Before we reboot, it is worth acknowledging where we are coming from — and why the system proved resilient. Global credit markets ended 2025 in better shape than many would have expected after a year of persistent macro uncertainty and episodic issuer-specific stress. Markets stayed open but remained disciplined. Global leveraged loan and high yield bond issuance was active, yet tilted heavily toward refinancing and repricings, a reminder that balance-sheet repair mattered more than growth for many companies. However, that outcome should not be mistaken for inertia. It was a byproduct of deliberate choices made by management teams weighing what they could execute upon with certainty against what could wait amid an elevated level of uncertainty. When input costs, policy, impacts from AI, and demand are all moving targets, long-term planning becomes inherently difficult and preserving flexibility takes priority. This had a knock-on effect on M&A activity. While deal activity rebounded, it ultimately remained insufficient to satisfy the market’s demand for new money supply. By year-end, investors had adopted a more pragmatic posture: selectivity, income generation, and structural protection moved back to the center of the conversation.
Looking ahead, our message is not to move to the sidelines. While we are in a more mature stage of the cycle with public equity valuations broadly feeling rich and anticipated credit losses continuing to normalize, we believe this environment calls for selectivity rather than retreat. As a firm, we believe the opportunity is to upgrade portfolio quality at a moment when the cost of doing so still appears cheap relative to history. That may be the most underappreciated asymmetry in the market today: even though many assets feel priced to perfection — the crosscurrents remain. Tariffs, monetary policy shifts, and persistent inflation are still working through the system, and geopolitics can create pockets of volatility overnight. This makes resilience, balance-sheet strength, and business-model durability more important than directional market exposure.
Income remains the predominant contributor to returns, and time is not neutral when income compounds. But good opportunities will be harder to source, and we believe more path-dependent. Deal activity is picking up, yet competition is intense and spreads are tight, particularly for higher-quality borrowers. The pressure to deploy is real, and that is often when structure gets watered down and downside protection is traded away for speed. At the same time, dislocations can still emerge when technicals gap or complexity pushes others to simplify. On the positive side, this reinforces our view that diversified income and constructing multi-asset portfolios across public and private credit will be the optimal path ahead.
In 2026, we believe outcomes will be designed, not discovered. Making your own luck, as we like to say, will not mean chasing beta in a crowded market. In our view, it means designing portfolios for resilience. That begins with controlling the inputs we can control, widening the opportunity set intelligently, and earning carry with structural protections, while recognizing that even the best protections might be tested in ways we cannot fully anticipate. That design discipline matters because the scoreboard is changing. Investors should be asking, relentlessly, what they are earning per unit of risk and where that risk lives: in the borrower, in the structure, in the liquidity, or in the assumptions embedded in “priced-to-perfection” markets. So, our reboot sequence is intentionally simple, even if the market is not.
With this framework in mind, we’ll rewind 2025 to collect the data points that matter most and use them to organize the rest of this note around three inputs: CTRL, ALT, and CREDIT.
