Credit Exchange with Lisa Lee

“The markets are recognising the risks around longer-term inflation. I think it’s recognising the ballooning deficits of governments around the world,” says Chris Wright, CEO and president of Crescent Capital Group, on the latest episode of Credit Exchange with Lisa Lee, taped on 19 August 2026. “What you’re seeing is the repricing of long-term assets based on a recognition of a higher inflationary rate going forward,” says Wright, who helms the global alternative investment firm with over $50 billion of AUM. And the financing of growth in a more uncertain market is getting more expensive, he contends. Wright also discusses the tie-up of insurance firms and credit asset managers, and why that model has gained in popularity. Crescent is owned by insurance company SunLife. He also chats about corporate credit markets, artificial intelligence and the huge capital spending to support it, and the evolution of private credit funds.

The rise in real yields because of government deficit spending, alongside ongoing huge demands for AI investment, are underpinning the rise in interest rates, says Ashok Bhatia, chief investment officer at Neuberger, an investment management firm with more than $600 billion in AUM. Speaking with Lisa Lee on the latest episode of Credit Exchange, Bhatia says that real interest rates are the key to understanding the current bond market landscape. “The bond market’s really relaxed about intermediate term, 5-to-10-year inflation rates. It is just telling you there is not a problem,” he says. “[But] the big change that happened in the bond market is real interest rates. If the 10 -year today is about 4.7%, the market tells you inflation will be about 2.2%. That's a 2.5% real yield. So that’s up from basically zero. [Historically] it’s probably a little bit on the cheap side.” But he notes that if the real interest rate climbs to 3% or above, that’s when the economy can be in strife. “At that point, if an economy is growing at 2-2.5%, and you think about the real cost of capital at 4%, you’re upside-down on that,” he says. “And it’s often when financial accidents and problems happen.” Bhatia contends that for the bond market, it is suddenly starting to feel that a horizon which had previously felt distant, is now “on a horizon that we need to invest on.” For Bhatia, who is also Neuberger’s global head of fixed income, aggressive rate hiking by the Fed at this point would represent “a policy error”, although a single rate rise would not be the end of the world. “But if the Fed started taking the policy rate up 100 basis points... the market would conclude that is really not necessary. It would also probably start putting real interest rates into more of a danger zone [and] would probably have some repercussions for the dollar.” Bhatia also discusses dangers on the horizon in the bond market, the ongoing impact of the Iran war, and the distinctive characteristics of working for an employee-owned firm.

“Whenever you have noise, that leads to more selling volume in our market – so volatility for us as secondary investors is a very good thing,” says Michael Schad, head of credit at Coller Capital, a secondaries specialist with $55 billion in AUM, on the latest episode of Credit Exchange with Lisa Lee. Schad is positive about the overall health of private credit, describing it as a “very attractive and sound” asset class, with its rapid growth coming alongside a more recent maturing of the market. He notes, though, that a decade is “not a very long time”, as some of the funds can run for that period of time. “Because the asset class was so new, people couldn’t really calibrate what would happen in a more volatile market environment, which we just happened to hit over the last couple of years.” Schad explains that Coller generally engages in two types of transactions – buying fund positions where the seller is a limited partner (LP secondaries), and transactions where it is a general partner making the sales decision (GP secondaries). The latter have become increasingly popular more recently. The firm is also a leader in the continuation fund market. Schad notes that the major evolution that has taken place over the last couple of years is that technology developed in the equity secondaries market for continuation funds, has been adopted “on steroids” in the credit secondaries market. “[The reason] that was so successful... is that the way a continuation fund works in credit is very different to private equity,” he says. “What you have now in private equity, it is maybe a single asset that gets into a continuation fund. In credit, what you have is actually still very diversified portfolios. So you still have high quality loans in a very, very diversified fashion that a GP brings to a continuation fund.”

“It’s just like nothing we’ve ever seen before,” says Bryan Whalen, CIO of fixed income at $200 billion global asset manager TCW, in reference to AI’s capital spend, equity prices and momentum on the latest edition of Credit Exchange with Lisa Lee. “What we’re looking at here is just everybody on one side of the boat, too much enthusiasm,” he says. “It just feels like it’s the beginning of the end of the euphoria.” The AI spending spree has broken the natural feedback loop to slow down borrowing. While the bond market is raising the cost of borrowing, these companies turn around and say, ‘we don’t care,’ Whalen contends. If the market starts to question the fundamental elements of the AI capital spend, that could lead not just to volatility in the sector, but for the rest of the market. And that would likely lead to an economic recession, reckons Whalen, who oversees $170 billion in AUM.

