Emerging markets (EMs) are in the headlines on a regular basis—both with positive and negative news flow—but rarely do we hear the whole story.
Investors are increasingly looking to distressed debt as the credit cycle matures. But with a competitive landscape and significant growth in private credit and European high yield, this cycle could look different than those of the past. Stuart Mathieson, Head of Barings’ Global Special Situations group, and Bryan High, Co-Portfolio Manager of the strategy, discuss how the macro environment is impacting their outlook, and where they’re seeing opportunities today.
There’s a moment that sends a chill down the spine of any sailor when a rock suddenly appears, off wrong side of the bow. It doesn’t really matter whether the chart was wrong or the skipper missed a buoy—it’s undeniably a sign of trouble. That same cold jolt struck investors this month with the arrival of inverted yield curves, wilting inflation expectations and an array of other economic oddities that weren’t on their charts. But it would be wrong to panic now.
Barings’ Stuart Mathieson and Bryan High discuss the outlook and competitive landscape for distressed debt and consider the implications of the significant growth in private credit and European high yield since the last cycle.
With loan and bond yields currently comparable, we believe—in a somewhat contrarian view to the market—there is a good argument for investing in loans, particularly in the U.S., where the economy appears to be marginally stronger than in Europe.