Credit Reimagined

Building Income, Managing Risk and Strengthening Resilience

Credit markets are evolving. Elevated rates, fragmented liquidity and mounting pressure on traditional 60/40 models against a backdrop of persistent market volatility are prompting investors to reassess income, diversification, and portfolio resilience.

Understanding the challenges of this complex and constantly evolving environment — along with the potential solutions needed to prosper in it — has never been more important. To that end, a broader and more dynamic range of credit strategies are reshaping how investors can seek to achieve their objectives, offering new ways to build portfolios designed to weather uncertainty and capture opportunity. Backed by deep experience and a disciplined, risk-aware mindset, Oaktree helps investors navigate this evolving landscape with clarity and confidence.

 

Global Credit Outlook

Watch Danielle Poli, Managing Director and Assistant Portfolio Manager at Oaktree, discuss the outlook for global credit markets at Bloomberg’s Global Credit Forum in Los Angeles.
A river running through a lush green forest

Evolving Beyond Traditional Fixed Income

After years of low yields, compressed spreads, and central bank distortion, credit markets are now offering attractive risk-adjusted opportunities that go beyond traditional bonds, including:

  • Private lending
  • Asset-backed structures
  • Multi-asset credit solutions

In today’s environment, where equity volatility is rising and traditional bonds are struggling to meet investor needs, these credit strategies:

  • Serve as valuable sources of stable income and diversification
  • Offer structural yield advantages
  • Exhibit low correlation to equities
  • Provide multiple ways to enhance returns and manage risk

These credit strategies can provide compelling entry points that investors should consider when building more resilient portfolios. 

Goal-Based Credit Solutions

A Closer Look at the Solutions

A multi-asset strategy across liquid credit markets — including high yield, loans, and emerging market debt — that adapts to changing conditions while targeting income and capital efficiency. As the chart below illustrates, performance can vary widely among fixed income classes in any given year, supporting the case for a multi-asset strategy that is able to shift among opportunities.

Key benefits include: 

Liquidity: Use of public markets results in greater liquidity that provides access to income-generating assets without locking up capital.

Flexibility: Managers shift across sectors to respond to market changes, capturing upside while minimizing downside capture to potentially achieve outperformance.

Expert-Driven Diversification: Combines active management and portfolio expertise to identify attractive income opportunities across the credit spectrum.

Past performance does not guarantee future results. The indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. This Peer analysis is provided for illustrative purposes only to demonstrate historical analysis on potential returns. The example shown is not representative of returns that have been or will be achieved by the strategy. Multi-Asset Credit Index Blend reflects a custom index blend consisting of, 25.0% Private Credit, 18.0% Senior Loans, 16.9% High Yield, 11.3% Real Estate Debt, 11.3% Corporate Structured Credit, 3.8% Emerging Markets Debt, 5.6% European High Yield, 4.5% European Loans, and 3.8% Convertibles; Private Credit reflects Cliffwater Direct Lending Index, High Yield Bonds reflects ICE BofA U.S. High Yield Index, Senior Loans reflects Credit Suisse Leveraged Loan Index, Real Estate Debt reflects Bloomberg US CMBS 2.0 Baa Index, Corporate Structured Credit reflects JP Morgan CLO 2.0 BB Post-Crisis Index, Emerging Markets Debt reflects JP Morgan Corporate Broad CEMBI Diversified High Yield Index Level, Convertibles reflects Refinitiv Global Focus Convertible Index; European High Yield reflects ICE BofA Global High Yield European Issuers Non-Financial Excluding Russia Index (HQSC); European Loans reflects Credit Suisse Western European Leveraged Loan Index. Global Senior Loans as Morningstar Global Leveraged Loan Index, Global High Yield as ICE BOFA Global High Yield Index. Source: JPMorgan, ICE BofA, Credit Suisse, Bloomberg, Cliffwater, Morningstar, Refinitiv, as of March 31, 2025.  As an asset class, private credit comprises a large variety of different debt instruments. While each has its own risk and return profile, private credit assets generally have increased risk of default, due to their typical opportunistic focus on companies with limited funding options, in comparison to their public equivalents.

Focused on floating-rate, senior-secured loans to high-quality middle-market borrowers, offering a compelling combination of strong income, low volatility, and long-term capital preservation. 

Key benefits include:

Income Stability: Contractual cash flows from senior-secured loans provide dependable income, even during market volatility.

High Income: Lending in less active markets rewards patient capital with higher yields and less price volatility, delivering an illiquidity premium.

Rate Protection: Floating-rate loans adjust with base rates, naturally hedging against rising interest rates while maintaining return potential.

Past performance does not guarantee future results. The indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. The figures stated are gross of fees. Source: Cliffwater Direct Lending Index. Represents trailing four quarters ending December 31, 2024. As an asset class, private credit comprises a large variety of different debt instruments. While each has its own risk and return profile, private credit assets generally have increased risk of default, due to their typical opportunistic focus on companies with limited funding options, in comparison to their public equivalents.

