Market & Topical Perspectives

Alternative Credit: 3Q21 Review

Alternative Credit: 3Q21 Review

The third quarter, in our view, was another period in which it paid to buy risk in the credit markets, a consistent theme for much of the post-Covid rebound given continued willingness of investors to stretch for income and trade liquidity for marginal spread. Once again, those inclined to step down in rating, seniority and/or size were rewarded with attractive performance in the third quarter.

Key Takeaways

  • Key-Takeaway

    With fundamentals and technicals continuing to be supportive, issuance of leveraged credit has been robust.

  • Key-Takeaway

    Spreads between traditional and alternative credit markets have tightened throughout 2021, especially in more liquid assets like leveraged loans and high yield bonds.

  • Key-Takeaway

    From an underwriting perspective, cost pressures remain our biggest concern, as it seems likely to us that the impacts of inflationary pressures on corporate profit margins soon will be broadly evident.

  • Key-Takeaway

    We remain focused on segments of the economy where we see value. Across high yield, loans and direct lending, this includes sectors like technology, healthcare and business services that we’ve been working with for more than a decade.