to support robust tax revenues and healthy fiscal dynamics for municipalities, as well as high recovery rates in the event of bond defaults. Continued monetary easing—the latest projection from the Fed suggests an additional 50 basis points worth of cuts to the policy rate in 2025, which would bring it to a range of 3.75–4.00%—could provide additional support to muni bonds.7  

Dispersion Brings Opportunity

Though it has pulled back alongside Treasuries, the muni bond market continues to offer investors yields above the historical average, as shown in Exhibit 2. Importantly, however, the fragmentation of the very large muni market results in significant dispersion of yields and prices for similar bonds, particularly lower in the credit-quality spectrum. This is most notable among those bonds not assigned a credit rating by a nationally recognized statistical rating organization (NRSRO)—i.e., unrated bonds. Exhibit 3 depicts the much wider range of yields and prices among unrated bonds within the S&P Municipal Yield Index compared to the AA/Aa2-rated cohort. In our view, this dispersion represents a bountiful hunting ground where active managers can leverage their credit underwriting skills to identify bonds that are undervalued relative to the overall market.

Exhibit 2. Muni Yields Remain Higher than the Historical Average at the Index Level…
Bloomberg US Municipal Bond Index Yield to Worst, January 2003 through December 2024

Note: Yield to worst is a financial metric that helps investors assess the minimum yield they can expect from a bond under various scenarios. It accounts for the bond’s yield in the worst-case scenario, considering factors like call provisions, prepayments and other features that may affect the bond’s cash flows.
Source: Bloomberg; data as of December 31, 2024.

Exhibit 3. …but Significant Price and Yield Dispersion Exists Among Individual Credits
Comparison of Bonds in the S&P Municipal Yield Index with 2044 Maturities

 

Source: Bloomberg; data as of December 31, 2024.
 

Unrated ≠ Uninvestible 

The High Yield Municipal Credit team's investment philosophy often leads us to areas of our universe where we believe our expertise in credit analysis and security selection gives us an advantage. Unrated bonds—a segment that comprises approximately two-thirds of the S&P Municipal Bond High Yield Index based on number of issues—are a prominent example.8

While unrated bonds have not been subject to the proprietary scrutiny of the likes of Moody’s or S&P Global Ratings, we don’t believe their lack of rating should be interpreted as a reflection of the borrower’s capacity to meet its financial commitments. There are a number of reasons a muni bond may go unrated at the time of issuance, the most straightforward of which is the cost. Issuers must pay a fee to the agency for its rating and also typically incur additional costs associated with preparing information for the agency; small offerings—which are not unusual in the muni space—may not find the expense of achieving a rating worthwhile relative to the proceeds raised. 

Though not necessarily riskier than any other muni bonds, the lack of rating lands not-rated bonds in the noninvestment grade bucket. To compensate for greater complexity and information risk involved with these bonds, they typically pay investors a higher yield compared to rated issuers of similar quality; as a result, skilled credit managers may find favorable yields relative to credit quality and default risk.

As an example, let’s consider land-secured muni bonds—aka, “dirt bonds”. Typically unrated, dirt bonds are issued by a public agency in partnership with a developer to finance infrastructure improvements such as roads, sidewalks and utilities for new residential communities. As the bonds’ proceeds fund a capital improvement that provides a public benefit, they typically are issued tax exempt. They are secured by a tax lien assigned to the property that is commonly paid off over a 30-year term through an annual special assessment coequal with property taxes. Development projects can be risky, especially in the early stages, but dirt bonds typically offer yields that we believe more than compensate for these risks compared to other forms of municipal financing, along with structural features that further enhance their appeal.

As the performance of dirt bonds is dependent on the progression of the project being financed and ultimately its sale to end users once developed, underwriting these opportunities entails the analysis of a great number of factors. For example, we would look at the master developer’s financial resources and ability to maintain the project through any potential downturns in the real estate market. We would assess the ratio of debt to equity for the project to determine the developer’s skin in the game. From a top-down prospective, we evaluate local and national economic trends—such as job growth in the area and prevailing mortgage rates—that may impact the project’s success. Finally, we would evaluate the structure of the deal, including any security features or credit enhancements built into the bond indentures.

As these projects progress and begin to generate revenue from a diversified tax base, the bonds may appreciate in price as the risk level recedes. Moreover, upon achieving certain development and revenue milestones, issuers may be able to refinance (or “refund” in muni parlance) the bonds, potentially at a lower interest rate and with an NRSRO rating.

