Markets have had a bumpy ride so far in 2025, with heightened volatility due to uncertainty around the economic impact of higher tariffs and trade conflicts. The S&P 500 fell more than 18% between February and April in anticipation of and following Trump’s tariff announcement, and is down -4.93% for the year, as of April 30, 2025. At the same time, trade war uncertainty continues to cloud the outlook for markets going forward.

While credit hasn’t been immune to the turmoil, it has helped investors insulate their portfolios from these shocks. Year-to-date through April 30, U.S. high yield bonds and senior loans are up 0.95% and 0.55%, respectively¹ with attractive yields around 8%.

There are several factors that help explain why credit can help strengthen portfolios during volatile markets relative to equities:²

• High coupon income: attractive, regular payments can buffer a portfolio during temporary price declines
• Contractual returns: when borrowers meet their payment obligations, investors earn their promised yield,
  while equities must deliver excellent business performance to drive strong returns
• Priority of repayment: we believe credit investors can achieve attractive outcomes versus equity holder even if a company becomes troubled 

We believe alternative credit remains a compelling option for income-seeking investors whose return targets align with the high-single digit yields we are observing today.

1 Represented by the ICE BofA U.S. High Yield Constrained Index, the S&P UBS Leveraged Loan Index, and the S&P 500 Index, respectively.
2 Risk factors that may negatively impact yield expectations include fees, liquidity differences, tax treatment, default risk and recovery rates.

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ID B733005