In Brief: CTRL + ALT + CREDIT
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Credit markets entered 2026 in better shape than many expected after a year marked by persistent uncertainty, sector-specific stress, and a steady flow of headlines. Markets remained open, income continued to compound, and defaults were contained in aggregate. More recently, volatility tied to developments in AI has added another layer of complexity for investors to navigate. Market news has shared no shortage of concerns. Macro and geopolitical uncertainty remain elevated, software valuations are being reassessed, defaults are expected to rise from historically low levels, and private credit has faced a more challenging narrative. Public markets, particularly in storied sectors, have experienced increased volatility, while investors continue to debate the durability of current valuations.
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Yet despite these concerns, credit spreads remain near historical tights on a relative basis. This raises an important question. If the headlines feel increasingly uncertain, why do credit markets still appear relatively calm?
From our vantage point, the data tells a more balanced story. Defaults have normalized after a benign period but have not signaled a broad deterioration in credit conditions. What we are seeing instead is greater dispersion between stronger and weaker borrowers as well as between managers. In other words, the market is becoming more selective.
Periods like this can feel uncomfortable, but they are often when disciplined investors find the most attractive opportunities. The benefits of diversification, global reach, and thoughtful deployment through the cycle tend to matter most when markets are uncertain.
As a result, we remain focused on moving up in quality, diversifying across asset classes and regions, and thoughtful portfolio construction. We believe this market calls for selectivity and that generating excess return will require proprietary origination and the ability to make “your own luck”. In this environment, outcomes will be designed, not discovered.
This edition of In Brief draws out the key themes explored in depth in our recent investor letter, CTRL + ALT + CREDIT.
CTRL
Controlling the inputs. Prioritizing higher-quality borrowers, durable capital structures, and disciplined underwriting that emphasizes downside protection. In this environment, outcomes will be driven by intention and portfolio construction rather than renting market beta.
+ ALT
Thinking in alternatives. Leveraging the full breadth of our platform to integrate private, proprietary origination, and cross-asset solutions into multi-asset credit portfolios. Scale, connectivity, and collaboration across strategies allow us to access differentiated opportunities and shape outcomes rather than react to them.
+ CREDIT
Asset selection as alpha. Dispersion remains elevated and the cost of being wrong is higher. Avoiding mistakes and allocating capital with precision may be the biggest contributor to return in this market. In our view, the most important metric is the return per unit of risk investors are taking – not yield in isolation.