Focuses on opportunities secured by tangible or contractual assets, such as aircraft, infrastructure, renewables, and consumer loans, diversifying private credit exposures. 

Key benefits include:

Income: Assets generate cash flows from tangible or contractual sources, offering income streams that provide diversification beyond traditional private credit portfolios.

Risk Mitigation Potential: Secured by physical or contractual collateral, ABF provides structural safeguards with improved recovery potential in stressed scenarios.

Diversification: Lower correlation to public markets and traditional corporate credit helps insulate portfolios from macroeconomic and credit-specific shocks.

For illustrative purposes only. Diversification does not guarantee a profit or protect against loss. As an asset class, private credit comprises a large variety of different debt instruments. While each has its own risk and return profile, private credit assets generally have increased risk of default, due to their typical opportunistic focus on companies with limited funding options, in comparison to their public equivalents. Because private credit usually involves lending to below-investment-grade or non-rated issuers, yield on private credit assets is increased in return for taking on increased risk. Asset back securities are subject to greater levels of credit risk, call risk and liquidity risks which may cause their values to decline. Asset-backed securities are complex investments and not suitable for all investors. 

Credit Where Credit is Due: Reimagining the Modern Credit Portfolio

Each credit strategy brings unique strengths. Individually or combined they provide flexible solutions that enhance income, diversify risk, and build resilience into portfolios. 


In our view, the most effective approach is to create a well-diversified credit portfolio that draws on a range of strategies. We believe this positions investors to capture opportunities across all market environments. 

 


 

Past performance does not guarantee future results. Past performance shown for illustrative purposes only and does not predict or depict the future performance of any investment. Indexes are unmanaged and cannot be purchased directly by investors. Target returns for credit investments are projections based on current assumptions and may not be achieved. The metrics shown are hypothetical and intended for illustrative purposes only. They do not represent actual or projected investment results and should not be relied upon as predictions of future performance. “Public Credit” is based on an illustrative portfolio comprising a 70% allocation to the ICE BofA U.S. Corporate Index and a 30% allocation to the ICE BofA US High Yield Index. “Public + Direct Lending” represents an illustrative portfolio comprising a 35% allocation to the ICE BofA U.S. Corporate Index, a 15% allocation to the ICE BofA U.S. High Yield Index, a 35% allocation to Private Investment-Grade Corporates and a 15% allocation to Direct Lending based on representative spreads and yields. “Public + Direct Lending + ABF” represents an illustrative portfolio comprising a 35% allocation to the ICE BofA U.S. Corporate Index, a 15% allocation to the ICE BofA U.S. High Yield Index, a 17.5% allocation to Private Investment-Grade Corporates, a 7.5% allocation to Direct Lending, a 17.5% allocation to Investment-Grade Asset-Based Finance and a 7.5% allocation to Sub-Investment-Grade Asset-Based Finance based on representative spreads and yields. As of April 30, 2025. The chart compares select credit allocation strategies but omits several material factors that may significantly impact investment decisions. Differences in liquidity constraints, management fees, tax treatment, and risk considerations are not fully reflected and should be carefully evaluated before investing. As an asset class, private credit comprises a large variety of different debt instruments. While each has its own risk and return profile, private credit assets generally have increased risk of default, due to their typical opportunistic focus on companies with limited funding options, in comparison to their public equivalents. Because private credit usually involves lending to below-investment-grade or non-rated issuers, yield on private credit assets is increased in return for taking on increased risk. Asset back securities are subject to greater levels of credit risk, call risk and liquidity risks which may cause their values to decline. Asset-backed securities are complex investments and not suitable for all investors. 

Howard Marks
Only truly superior skill, discipline and integrity are likely to produce consistently high returns in the long run with limited risk.
Howard Marks
Co-Chairman, Co-Founder of Oaktree Capital

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Important Disclosures 

All investing involves risk. The value of an investment will fluctuate over time, and an investor may gain or lose money, or the entire investment. Past performance is no guarantee of future results. 

The information contained herein is for educational and informational purposes only and does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This material discusses broad market, industry or sector trends, or other general economic or market conditions, and it is being provided on a confidential basis. 

It is not intended to provide an overview of the terms applicable to any products sponsored by Brookfield Corporation and its affiliates (together, “Brookfield”). Information and views are subject to change without notice. Some of the information provided herein has been prepared based on Brookfield’s internal research, and certain information is based on various assumptions made by Brookfield, any of which may prove to be incorrect. Brookfield may not have verified (and disclaims any obligation to verify) the accuracy or completeness of any information included herein, including information that has been provided by third parties, and you cannot rely on Brookfield as having verified any of the information. The information provided herein reflects Brookfield’s perspectives and beliefs as of the date of this material. 

