The most important question in credit today is not whether yield is still available—quite simply, we believe it is. The more important question is whether that yield is attached to risks investors can understand, control and are being adequately paid to own. In today’s market, that distinction matters.

On the surface, markets have remained resilient. Equity indexes have continued to find support from a narrow set of themes, most notably artificial intelligence-linked capital spending and higher-end consumer resilience. Credit spreads have retraced a meaningful portion of the February and March weakness, fund flows have improved, and primary markets have reopened selectively. Capital is still available, but it is becoming more conditional.

Meanwhile, investors still want yield, but they are less willing to forgive mistakes. As such, the task for managers is not simply to find more yield; it is to find yield with what we consider to be better architecture around it.

That view shaped how we entered the year. We reduced risk in areas where returns appeared asymmetric, particularly where underwriting standards had weakened or liquidity depended too heavily on continued refinancing availability. When volatility emerged in February and March, that prior de-risking mattered. It gave us the opportunity to return capital, preserve liquidity, and re-engage selectively where we believed the form of risk was clear.

When markets are broad and forgiving, exposure can be enough. With markets as they are today, outcomes depend more on how risk is sourced, underwritten, documented, collateralized and controlled. By focusing on areas where credit meets structure, we believe complexity can potentially become a source of durable premium rather than a source of hidden risk.

After years of rewarding capital-light businesses, we have begun to see a shift in market leadership to businesses that control scarce, tangible assets. We believe this shift is supported by structural forces.

The massive investment in artificial intelligence-related capital expenditures has also underscored the need for infrastructure as power demand increases and bottlenecks emerge. Electrification scales not only through generation but through the grid—generation, transmission and cooling, as well as reliance on the materials and equipment used to build the infrastructure, like copper and gas turbines. As a result, the challenges are local and practical, so companies that control scarce physical capacity have pricing power.

After years of underinvestment in global infrastructure for energy and natural resources, supply is struggling to keep up with the step up in demand, resetting commodity prices structurally higher. The timeline from discovery to production for most commodities can span well over a decade, which suggests to us that supply is likely to remain constrained for several years.

These secular forces have coalesced to shift value from capital-light businesses to businesses characterized by capital- and labor-intensive production and manufacturing, where competitive advantages are rooted in physical property, not intellectual property. Importantly, we believe that mere exposure to real assets is not enough. Selectivity—with a focus on genuine scarcity value and advantageous cost position—remains vital for investors seeking access to companies with the potential for persistent earnings power and resilience.