Within this important high yield category, we currently focus much of our attention on Florida, Texas and Utah, where population growth is being fueled by low taxes, above-average job creation and better housing affordability. There continues to be a severe housing shortage across the US because of a structural undersupply of new construction following the global financial crisis. More than one million single-family homes need to be built every year to keep pace with the country’s household formation, but commercial homebuilders are falling short.9 The impact of new-home underbuilding has been exacerbated by the limited supply of existing homes for sale, as the “lock-in effect” of low mortgage rates has disincentivized homeowners from selling. This dynamic also has enabled homebuilders to take share from the resale market; new-home sales now account for more than 30% of all homes sold, double the pre-Covid rate.10 With new housing developments selling quickly and taxpayers revenue streams thus diversifying at a similar pace, the credit quality of many dirt bonds has improved.

This improved credit quality also illustrates that not all speculative bonds are created equal and highlights why the differentiated risk/reward profile of unrated bonds may offer opportunity. Further, high yield municipal bonds have a far lower historical default rate than comparable corporate issues. While a typical unsecured corporate bond is backed by nothing other than the issuer’s
creditworthiness and a contractual obligation to repay, municipal bonds generally include some sort of structural enhancement bolstering their risk profiles. General obligation bonds, for example, are backed by the full faith and credit of the issuing municipality, which includes its taxing power. Revenue bonds are linked to income streams generated by specific projects or public works, such as those generated by a toll road or hospital. All told, speculative-grade municipal bonds had an average trailing-12-month default rate of just under 1% for the period 1970 to 2022 compared to 4% for similarly rated corporates.11

Seeking Resilience in Fertile Ground

While we are constructive on the municipal market as a whole, our investment process takes us to unloved, overlooked or contrarian areas of the market where we believe fundamental, research-driven investment managers may be able to uncover particularly attractive opportunities. With about $4 trillion distributed across more than one million distinct municipal bonds and 50,000 issuers, the highly fragmented municipal bond market is subject to significant yield dispersion among its constituents, particularly those without ratings.12 We believe this dispersion offers rigorous, fundamental credit managers an opportunity to source bonds whose yields and prices more than adequately compensate for the credit risk involved.

1. Source: Morningstar; data as of October 31, 2024.
2. Source: Investment Company Institute; data as of November 4, 2024.
3. Source: Securities Industry and Financial Markets Association; data as of December 2, 2024.
4. Source: Board of Governors of the Federal Reserve System, US Bureau of Economic Analysis, National Association of State Budget Officers; data as of November 30, 2024.
5. Source: Moody’s Investors Service; data as of November 15, 2024.
6. Source: FactSet; data as of December 31, 2024.
7. Source: Federal Reserve; data as of December 18, 2024.
9. Source: Freddie Mac; data as of May 15, 2024.
10. Source: US Census Bureau, US Department of Housing and Urban Development, National Association of Realtors; data as of November 26, 2024.
11. Source: Moody’s Investors Service; data as of December 31, 2022.
12. Source: Securities Industry and Financial Markets Association; data as of December 2, 2024.

The opinions expressed are not necessarily those of the firm. These materials are provided for informational purposes only. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. Any statistics contained herein have been obtained from sources believed to be reliable, but the accuracy of this information cannot be guaranteed. The views expressed herein may change at any time subsequent to the date of issue hereof. The information provided is not to be construed as a recommendation to buy, hold or sell or the solicitation or an offer to buy or sell any fund or security.

Past performance is not indicative of future results.

Risk Disclosures 

All investments involve the risk of loss of principal.

There are risks associated with investing in securities of foreign countries, such as erratic market conditions, economic and political instability and fluctuations in currency exchange rates.

A principal risk of investing in value stocks is that the price of the security may not approach its anticipated value or may decline in value. “Value” investments as a category, or entire industries or sectors associated with such investments, may lose favor with investors as compared to those that are more “growth” oriented.

The value and liquidity of portfolio holdings may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the US or abroad. During periods of market volatility, the value of individual securities and other investments at times may decline significantly and rapidly. The securities of small and micro-size companies can be more volatile in price than those of larger companies and may be more difficult or expensive to trade.