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Index Provider Disclaimer

The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison, such as differences in volatility and also regulatory and legal restrictions between the indexes shown and any investment in a Brookfield strategy, composite or fund. Brookfield obtained all index data from third-party index sponsors and believes the data to be accurate; however, Brookfield makes no representation regarding its accuracy. Indexes are unmanaged and cannot be purchased directly by investors. Brookfield does not own or participate in the construction or day-to-day management of the indexes referenced in this document. The index information provided is for your information only and does not imply or predict that a Brookfield product will achieve similar results. This information is subject to change without notice. The indexes referenced in this document do not reflect any fees, expenses, sales charges or taxes. It is not possible to invest directly in an index. The index sponsors permit use of their indexes and related data on an “as is” basis, make no warranties regarding same, do not guarantee the suitability, quality, accuracy, timeliness and/or completeness of their index or any data included in, related to or derived therefrom, and assume no liability in connection with the use of the foregoing. The index sponsors have no liability for any direct, indirect, special, incidental, punitive, consequential or other damages (including loss of profits). The index sponsors do not sponsor, endorse or recommend Brookfield or any of its products or services. Unless otherwise noted, all indexes are total-return indexes. 

Index Definitions 

The Cliffwater Direct Lending Index measures the unlevered, gross-of-fees performance of U.S. middle-market corporate loans, as represented by the asset-weighted performance of the underlying assets of business development companies (BDCs), including both exchange-traded and unlisted BDCs, subject to certain eligibility requirements.

The U.S. High-Yield Market Capped Index uses the U.S. High-Yield Market Index as its foundation. The index uses the same design criteria and calculation methodology as the U.S. High-Yield Market Index, but caps the total debt of any single issuer at USD $15 billion of par amount outstanding and also delays the entry of fallen angels for a minimum of one month after their downgrade to high-yield.

The ICE BofA Global High Yield European Issuers Non-Financial 3% Constrained, Ex Russia Index is a sub-index that contains all securities in the broader index except those from Financial issuers or with Russia as their country of risk but caps issuer exposure at 3%. The index is rebalanced monthly. The index is USD Hedged.

The Credit Suisse Leveraged Loan Index is designed to mirror the investible universe of the $US-denominated leveraged loan market. The index includes only those loans rated “5B” or lower, or if unrated, the initial spread level must be Libor plus 125 basis points or higher. The index includes only funded loans with a tenor of at least one year.

The Credit Suisse Western European Leveraged Loan Index is designed to mirror the investable universe of the Western European leveraged loan market. The index includes loans denominated in U.S. dollars and Western European currencies. Loans must be rated Moody's/S&P of Baa1/BBB+ or lower, have a minimum initial spread of Libor +125 bps, and be a funded loan. This index is EUR Hedged for the European Senior Loan Composite and USD Hedged for the European senior loan component within Oaktree’s Global Credit strategy.

The Bloomberg Barclays Capital CMBS 2.0 BBB Index is a rules-based index constructed to measure the market of investment-grade CMBS BBB conduit and fusion deals issued since the beginning of 2010.

The JP Morgan CLO 2.0 BBB Post-Crisis Index tracks floating-rate CLO BBB securities in post crisis vintages, which consists of deals issued in 2010 and later. The index utilizes a market-value weighted methodology.

The JP Morgan Corporate Emerging Market Bond High Yield Index (CEMBI HY) is a global, liquid corporate emerging markets index that tracks U.S.-denominated corporate bonds (high yield subset only) issued by emerging markets entities.

The Thomson Reuters Global Focus Convertible Index is represented by the Oaktree custom Global Convertibles Index through December 2015 and the Thomson Reuters Global Focus Convertible Index thereafter. The Thomson Reuters Global Focus Convertible Index is composed of larger balanced convertibles which meet monthly price and premium tests and has no restrictions on credit rating. Convertibles that are fixed income surrogates or equity substitutes are removed from the index and replaced by balanced securities. The benchmark was changed prospectively because this index more closely matches the strategy’s current exposures to High Income Convertibles, U.S. Convertibles and Non-U.S. Convertibles. The index is valued in and hedged to U.S. dollars. Prior to January 2016, the benchmark was the Custom Global Convertibles Index represents a weighted blend of Oaktree’s primary benchmarks for the U.S. Convertibles and Non-U.S. Convertibles strategies. The benchmark for the High Income Convertibles strategy allocation is represented by the U.S. Convertibles benchmark. The U.S. Convertibles benchmark is the ICE BofA All U.S. Convertible Index, and the Non-U.S. Convertibles benchmark is the JACI Global ex-U.S. (Local) Index through December 31, 2014 and the Thomson Reuters Global Focus ex-US Index thereafter. The shift in the Non-U.S. Convertibles benchmark is a result of Jefferies discontinuing their index. The Thomson Reuters convertible index was selected as it mirrors Oaktree’s convertibles investing approach and is the most widely used index in Europe. The custom index reflects the asset allocation policy weights of the Composite and is rebalanced monthly based on the Composite’s policy weight changes and adjustments, which are implemented in the next full measurement period.

The ICE BofA U.S. Corporate Index tracks the performance of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market. Eligible securities are rated BBB-/Baa3 or higher, have at least one year remaining to maturity, and a minimum of $250 million in outstanding face value.

The ICE BofA U.S. High Yield Index tracks the performance of U.S. dollar-denominated, below-investment-grade (IG) corporate debt publicly issued in the major domestic markets.

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