Lotfi Karoui
Latest Insights
This year’s energy price shock isn’t exactly following the historical playbook, with markets and economies absorbing much of the impact – though clear risks remain.
Despite a sharp rise in AI-related borrowing, signs of broad corporate credit market disruption remain limited.
AI capital spending may be contributing to higher real rates, but there is little evidence that it’s due to AI bond issuance crowding out Treasuries.
For equity investors, the question is relatively simple: Who wins the AI race? For credit investors, it is more nuanced: Do spreads adequately compensate for the broad set of risks embedded in financing the buildout?
Balanced portfolios are back: Higher bond yields are restoring fixed income’s role as both a potential source of income and a powerful diversifier.
With resilience concentrated among wealthier households, investors should prioritize quality and structure across consumer-linked ABF investments.
Most U.S. investment grade and high yield borrowers appear positioned to withstand refinancing costs, but CCC rated issuers face greater pressure as elevated yields meet weaker balance sheets.
Direct lending defaults are harder to observe than public market defaults, but analysis suggests financial distress has risen markedly since 2022.
BDC equities continue to trade at significant discounts to NAV, reflecting skepticism toward reported marks, a concern reinforced by valuation levels that have yet to fully reset, even as BDC bonds continue to outperform their stocks.
As AI-related issuance reshapes bond markets, differences in U.S. dollar and euro performance offer new insights into the roles of supply and technical factors.
Foreign demand for U.S. assets – especially credit – remains resilient amid broader macro and market uncertainties.
Leverage and complexity are gaining ground in today’s late-cycle markets, signaling caution – not crisis – and underscoring the value of diversification and risk management.