“One of the predictions I would make is that the private equity industry is in a tectonic, Darwinian moment itself,” says David Golub, co-CEO of Golub Capital, a direct lending specialist with more than $90 billion in AUM. Speaking on the latest episode of Credit Exchange with Lisa Lee, Golub also sees a ‘Darwinian moment’ for private credit due to higher-than-usual credit stress and lower-than-expected returns. “The winners thrive, they adapt, and they grow, and the losers, they don’t,” says Golub. This will all lead to more consolidation in the industry, and a core group of private equity and private credit firms of size unseen before. David, who along with his brother Lawrence Golub has been in the private credit space virtually since its inception, also speaks about the history of the industry, the recent bout of negative headlines, and trading the illiquid asset.

Lotfi Karoui, multi-asset credit strategist at fixed-income behemoth PIMCO, says the top risk to markets and the economy is the potential unwinding of the AI capex cycle, on the latest episode of Credit Exchange with Lisa Lee. “Then you’re going to tighten financial conditions,” says Karoui, which is bad news for equities. That will have wealth effects and probably affect the broader economy. The market isn’t blindly rewarding all capex financing announcements, he says. Right now, markets are seeing some indigestion regarding data centre financing – Karoui recommends looking at dollar versus other currency debt to see whether that’s fundamental or technical. Karoui, who is also co-head of client solutions and analytics at PIMCO, is watching six-month oil futures and diesel prices to gauge whether the resumption of the Iran war is choking up economic activity. We discuss his inflation expectations (moderating), the direction of Federal Reserve monetary policy (on hold), and private credit (seeing some stress). He also finds pockets of fixed income in emerging markets such as Brazil and South Africa compelling.

“We certainly have noted from an oil price or fuel price perspective, just how comfortable businesses have gotten with oil price or gas price pass-throughs,” says Aaron Kless, CEO and CIO of direct lending specialist Andalusian Credit Partners, on the latest edition of Credit Exchange with Lisa Lee. “They’ve really been able to manage that price volatility, and price spikes, quite well.” Andalusian has a unique perspective on the macro-economic backdrop. Its executive chairman is Roger W. Ferguson, Jr., a former vice-chairman of the Federal Reserve, who also sits on its investment committee. “Our view certainly is that there’s really no expectation of rate cuts, [and the] possibility of rate increases,” says Kless. The firm focuses on the so-called middle market segment, which drives around 40% of US GDP and 30% of US employment. “We continue to see real resilience in the consumer, even at the lower part,” says Kless, who was formerly head of non-sponsor direct lending at Apollo Global Management. Kless also discusses the attractiveness of sports investing due to the recurring, predictable and sticky nature of the cashflow. The World Cup will help boost soccer in the US. “We’re on the precipice of something really exciting around soccer,” he says. “We get to participate in the market, or at least in the deal flow in the market. [There are] lots of smart and interesting things happening around what I would call ‘minor league’ soccer.” Kless also talks about what makes a good investment in sports. For instance, pickleball as an amateur sport is interesting, but remains too emergent from a professional perspective for a credit investment.

“Last frontiers of alpha is in the sports and entertainment-related real estate,” says Jonathan Fascitelli, founder and CEO of sport and entertainment real estate firm Seregh, on a special edition of Credit Exchange with Lisa Lee, recorded at the FII Institute’s conference in Rome. Just 18 months since founding, Seregh already has more than $35 billion in their pipeline. Seregh, which has the backing of Creative Arts Agency (CAA), Apollo co-founder Josh Harris, and Blackstone’s David Blitzer among many others, seeks to develop and invest in infrastructures around stadium and arenas. That means building communities that include residential homes, office buildings, restaurants, and more. Fascitelli, who was formerly the CEO of Harris Blitzer Sports & Entertainment real estate, also talks about FII PRIORITY Europe 2026, of investing in the “collective effervescence” (the shared moment when everyone experiences the same thing at the same time – think recent moments involving the New York Knicks or English Premier League club Arsenal), and how that can combat the rise of AI.

