Elevated, range bound interest rates combined with compressed credit spreads indicate an environment where attractive all-in yields may translate into solid long-term returns. Although credit fundamentals remain solid, issue selection is paramount given valuations and looming tail risks. 

Portfolio Considerations

• Multi-sector fixed income exposure with risk flexibility
• Global bonds for a broader opportunity set and diversification
• Short-duration credit amid monetary policy and inflation uncertainty
• High-quality securitized credit, including asset-based finance and CLOs

Private credit offers broad diversification opportunities—ABF and infrastructure offer non-corporate credit risk with customization attributes. Direct lending with stringent underwriting standards can complement public credit exposure. Real estate offers diversification amidst its prolonged, early cycle stage, supported by structural factors and tactical opportunities.

Portfolio Considerations

• Direct lending, including credit secondaries, with stringent underwriting standards
• Public-private credit strategies guided by a flexible relative value framework
• Private real estate, REITs for diversification, inflation protection, and the sector’s early-cycle characteristics

The effects of the AI buildout will continue to emerge, highlighting the need to identify winners that can capitalize on multi-year opportunities bolstered by innovation, durable competitive moats, and sector leadership.

Portfolio Considerations

• Global growth equity as AI adoption accelerates
• Private real estate for exposure to the AI-infrastructure buildout