There are risks associated with investing in foreign investments (including depositary receipts). Foreign investments, which can be denominated in foreign currencies, are susceptible to less politically, economically and socially stable environments; fluctuations in the value of foreign currency and exchange rates; and adverse changes to government regulations.

Investment in gold and gold-related investments present certain risks, including political and economic risks affecting the price of gold and other precious metals, like changes in US or foreign tax, currency or mining laws; increased environmental costs; international monetary and political policies; economic conditions within an individual country; trade imbalances; and trade or currency restrictions between countries. The price of gold, in turn, is likely to affect the market prices of securities of companies mining or processing gold and, accordingly, the value of investments in such securities may also be affected. Gold-related investments as a group have not performed as well as the stock market in general during periods when the US dollar is strong, inflation is low and general economic conditions are stable. In addition, returns on gold-related investments have traditionally been more volatile than investments in broader equity or debt markets. Investment in gold and gold-related investments may be speculative and may be subject to greater price volatility than investments in other assets and types of companies.

Municipal bonds are subject to credit risk, interest rate risk, liquidity risk and call risk. However, the obligations of some municipal issuers may not be enforceable through the exercise of traditional creditors’ rights. The reorganization under federal bankruptcy laws of a municipal bond issuer may result in the bonds being cancelled without payment or repaid only in part or in delays in collecting principal and interest.

The information is not intended to provide and should not be relied on for accounting or tax advice. Any tax information presented is not intended to constitute an analysis of all tax considerations.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Alternative Investment Risks 
Alternative investments can be speculative and are not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing and able to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Certain of these risks include: 

• Loss of all or a substantial portion of the investment; 
• Lack of liquidity in that there may be no secondary market or interest in the strategy and none is expected to develop; 
• Volatility of returns;
• Interest rate risk;
• Restrictions on transferring interests in a private investment strategy; 
• Potential lack of diversification and resulting higher risk due to concentration within one or more sectors, industries, countries or regions; 
• Absence of information regarding valuations and pricing; 
• Complex tax structures and delays in tax reporting; 
• Less regulation and higher fees than mutual funds; 
• Use of leverage, which magnifies the potential for gain or loss on amounts invested and is generally considered a speculative investment technique and increases the risks associated with investing in the strategy; 
• Carried interest, which may cause the strategy to make more speculative, higher-risk investments than would be the case in absence of such arrangements; and 
• Below investment grade loans, which may default and adversely affect returns. 