“We’re clearly in late cycle, but we’re not obviously at the turning point,” says Ariadna Stefanescu, co-head of Permira Credit, in the latest edition of Credit Exchange with Lisa Lee. Permira is a global investment firm with buyout and credit businesses holding nearly €90 billion in committed capital. The current environment provides an opportunity for different managers to differentiate themselves, says Stefanescu. Not only will there be more dispersion, but some shops will either fold or face consolidation. “Ultimately, some people will be priced out of the market,” she predicts. While Stefanescu expects defaults in sub-investment grade debt to increase, she also notes there have been structural changes that have served to reduce the default rate, most notably more pockets of liquidity.

Middle-market direct lending finances growing businesses, says Gauthier Reymondier, head of European credit at Bain Capital, a private equity and credit powerhouse with more than $225 billion in assets under management. Reymondier speaks about the fundamental difference between US and European economic growth, the impact of artificial intelligence and capex spending, and consumer habits. While European growth expectations have been very mediocre, more political stability would prompt consumers to spend more, he says, as has been the case in Spain, Portugal or Poland. “Trust would be the biggest growth driver,” Reymondier says. “I think stability is important because we see in our market that without stability, people don’t spend.” Bain Capital’s private equity arm this week announced a major deal to acquire Everllence, a marine power and turbomachinery manufacturer, in a carve-out from Volkswagen Group, and Reymondier also weighs in on the future prospects for M&A and LBOs.

Issues in the software space and a looming maturity wall will result in a return to more traditional distressed opportunities, says Jeff Kivitz, chief investment officer at Canyon Partners, on the latest episode of Credit Exchange with Lisa Lee. There’s a wall of software debt maturities looming and while in the past these have “magically gone away, I think this wall is a little bit different,” Kivitz says. Eventually, the rubber will meet the road and there will be distressed and restructuring opportunities. Canyon, a global alternative investment manager with $30 billion in AUM, is a firm to watch. While others are pulling back from lending to software, Canyon earlier this year led the arranging of a landmark $4.8 billion private credit loan in the space. Kivitz explains how they got comfortable with backing private equity shop Thoma Bravo as its portfolio software company Auctane merged with logistics provider WWEX Group. In addition, Kivitz discusses how Canyon set up its new ABF unit, Canyon ABF Partners, with anchor investments from management, Daiichi Life Insurance and Korea Investment Holdings. He also talks about how Canyon nabbed credit market star Jay Kim, former CEO of Apollo’s ATLAS SP Partners.

“We’re starting to see some impact on cost. Very manageable, but it’s hard to ignore,” says Alex Chi, deputy CIO of global credit at Carlyle, one of the world’s largest investment managers with nearly $500bn in assets under management. Speaking on the latest episode of Credit Exchange with Lisa Lee, Chi says that they are being very careful about how they underwrite new credits going forward. But new originations and investments stand to benefit from higher interest rates, he adds, as most of Carlyle’s credit holdings are floating-rate. While Chi says consumer spending is holding up, particularly from higher-end consumers, Carlyle is staying away from credits that have significant exposure to discretionary consumer, “because we just don’t know what the impact’s going to be.” Expect to see more defaults within the software landscape, says Chi, who is also head of direct lending at Carlyle. The vintages of late 2020 through early 2022 are especially problematic. If you look at the rates of default within those vintages, they have the highest percentage of non-accruals and defaults, he says. “I think that we’re going to have to face the music at some point, because the maturity wall is coming,” Chi says. “And as a deputy CIO, I also think that could be very interesting for the opportunistic credit asset class.” On AI, the software firms experiencing problems aren’t a result of AI disruption, Chi contends. “I actually think that you’re going to see more of an impact of AI from white-collar business services companies,” he says.

The Iran war is currently in a “mushy middle”, says Marko Papic, a macro and geopolitical expert at global investment research firm BCA Research, in the latest episode of Credit Exchange with Lisa Lee. “[What] investors really have to focus on is not the verbiage, not the rhetoric, not the negotiations – but rather, the ships going in and out of Hormuz,” says Papic. While difficult to track, Hormuz has become a permeable membrane in the past few months. Combined with high oil reserves at the onset of the war, it’s helping prevent a calamitous global recession, and allowing time for the US and Iran to negotiate a truce. Recalling Baron Rothschild’s famous utterance that you ‘buy on the sound of cannons and sell on the sound of trumpets’, Papic predicts problems for economies and markets after the conflict ends, with Europe probably already in a mild recession as a result of the war. Inflation will be stoked because government will attempt to refill depleted oil inventories, and the AI build-out is proving to be more inflationary than previously thought. Papic, who is also the author of ‘Geopolitical Alpha: An Investment Framework for Predicting the Future’, also discusses mid-term elections in the US, the Federal Reserve, and China.

