The Next Stage of the Credit Cycle with Oaktree’s Poli
Odd Lots
Navigating Volatility: Strategies and Opportunities in Credit Markets
Investment decisions in volatile markets require a strategic approach to balancing liquidity and risk. The ability to capitalize on volatility hinges on identifying better entry points for investments, particularly in converts and credit opportunities, rather than equities during sell-offs. While convertibles can offer initial opportunities, their performance may not align with investor criteria amid other market risks such as upcoming rate decisions and elections. Maintaining liquidity is crucial, as cash has regained value in the current market, allowing for investment in short-duration, investment-grade instruments to enhance yield. Implementing a barbell strategy by reallocating funds from less liquid assets, such as leverage loans, into liquid cash and CLOs aids in mitigating risk while being positioned to seize market opportunities. This requires a flexible portfolio management approach that can adapt quickly in response to market movements.
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