Yet despite these concerns, credit spreads remain near historical tights on a relative basis. This raises an important question. If the headlines feel increasingly uncertain, why do credit markets still appear relatively calm?
From our vantage point, the data tells a more balanced story. Defaults have normalized after a benign period but have not signaled a broad deterioration in credit conditions. What we are seeing instead is greater dispersion between stronger and weaker borrowers as well as between managers. In other words, the market is becoming more selective.
Periods like this can feel uncomfortable, but they are often when disciplined investors find the most attractive opportunities. The benefits of diversification, global reach, and thoughtful deployment through the cycle tend to matter most when markets are uncertain.
As a result, we remain focused on moving up in quality, diversifying across asset classes and regions, and thoughtful portfolio construction. We believe this market calls for selectivity and that generating excess return will require proprietary origination and the ability to make “your own luck”. In this environment, outcomes will be designed, not discovered.
This edition of In Brief draws out the key themes explored in depth in our recent investor letter, CTRL + ALT + CREDIT.