The US healthcare space is very interesting as far as real estate is concerned, says David Mihalick, co-head of global investments at Barings, a $500 billion alternative asset manager with expertise in credit, real assets and emerging markets. Mihalick points to demographic trends with an ageing population and the need for medical offices and senior housing as reasons why Barings is keen. “We think that creates a really compelling investment opportunity, and we’re looking to take advantage of that in our business.” Mihalick, who once served as the head of private assets as well as head of US public fixed income and US high yield at Barings, expects to see more trading of private credit loans. On high-yield bonds, despite the low spreads, Mihalick contends that investors are getting appropriately compensated. He also discusses infrastructure CLOs, a fairly novel structure that Barings is among the few firms involved in issuing, and private credit CLOs in Europe, where Barings is one of two managers currently issuing such deals.

“The dispersion in performance is becoming more visible, certainly to institutional investors,” says James Reynolds, global co-head of private credit at Goldman Sachs, on the latest episode of the Credit Exchange podcast with Lisa Lee. “It’s clear, as you travel the world and speak to LPs, that there is a flight to quality happening. There is a flight to quality and scale,” he says. The headlines around private credit are focused mainly on BDCs, which accounts for $400bn of the asset class and is located in the US. The distribution yields have come down, Reynolds notes, but they were perhaps inflated since, over the course of 2022 and 2023, interest rates went from zero to 5%. When the market dislocates, you tend to earn excess yield. And there’s also momentum with institutional investors, who understand this is a pretty interesting moment to step into these markets, Reynolds says. He sees opportunities “everywhere” – in direct lending senior, direct lending junior, capital solutions, anything around infrastructure, ABF, structured IG, and single-name corporate IG private. The first quarter of this year was the busiest ever for Goldman’s private credit team, and Reynolds expects the rest of the year to be busy as well.

“We’ve been very opportunistic about deployment in cycles or dislocations, which I think we’re in the very early innings of,” says Milwood Hobbs, Jr., deputy chief investment officer of Oaktree’s strategic credit platform, on the latest episode of Credit Exchange with Lisa Lee. There were about USD 200bn of private credit loans inked in 2021 and 2022, when tech-related business valuations had reached all-time highs. Since then, interest rates went from zero to 5%, valuations came down, and free cash disappeared. And AI has made it more difficult to price the risk and support the businesses. These loans mature in 2027 and 2028, and that’s where Hobbs suggests “you should focus on potential dislocation.” New private credit deals should be more sensible. The recent spate of withdrawals from BDCs means that marginal buyers are gone, which means higher spreads and more conservative capital structures. “I think that is good for the investor and good for the market,” Hobbs says.

“Everybody’s still searching for that easy button on AI,” says David Neuenhaus, US head of asset management and private equity at KPMG, on the latest edition of the Credit Exchange podcast with Lisa Lee, taped at the conclusion of the Milken Institute Global Conference in Beverly Hills. Neuenhaus says AI was among the hottest topics at the conference, which featured a who’s-who of the finance world, as well as former NBA star Shaquille O’Neal and football legend Tom Brady. “There are some early adopters – some folks that have, I think, figured out ways to apply it and get traction sooner,” Neuenhaus says. On attracting retail cash, he says: “We are on a journey, a learning curve here.” There will be ways to address the liquidity needs of the average investor in a more sophisticated manner as we move forward, he says. There’s a rush toward retail, but the first movers have already arrived and it’s a crowd movement. For new entrants, there are some cases where “it’s a hard look in the mirror,” because not every firm is prepared to chase retail money. “You’ve really got to get your house in order.” Neuenhaus also shares his opinion on some good news on the regulatory front for asset managers and private equity firms: “I think that’s a nice direction of travel.”

