Private credit investing is a necessary component of high functioning capital markets and economies. Capital can stagnate and economies could grow below their long run potential without mechanisms for financing smaller companies, clearing bad debt, and unlocking value in distressed companies. Private credit provides credit, throughout market cycles, to areas where large banks and credit providers are unable or ill-equipped to go. They also play a vital role through bidding processes that allow prices to reset and distressed markets to clear.  The massive build-up of credit in the middle ‘00s and the subsequent 2008 crash has caused substantial regulatory change, the decimation of securitization, and a fundamental shift in the business model of a primary market financing mechanism: commercial banking. It is our belief that an extraordinary potential to invest in above-normal risk versus reward propositions in private credit is likely to persist far longer than in times past, potentially for even a decade or more.

The underlying private credit investments in our funds are evaluated according to the following criteria, developed over our 25+ year history of experience in private credit investing:^[1]

• Underwrite investments to a flat/down economic environment
• Prefer assets that are cash flowing and self-liquidating
• Ensure mandate is met unlevered, may use low leverage in certain strategies
• Remain senior in capital structure, have effective control, or structure investments to minimize downside
• Favor complex, process-driven strategies that require activism to unlock value

As investors look to alternatives to help enhance their returns and diversify their portfolios, the timberland asset class has become an integral portion of many institutional real asset allocations. Timberland investment portfolios can provide investors with historically attractive risk-adjusted returns, a hedge against inflation, and the ability to meet cash flow and appreciation objectives while preserving capital.  At the same time, forestland investments can be managed with a strong focus on sustainability.

Silver Creek’s strategy has been to partner its institutional clients with an experienced operating company who is also a significant co-investor.  Green Diamond Resource Company, whose roots date back to 1890, is such a partner and the timberland manager for Silver Creek’s timber portfolio which spans the Southern U.S. and Pacific Northwest.  The complete portfolio is certified under the Sustainable Forestry Initiative Standard, the world’s largest forest certification system.

Silver Creek’s timberland fund has entered into an agreement to sell carbon offsets on a portion of its property and continues to seek additional opportunities for carbon monetization. Our partner is one of the national leaders in forestry carbon initiatives.

Aggregates (hard rock, sand and gravel) are essential building blocks in the U.S. economy. Demand is expected to range between 5 and 10 tons per American per year. Demand grows as population grows. 50% of that demand is driven by public infrastructure (roads, rail beds, seawalls, tunnels, bridges) and 50% in commercial and residential construction. Aggregate reserves refer to the rock beneath rock quarry operations. They are extracted by the operator, crushed, cleaned, sized and sold to customers.

Silver Creek believes that regenerative agricultural practices are critical components to the solution of one of the world’s most pressing issues: climate change. We believe that developing regenerative agricultural and ranching practices to attract, build, and retain carbon in the soil (known as “carbon sequestration”) is a key element to reducing the amount of carbon dioxide in the atmosphere and minimizing the effects of global warming on our planet. Regenerative agriculture systems focused on soil health also increase agricultural productivity, produce more nutritionally dense food, and enhance ecosystems.

Silver Creek is working on developing an investment strategy for the implementation of a “soils-focused” regenerative farming and ranching model in the Northern Great Plains. Eric Dillon, Silver Creek’s CEO and CIO, will lead the regenerative strategy. Silver Creek has assembled an advisory team of industry thought leaders to assist these efforts, including: Dr. Steve Jones, Director of WSU Breadlab; Dr. David Montgomery, an author and professor at the University of Washington; and Jason Rowntree, soil carbon specialist and Associate Professor at Michigan State University.