As the summer ends, it’s a great opportunity to reflect on a busy year thus far for our liquid and structured credit team.
It is also the time of year where we start thinking about what lies ahead. Although it is not quite yet “outlook season,” I want to acknowledge the contributions of my colleagues and share what our team is focused on as we approach the back end of the year.
As we navigate the complexities of today's credit markets, our team remains broadly constructive on credit. Yields on corporate and structured credits remain at attractive levels, but the evolving macroeconomic and geopolitical environments, along with potential shifts in Fed policy, could introduce volatility.
In response, we're executing a disciplined approach focused on reducing risk and enhancing portfolio quality while allowing for flexibility to capitalize on the potential idiosyncratic opportunities that continue to arise.
To that end, here are three key takeaways from our team on the current market landscape:
1. Liquid Credit: Corporate credit, particularly in the bank loan sector, continues to offer attractive yields. With spreads wide relative to history, there are compelling opportunities, especially within the single-B segment. We are selectively adding exposure to credits with strong fundamentals, even as we remain vigilant about the potential for increased volatility.
2. Structured Credit: The structured credit market, especially CLOs, remains resilient with steady issuance and strong investor demand. Our own CLO management business has had an active year thus far, issuing, resetting and refinancing several new deals over the period. On the CLO investing side, technical conditions remain favorable, and we see attractive value in parts of the capital stack particularly in CLO mezzanine debt. We are also finding compelling opportunities in the asset-backed markets through bespoke transactions.
3. Default Rates and Risk: Despite the higher interest rate environment, default rates have remained low, and forecasts have generally improved since mid-2023. This stability reflects the strong fundamentals of many companies, even in a higher-for-longer rate scenario. While we remain mindful of potential risks, we expect default rates to remain near current levels.
Our Liquid and Structured Credit teams have enjoyed an active first half of 2024 as credit markets continue to perform well amid strong investor sentiment, increased capital markets activity, and a supportive earnings season.
We continue to have a favorable view towards corporate and structured credit, broadly. CLOs, high-yield bonds, and bank loans have all delivered strong returns in 2024, in part driven by supportive supply-demand market dynamics.
We look forward to continuing to apply our active, fundamental approach to investing in syndicated, multi-asset, and structured credit markets.
To learn more about our dynamic approach to credit investing, please visit: www.baincapitalcredit.com
#Credit #BainCapitalCredit
Regional Head UK & Eire, Sales and Operations at TCN
1moWell done guys 🥳