The Credit Edge by Bloomberg Intelligence
First Eagle Plays Safe as Credit Spreads Get Squeezed
Jan 9, 2025
Jim Fellows, Co-president and CIO of First Eagle Alternative Credit, shares his insights on the current credit landscape. He highlights the tightening debt spreads and urges a conservative approach in leveraged loans and high-yield bonds. The conversation digs into opportunities in asset-based lending and trends in middle-market loan pricing. Fellows also discusses the outlook for buyout finance and the challenges posed by private credit defaults, revealing the complexities and risks in today's investment climate.
37:02
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Quick takeaways
- First Eagle warns of conservative investment strategies in credit markets due to tightening spreads and the lack of obvious value.
- Despite challenges in certain sectors, the lower middle market presents unique investment opportunities as direct lenders capitalize on less competition.
Deep dives
Current Trends in Credit Markets
Credit markets are experiencing a significant surge, with expectations for record debt issuance, primarily for refinancing purposes. The demand for high-grade debt remains strong, offering yields approaching 5.4%, which is appealing to investors amid low default risk. However, this has resulted in thin spreads, pushing investors towards structured finance and private debt for potentially better returns. A notable concern arises over risk mispricing in the current climate, which could exacerbate in 2025, leading to increased caution among market participants.
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