Indexes are unmanaged and one cannot invest directly in an index.
Bloomberg Municipal Bond Index (Gross/Total) measures the performance of the US municipal tax-exempt investment grade bond market. A total-return index tracks price changes and reinvestment of distribution income.
Bloomberg US Aggregate Bond Index (Gross/Total) measures the performance of the investment grade, US dollar-denominated, fixed-rate taxable bond market in the US, including Treasuries, government-related and corporate securities, fixed-rate agency MBS (agency fixed-rate and hybrid ARM passthroughs), ABS and CMBS. A total-return index tracks price changes and reinvestment of distribution income.
Bloomberg US Corporate Bond Index (Gross/Total) measures the performance of investment grade, fixed-rate, taxable corporate bond market. It includes US dollar denominated securities publicly issued by US and non-US industrial, utility and financial issuers. A total-return index tracks price changes and reinvestment of distribution income.
Bloomberg US Corporate High Yield Bond Index (Gross/Total) measures the US dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. A total-return index tracks price changes and reinvestment of distribution income.
Cliffwater Direct Lending Index is an asset-weighted index of US middle market direct loans.
Consumer price index (CPI) (Price) measures inflation as experienced by consumers in their day-to-day living expenses by capturing the average change over time in the prices paid for a representative basket of consumer goods and services. A price-return index only measures price changes. 
Fannie Mae Home Purchase Sentiment Index (HPSI) (Gross/Total) distills consumer responses to Fannie Mae’s monthly National Housing Survey into a single indicator designed to provide signals on future housing outcomes. A total-return index tracks price changes and reinvestment of distribution income.
ICE BofA AA-BBB US Fixed Rate Automobile ABS Index (Gross/Total) measures the performance of asset-backed securities collateralized by automobile loans with a middle rating in a range of AA/Aa to BBB/Baa as measured Moody’s, Fitch and S&P. A total-return index tracks price changes and reinvestment of distribution income.
ICE BofA AA-BBB US Floating Rate Credit Card ABS Index (Gross/Total) measures the performance of asset-backed securities collateralized by credit card loans with a middle rating in a range of AA/Aa to BBB/Baa as measured Moody’s, Fitch and S&P. A total-return index tracks price changes and reinvestment of distribution income.
ICE BofA AA-BBB US Floating Rate Student Loan ABS Index (Gross/Total) measures the performance of asset-backed securities collateralized by student loans with a middle rating in a range of AA/Aa to BBB/Baa as measured Moody’s, Fitch and S&P. A total-return index tracks price changes and reinvestment of distribution income.
ICE BofA Current 10-Year US Treasury Index measures the performance of US Treasury securities with a remaining maturity exceeding seven years and less than or equal to 10 years. A total-return index tracks price changes and reinvestment of distribution income.
Morningstar LSTA US Leveraged Loan Index (Gross/Total) is a market value-weighted index that measures the performance of the US leveraged loan market. A total-return index tracks price changes and reinvestment of distribution income.
MSCI China Index (Net) measures the performance of large and midcap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listings. A net-return index tracks price changes and reinvestment of distribution income net of withholding taxes.
MSCI World Index (Net) measures the performance of large and midcap equities across developed markets. A net-return index tracks price changes and reinvestment of distribution income net of withholding taxes.
Palmer Square CLO AAA Index (Gross/Total) is a subindex of the Palmer Square CLO Debt Index that tracks only CLOs originally rated AAA. A total-return index tracks price changes and reinvestment of distribution income.
Palmer Square CLO BBB Index (Gross/Total) is a subindex of the Palmer Square CLO Debt Index that tracks only CLOs originally rated BBB. A total-return index tracks price changes and reinvestment of distribution income.
Russell 2000® Index (Gross/Total) measures the performance of the small cap segment of the US equity universe. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. A total-return index tracks price changes and reinvestment of distribution income.
S&P 500 Index (Gross/Total) measures the performance of 500 of the top companies in the leading industries of the US economy and is widely recognized as a proxy for the US market as a whole. A total-return index tracks price changes and reinvestment of distribution income.
S&P Municipal Bond High Yield Index (Gross/Total) measures the performance of bonds in the S&P Municipal Bond Index that are not rated or whose ratings are below investment grade. A total-return index tracks price changes and reinvestment of distribution income.
S&P Municipal Yield Index (Gross/Total) measures the performance of high yield and investment grade municipal bonds. A total-return index tracks price changes and reinvestment of distribution income.