“We have ample liquidity,” says Dan Leiter, head of international at Blackstone Credit & Insurance, on the latest episode of Credit Exchange with Lisa Lee, as he explained the firm’s decision to honour all withdrawal requests at its private credit perpetual fund. “[As a result] it was not an issue to honour the redemption, and we thought it was the right thing to do,” says Leiter. Competitors – some of whom capped redemptions at 5% – made assessments and opted for what was right for their vehicles. “They also have different liquidity profiles. They have different considerations,” he adds. Leiter also addresses whether retail investors understood the terms of these perpetual funds, and says he has heard of no complaints from retail investors about being capped. The negative headlines, which have more of an impact on retail investors, should wane soon. “When we look back in just a few months’ time, I don’t think it will take that long. Everyone will see that actually, the return profile in private credit remains really attractive, especially versus liquid credit,” predicts Leiter, who is also global head of liquid credit at the asset manager, which boasts around $1.3 trillion in AUM. Shifting gears, Leiter says that everything that’s happening around AI is real, and there will be a lot of disruption. But, so far, Leiter says that Blackstone’s credit portfolios are performing well. He isn’t seeing any major stress in Blackstone’s portfolio companies. But “that doesn’t mean there won’t be idiosyncratic defaults here and there,” he cautions. Private credit default rates remain in line with, or even lower than, the publicly-traded leveraged loan market, and Leiter believes recoveries will be higher than for leveraged loans as well. He also discusses opportunities in Asia, investment-grade private credit, and insurance; he also provides insights into growth prospects in the US, Europe and Asia, against the backdrop of the Iran war.

Global economies are adjusting to the oil shock from the Iran war, says Juhi Dhawan, macro strategist at Wellington Management, on the latest episode of the Credit Exchange podcast with Lisa Lee – and China has shown surprising resilience that may improve its competitiveness against Europe, Japan and some other Asian countries. Looking at the past performance of economies and markets to oil shocks, one of the surprises this time has been China, Dhawan says. It has held up better because it has reduced its reliance on oil due to its big push into renewables and coal. That’s good news in that China is a big driver of global growth, but less good in that China is already in a very competitive position from a manufacturing standpoint relative to Europe, Japan, and some other countries in south-east Asia. “One of the questions we are asking ourselves is, will China again gain competitiveness as Europe struggles with this energy shock; as Japan faces this energy shock,” Dhawan says. “[Will] China end up being relatively better off compared to what its past would have suggested?” Dhawan, who leads analysis of the US economy at Wellington, an asset manager with more than $1.3 trillion in AUM, says the United States came into 2026 with some of the most accommodative fiscal and monetary policy set-up in a few years. That creates some buffer room for the economy to withstand these higher energy prices. Besides energy prices, Dhawan also discusses productivity gains from AI, the labour market, trade flows and demographics. In addition, financial markets are reacting to the Iran war, resulting in adjustments. There could be boosts coming into AI-related areas, power, and energy, she says.

“The doomsday scenario is a complete over-exaggeration,” says David Manlowe, CEO of Benefit Street Partners, on the latest episode of Credit Exchange with Lisa Lee. Manlowe asserts that investors will have time to see the impact of artificial intelligence, which could even help boost margins at software firms. “I don’t see a big company like, for example, Franklin Templeton, ripping out their core software system in the next couple of quarters.” The average level of exposure is around 22-23% for BDCs, Manlowe says, but among funds, there’s huge disparity. If one drew a histogram of all private credit BDCs and their ownership of software, it would range from funds focused on technology at up to 70%, while others are at 2%. BSP, the $94 billion alternative credit business inside Franklin Templeton, has around 9.5% exposure to software. Where the rubber really hits the road, is not in performance this quarter or next quarter, but when these companies have to refinance their debt, Manlowe notes. And that doesn’t really start until the second half of next year. That said, there will be some early indicators in the earlier part of the year, and every quarter to follow. “You could see, over the next few quarters, an extended period of time where some of these software companies actually see a fairly significant margin expansion, because they’re so much more efficient at how they’re writing code and deploying code, so on and so forth.” This raises a key question – how wide, and how deep, is the moat around a given software application? On the recent withdrawals from semi-liquid private credit funds, Manlowe believes the design of the product was very thoughtful around the asset class. The 5% cap ensures what’s going into the funds actually has a duration that is shorter and can fund the redemptions. “That five percent per quarter wasn’t a made-up number,” he says. “There’s something I learned through all this – maybe we didn’t educate as much as we should. “Let’s get back out educating the investor base. It’s not a product design flaw.” On the Iran war, Manlowe predicts it will have an impact on short-to-intermediate-term inflation. He is upbeat about the prospects for floating-rate credit markets in particular: “[The] underlying economy, both in the US and Europe, should be conducive to the companies that we lend to, and the companies in the market performing reasonably well.”