Macro & Market Views

Giving (Alt) Credit Where (Alt) Credit Is Due

Giving (Alt) Credit Where (Alt) Credit Is Due

Alternative credit assets have grown in popularity over the past decade-plus as meager yields prompted investors to expand their search for current income beyond traditional investment grade bond markets.

Key Takeaways

  • Floating-rate assets like syndicated loans and direct lending served as a relative port in the storm as sharply rising interest rates in 2022 resulted in a historically bad year for investment grade fixed income markets.

  • Due to their combination of higher yields and senior position in borrowers’ capital structures, alternative credit assets have a history of delivering higher income and lower losses than other fixed income sectors.1

  • Alternative credit historically has had a low to negative correlation to public fixed income markets, giving the assets attractive diversification potential.

  • We believe interval fund structures are well-suited to strategies that invest in less-liquid alternative credit assets and can help reduce the volatility that may accompany daily inflows and outflows of investor assets.

     

     

    1. Source: Bloomberg, JPMorgan; data as of March 31, 2023.