CTRL + ALT + CREDIT
Sign up to subscribe to the latest insights from KKR
Please enter your business email.
Please enter a valid email address.
Please enter a professional email address.
We have all lived through some version of the same moment: the screen is still on, the system is technically running, but the inputs stop matching the outputs. You’re not staring at a black screen, but there is a drift: too many tabs open, too many background processes running, and just enough lag to make timing feel unpredictable. As we have discussed in prior notes, markets can be deceptively calm on the surface while the wiring underneath shifts and evolves. Dispersion rarely announces itself in real time. Asset prices may rally, yet rolling recessions can still play out across sectors, leaving behind a widening gap between the haves and the have-nots, similar to what we are seeing in the software sector today. That disconnect tends to show up in flows into asset classes, thin issuance windows, and outcomes that vary meaningfully based on how and where risk is taken. In a market like this, an overt focus on headlines can also distract from the more important story. The real work lies in how investors recalibrate from noise and become more deliberate about where and how risk is taken. That’s the lens we are applying as we frame the year ahead around CTRL + ALT + CREDIT, an intentional way to think about controlling inputs, expanding opportunity sets, and avoiding unforced errors in credit.
Sign up to subscribe to the latest insights from KKR
Please enter your business email.
Please enter a valid email address.
Please enter a professional email address.
Before we reboot, it is worth acknowledging where we are coming from — and why the system proved resilient. Global credit markets ended 2025 in better shape than many would have expected after a year of persistent macro uncertainty and episodic issuer-specific stress. Markets stayed open but remained disciplined. Global leveraged loan and high yield bond issuance was active, yet tilted heavily toward refinancing and repricings, a reminder that balance-sheet repair mattered more than growth for many companies. However, that outcome should not be mistaken for inertia. It was a byproduct of deliberate choices made by management teams weighing what they could execute upon with certainty against what could wait amid an elevated level of uncertainty. When input costs, policy, impacts from AI, and demand are all moving targets, long-term planning becomes inherently difficult and preserving flexibility takes priority. This had a knock-on effect on M&A activity. While deal activity rebounded, it ultimately remained insufficient to satisfy the market’s demand for new money supply. By year-end, investors had adopted a more pragmatic posture: selectivity, income generation, and structural protection moved back to the center of the conversation.
Looking ahead, our message is not to move to the sidelines. While we are in a more mature stage of the cycle with public equity valuations broadly feeling rich and anticipated credit losses continuing to normalize, we believe this environment calls for selectivity rather than retreat. As a firm, we believe the opportunity is to upgrade portfolio quality at a moment when the cost of doing so still appears cheap relative to history. That may be the most underappreciated asymmetry in the market today: even though many assets feel priced to perfection — the crosscurrents remain. Tariffs, monetary policy shifts, and persistent inflation are still working through the system, and geopolitics can create pockets of volatility overnight. This makes resilience, balance-sheet strength, and business-model durability more important than directional market exposure.
Income remains the predominant contributor to returns, and time is not neutral when income compounds. But good opportunities will be harder to source, and we believe more path-dependent. Deal activity is picking up, yet competition is intense and spreads are tight, particularly for higher-quality borrowers. The pressure to deploy is real, and that is often when structure gets watered down and downside protection is traded away for speed. At the same time, dislocations can still emerge when technicals gap or complexity pushes others to simplify. On the positive side, this reinforces our view that diversified income and constructing multi-asset portfolios across public and private credit will be the optimal path ahead.
In 2026, we believe outcomes will be designed, not discovered. Making your own luck, as we like to say, will not mean chasing beta in a crowded market. In our view, it means designing portfolios for resilience. That begins with controlling the inputs we can control, widening the opportunity set intelligently, and earning carry with structural protections, while recognizing that even the best protections might be tested in ways we cannot fully anticipate. That design discipline matters because the scoreboard is changing. Investors should be asking, relentlessly, what they are earning per unit of risk and where that risk lives: in the borrower, in the structure, in the liquidity, or in the assumptions embedded in “priced-to-perfection” markets. So, our reboot sequence is intentionally simple, even if the market is not.
With this framework in mind, we’ll rewind 2025 to collect the data points that matter most and use them to organize the rest of this note around three inputs: CTRL, ALT, and CREDIT.
is about controlling the inputs: higher-quality borrowers, robust structures, real downside protection, and disciplined underwriting that “makes its own luck” rather than renting market beta.
is about thinking in alternatives: integrating private, proprietary origination, and cross-asset solutions into a multi-asset credit portfolio, consistent with the idea of credit as an interconnected ecosystem of circuits.
is about selection as alpha: in 2026, avoiding mistakes may be the alpha as dispersion remains elevated, the herd grows louder, and the most important metric becomes return per unit of risk, not yield in isolation.
EXHIBIT 1: Global Credit Remained a Resilient Source of Income in 2025
2025 Returns Across Global Credit Markets
2025 Market Rewind
Before we hit enter, it is worth running the playback on 2025 to collect the data that mattered, separate noise from signal, and establish the baseline for the CTRL, ALT, and CREDIT decisions ahead. If 2025 reinforced anything, it is that credit can appear calm even as the system underneath is quietly re-prioritizing and repricing. That disconnect became particularly visible in the months following Liberation Day. Over the past year, sentiment often ran on two tracks simultaneously. One was shaped by headlines and daily commentary, where narratives often shifted quickly and conviction was binary. The other was quieter and more consequential, reflected in the data: how capital flowed, where returns were generated, and which parts of the system proved resilient under pressure. This reboot is about choosing where you focus. The level set is straightforward. While the headlines were often binary, the market is far more dynamic.
That distinction matters because 2025 produced no shortage of negative headlines, particularly around private credit markets. Much of that commentary recycled familiar concerns around opacity, leverage, and defaults, without fully accounting for the facts and acknowledging how the credit ecosystem has evolved. In our view, that narrative missed the bigger story. The headlines tended to focus on the loudest corner cases, often overlooking the more constructive developments. Credit has become more diverse, more modular, and more integrated across public and private markets. For the investors positioned to underwrite across that ecosystem, we continue to view this evolution as positive. It creates room for selectivity, structural innovation and origination opportunities. We will go deeper on that topic later in this note.
