Investors can no longer count on traditional core bonds, such as Treasuries and investment grade corporates, for meaningful income, due to factors ranging from depressed yields despite rate increases, deteriorating credit quality, extended duration, higher inflation risk and weakening covenants.

Alternative credit assets—including high yield bonds, direct lending and broadly syndicated loans—may meet investors’ income needs while helping to mitigate portfolio risk and the impact of rising interest rates. To compensate for their lower liquidity and non-investment grade ratings, these assets generally offer incremental yield relative to core fixed income.