Definitions

A 10-year Treasury note is a debt obligation of the US government with a maturity of 10 years upon issuance.
AA credit rating—as used by S&P Global Ratings and Fitch Ratings—is an investment grade rating on a bond considered to have a very strong capacity to meet its financial commitments. The equivalent rating from Moody’s Investors Service is Aa.
AAA credit rating—as used by S&P Global Ratings and Fitch Ratings—is an investment grade rating on a bond considered to have an extremely strong capacity to meet its financial commitments. The equivalent rating from Moody’s Investors Service is Aaa.
Asset-based lending (ABL) is corporate borrowing supported by specific assets of the borrower rather than its cash flows.
BBB credit rating—as used by S&P Global Ratings and Fitch Ratings—is an investment grade rating on a bond considered to have adequate capacity to meet its financial commitments but that is more susceptible to adverse business, financial and economic conditions. The equivalent rating from Moody’s Investors Service is Baa.
Beta is a measure of an investment’s price volatility relative to that of the overall market.
A bull market is generally defined as a period during which a securities market index rises by 20% or more.
A business development company is a closed-end investment vehicle that invests in early stage and/or distressed small and medium- sized companies.
Collateralized loan obligations (CLO) are financial instruments collateralized by a pool of corporate loans.
Collective investment funds (CIFs), also known as collective investment trusts (CITs), are bank-administered trusts that hold commingled assets.
A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other bonds. Ratings are measured on a scale that generally ranges from AAA/Aaa (highest) to D/RD (lowest); ratings are subject to change without notice. Not rated (NR) indicates that the debtor was not rated and should not be interpreted as indicating low quality.
Credit-risk transfer (CRT) securities are synthetic securitizations that reference the credit risk of a designated group of mortgage loans guaranteed by Fannie Mae or Freddie Mac.
Currency debasement refers to the reduction of a currency’s purchasing power.
Direct lending refers to a loan agreement between a borrower and single lender or small group of lenders. Direct lending can also be referred to as “private credit” or “private lending.”
Exchange-traded funds (ETFs) are listed investment vehicles that seek to provide exposure to a benchmark, index or actively managed strategy.
Federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis.
General obligation bonds are municipal securities in which payments are backed by the full faith and credit of the issuer and by extension its ability to tax its residents.
A Goldilocks economic scenario refers to a level of growth that is neither strong enough to promote inflation pressures nor weak enough to suggest recession may be near.
Government-sponsored enterprises (GSEs) were established and chartered by the US federal government for public policy purposes. They are private companies, and their securities are not backed by the full faith and credit of the federal government.
High yield municipal bonds are debt securities issued by states, cities, counties and other public entities that offer a higher rate of interest due to their perceived higher risk of default.
An interval fund is a pooled investment vehicle that offers investors periodic liquidity at an interval specified in its prospectus.
Moody’s Investors Service is a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other bonds. Ratings are measured on a scale that generally ranges from Aaa (highest) to RD (lowest); ratings are subject to change without notice.
Mortgage-backed securities (MBS) are debt securities whose payments of principal and interest are backed by the cash flow generated by pools of mortgage loans.
Net orderly liquidation value (NOLV) is the estimated proceeds from selling a borrower’s collateral assets in an orderly manner, including a reasonable amount of time to find a buyer, after all costs related to the sale.
Not rated (NR) indicates that the debtor was not rated and should not be interpreted as indicating low quality.
A private fund is a pooled investment vehicle that is not required to be registered or regulated as an investment company under the Investment Company Act of 1940, as amended.
Revenue bonds are municipal securities whose payments are backed not by a government’s taxing power but by revenues from a specific project or source, such as highway tolls or lease fees.
Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.
A separately managed account (SMA) is a portfolio of securities that is managed by a professional investment firm.
A soft landing refers to a gradual economic slowdown that comes to an end without triggering a recession.
Sovereign debt refers to debt obligations issued by a country’s government as a means to borrow capital.
S&P Global Ratings is a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments, or other bonds. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice.
A tranche is a portion of a security issue with its own unique risk/reward characteristics and credit rating.
Undertakings for Collective Investment in Transferable Securities (UCITs) are pooled investment vehicles registered in countries in the European Union.
Volatility represents the degree to which an investment’s price has deviated from its average over time.
A yield curve is a graphical representation of interest rates on debt of equal credit quality across a range of maturities.

FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor, but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy, or product. 

First Eagle Investments is the brand name for First Eagle Investment Management, LLC and its subsidiary investment advisers. 

Important Information for Non-US Residents 
This material and the information contained herein is provided for informational purposes only, do not constitute and is not intended to constitute an offer of securities, and accordingly should not be construed as such. Any funds or other products or services referenced in this material may not be licensed in all jurisdictions and unless otherwise indicated, no regulator or government authority has reviewed this material or the merits of the products and services referenced herein. This material and the information contained herein has been made available in accordance with the restrictions and/or limitations implemented by any applicable laws and regulations. This material is directed at and intended for institutional investors (as such term is defined in any applicable jurisdiction). This material is provided on a confidential basis for informational purposes only and may not be reproduced in any form. This material is for general information only and is not intended as investment advice or any other specific recommendation as to any particular course of action or inaction. The information in this material does not take into account the specific investment objectives, financial situation, tax situation or particular needs of the recipient. Before acting on any information in this material, prospective investors should inform themselves of and observe all applicable laws, rules and regulations of any relevant jurisdictions and obtain independent advice if required. This material is for the use of the named addressee only and should not be given, forwarded or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof). Important Information for Residents in the Abu Dhabi Global Market (ADGM) This material constitutes an Exempt Communication or is not otherwise subject to the financial promotion restriction in accordance with the Financial Services and Markets Regulation of the ADGM. It must not be delivered to, or relied on by, any other person. The ADGM does not accept any responsibility for the content of the information included in this material, including the accuracy or completeness of such information. The ADGM has also not assessed the suitability of the products or services to which this material relates to any particular investor or type of investor. If you do not understand the contents of this material or are unsure whether the products or services to which this material relates are suitable for your individual investment objectives and circumstances, you should consult an authorised financial adviser.

