Global credit environment ‘could remain favourable’

THE global environment for credit is expected to remain favourable throughout the coming quarter, according to a latest report by Investcorp.

The leading global alternative investment firm yesterday (Jan 12) released its quarterly ‘House View’ on the state of global credit markets, covering the US and Europe.

It said that given the benefits of rate increases on leveraged loans, the market is already seeing increases in demand with the US market seeing $26 billion of retail and mutual funds inflows in the nine months ended September 30 last year (2021).

“From an asset perspective, global large-cap leveraged loan markets are generally well positioned to continue to perform well in inflationary conditions,” said the report.

European credit markets seem set for a positive start to the year driven by ultra-low default levels and increasing credit spreads as the supply/demand imbalance seen over 2021 corrects.

“We strongly believe that through careful portfolio construction, in particular, a focus on larger-cap issuers and avoidance of high inflation risk sectors, along with active portfolio management, we can position our leveraged loan portfolios to cope with inflationary impacts while benefitting from potential rate rises,” said Investcorp Credit Management managing partner and chief executive Jeremy Ghose.

“Overall, we expect 2022 to provide compelling investment opportunities for our funds.

“Given our market position, we believe that we are well placed to continue to benefit from the well-priced primary issuance we have seen recently and to use this to rotate portfolios to increase yields.”

The US Credit Management at Investcorp co-head David Moffitt added, “The US credit market benefited from similar tailwinds to its European counterpart last year.

“Credit spreads are near decade lows reflecting strong fundamentals, the benign outlook for defaults and strong demand for leveraged loans from Collateralised loan obligation (CLO) origination.

“We see the potential for increasing inflation and corresponding policy adjustments as potential challenges in 2022.”

Meanwhile, Investcorp’s European Credit Funds head Philip Yeates stated the European credit market continued to exhibit high levels of resilience in Q4 2021, culminating in another year of record issuance.

“However, we expect the issuers we target within the European market to remain resilient in the face of inflationary headwinds given their relative size,”he added.

“We expect 2022 to deliver more opportunity to diversify risk and rotate portfolios in order to increase yields.”

Investcorp Credit Management is a leading global credit manager with more than $14 billion in assets under management.




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