Lotfi Karoui
Latest Insights
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.
The evolution of credit spreads remains driven primarily by credit fundamentals, investor risk appetite, flows, and broader market technicals rather than relative value between Treasuries and swaps.
Higher earnings forecasts across corporate credit have raised the bar for second-quarter reporting, while AI hyperscaler capital spending is poised to continue to drive the narrative.
Higher rates, weaker underwriting, and software concentration are exposing vulnerabilities in direct lending and leveraged loans, while high yield bonds appear better positioned.