Important Information for Residents of Australia 
This communication is exclusively directed and intended for wholesale clients (as such term is defined in Australian Corporations Act 2001 (Cth) only and, by receiving it, each prospective investor is deemed to represent and warrant that it is a wholesale client. The information contained herein is provided for informational purposes only and should not be considered a solicitation or offering of investment services, nor a solicitation to sell or buy any shares of any securities (nor shall any such securities be offered or sold to any person) in any jurisdiction where such solicitation or offering would be unlawful under the applicable laws of such jurisdiction. Unless otherwise indicated, no regulator or government authority has reviewed this material or the merits of the products and services referenced herein. This material and the information contained herein has been made available in accordance with the restrictions and/or limitations implemented by any applicable laws and regulations. This material is provided on a confidential basis for informational purposes only and may not be reproduced in any form. Before acting on any information in this material, prospective investors should inform themselves of and observe all applicable laws, rules and regulations of any relevant jurisdictions and obtain independent advice if required. This material should not be relied upon as investment advice and is not a recommendation to adopt any investment strategy. This material is for the use of the named addressee only and should not be given, forwarded or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof). First Eagle Investment Management, LLC is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) in respect of the financial services it provides to wholesale clients in Australia and is regulated by the US Securities and Exchange Commission under US laws, which differ from Australian laws.

Important Information for Residents of Brazil
First Eagle Investment Management, LLC is not accredited with the Brazilian Securities Commission - CVM to perform investment management services. The investment management services may not be publicly offered or sold to the public in Brazil. Documents relating to the investment management services as well as the information contained therein may not be supplied to the public in Brazil.

Important Information for Residents of Canada 
This material does not constitute investment advice or an offer or solicitation to sell or a solicitation of an offer to buy any product or service or any securities (nor shall any product or service or any securities be offered or sold to any person until such time as such offer and sale is permitted under applicable securities laws.) Any products or services or any securities referenced in this material may not be licensed in all jurisdictions, and unless otherwise indicated, no securities commission or similar authority in Canada has reviewed this material or the merits of the products and services referenced herein. If you receive a copy of this material, you should note that there may be restrictions or limitations to whom these materials may be made available. This material is private and confidential and is directed at and intended for institutional investors and is only being provided to “permitted clients” as defined under the Canadian Securities Administrators’ National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations. This material is for informational purposes only. This material does not constitute investment advice and should not be relied upon as such. Before acting on any information in this material, prospective clients should inform themselves of and observe all applicable laws and regulations of Canada. Prospective clients should inform themselves as to the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of shares or the ongoing provision of services, and any foreign exchange restrictions that may be relevant thereto. First Eagle Investment Management, LLC is not authorized to provide investment advice and/or management money in Canada.

Important Information for Residents of Dubai 
This material and the information contained herein is provided for informational purposes only, does not constitute and is not intended to constitute an offer of securities, and accordingly should not be construed as such. Any funds or other products or services referenced in this material may not be licensed in all jurisdictions and unless otherwise indicated, no regulator or government authority has reviewed this document or the merits of the products and services referenced herein. This material and the information contained herein has been made available in accordance with the restrictions and/or limitations implemented by any applicable laws and regulations. This material is directed at and intended for institutional investors (as such term is defined in any applicable jurisdiction). This material is provided on a confidential basis for informational purposes only and may not be reproduced in any form. Before acting on any information in this material, prospective investors should inform themselves of and observe all applicable laws, rules and regulations of any relevant jurisdictions and obtain independent advice if required. This material is for the use of the named addressee only and should not be given, forwarded or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof).

Important Information for Residents of the State of Kuwait 
The Capital Markets Authority and all other Regulatory Bodies in Kuwait assume no responsibility whatsoever for the contents of this material and do not approve the contents thereof or verify their validity and accuracy. The Capital Markets Authority and all other Regulatory Bodies in Kuwait assume no responsibility whatsoever for any damages that may result from relying on the contents of this material either wholly or partially. It is recommended to seek the advice of an investment advisor.

Important Information for Residents of the State of Qatar 
Any funds, products or services referenced in this material may not be licensed in all jurisdictions, including the State of Qatar (“Qatar”), and unless otherwise indicated, no regulator or government authority, including the Qatar Financial Markets Authority (QFMA), has reviewed this material or the merits of the products and services referenced herein. If you receive a copy of this material, you may not treat this as constituting an offer, and you should note that there may be restrictions or limitations as to whom these materials may be made available. This material is directed at and intended for a limited number of “qualified” investors (as such term is defined under the laws of Qatar). This material is provided on a confidential basis for informational purposes only and may not be reproduced in any form. Before acting on any information in this material, prospective clients should inform themselves of and observe all applicable laws and regulations of any relevant jurisdictions, including any laws of Qatar. This material is for the use of the named addressee only and should not be given, forwarded or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof). Any entity responsible for forwarding this material to other parties takes responsibility for ensuring compliance with applicable securities laws.

Important Information for Residents of the Kingdom of Saudi Arabia
The information contained herein is provided for informational purposes only and should not be considered a solicitation or offering of investment services, nor a solicitation to sell or buy any shares of any securities (nor shall any such securities be offered or sold to any person) in any jurisdiction where such solicitation or offering would be unlawful under the applicable laws of such jurisdiction. Unless otherwise indicated, no regulator or government authority has reviewed this material or the merits of the products and services referenced herein, including the Saudi Arabian Capital Market Authority. This material and the information contained herein has been made available in accordance with the restrictions and/or limitations implemented by any applicable laws and regulations. This material is directed at and intended for institutional investors (as such term is defined under the laws of the Kingdom of Saudi Arabia). This material is provided on a confidential basis for informational purposes only and may not be reproduced in any form. Before acting on any information in this material, prospective investors should inform themselves of and observe all applicable laws, rules and regulations of any relevant jurisdictions and obtain independent advice if required. This material should not be relied upon as investment advice and is not a recommendation to adopt any investment strategy. This material is for the use of the named addressee only and should not be given, forwarded or shown to any other person (other than employees, agents or consultants in connection with the addressee’s consideration thereof).

Important Information for Residents of Taiwan 
First Eagle Investment Management, LLC is not licensed to engage in an investment management or investment advisory business in Taiwan and the services described herein are not permitted to be provided in Taiwan. However, such services may be provided outside Taiwan to Taiwan resident clients.

Important Information for Residents of United Arab Emirates (Abu Dhabi) 
The offering of the products and/or services described herein have not been approved or licensed by the UAE Central Bank, the UAE Securities and Commodities Authority (SCA), the Dubai Financial Services Authority (DFSA) or any other relevant licensing authorities in the UAE, and accordingly does not constitute a public offer in the UAE in accordance with the commercial companies law, Federal Law No. 2 of 2015 (as amended), SCA Board of Directors’ Decision No. (13/Chairman) of 2021 on the Regulations Manual of the Financial Activities and Status Regularization Mechanisms or otherwise. Accordingly, this material is not offered to the public in the UAE (including the Dubai International Financial Centre (DIFC)). This material is strictly private and confidential and is being issued to a limited number of institutional and individual clients: a) who meet the criteria of a Professional Investor as defined in SCA Board of Directors’ Decision No. (13/ Chairman) of 2021 on the Regulations Manual of the Financial Activities and Status Regularization Mechanisms or who otherwise qualify as sophisticated clients; b) upon their request and confirmation that they understand that the products and/or services described in this material have not been approved or licensed by or registered with the UAE Central Bank, the SCA, DFSA or any other relevant licensing authorities or governmental agencies in the UAE; and c) must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose.

Important Information for Residents of United Kingdom This material is issued by First Eagle Investment Management, LLC and is lawfully distributed in the United Kingdom by First Eagle Investment Management, Ltd. First Eagle Investment Management, Ltd is authorised and regulated by the Financial Conduct Authority (FRN: 798029) in the United Kingdom. This material is directed only at persons in the United Kingdom who qualify as “professional investors.” This material is not directed at any persons in the United Kingdom who would qualify as “retail investors” within the meaning of the UK Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773) or the EU Packaged Retail and Insurance-based Investment Products Regulation (No 1286/2014), the UK PRIIPs Regulation, and such persons may not act or rely on the information in this material. 

First Eagle Investments is the brand name for First Eagle Investment Management, LLC and its subsidiary investment advisers. First Eagle Alternative Credit and Napier Park are brand names for the two subsidiary investment advisers engaged in the alternative credit business.

©2025 First Eagle Investment Management, LLC. All rights reserved.