An Alternative Approach to Credit Investing
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Tuesday, 3 November 2026
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An Alternative Approach to Credit Investing
By Brian Lieberman, Portfolio Manager at Muzinich & Co.
Global fixed income continues to experience uncertainty in the new environment that Covid-19 has brought with it. Credit markets rallied since the March lows in response to the support provided by central banks and governments. Despite some economic activity resuming and positive macro data, forward-looking expectations remain challenged.
As the outbreak continues to evolve and the reopening of economies is slowing pace, and sometimes even reversed, market volatility is likely to remain high. The question for many investors in credit markets is how to capture the current value of yields and credit spreads whilst containing volatility.
We believe that a long/short approach to credit investing, seeking to exploit sources of return away from carrying and pure market beta by utilizing a broad set of instruments, may offer the potential to capture returns, preserve capital, and help investors navigate the current markets with moderate volatility.
In this context, a long/short credit approach combines direct and actively managed exposure to credit markets, specific sectors, and issuers, while portfolio hedges through dynamic management of short positions aim to materially reduce the downside risk and volatility that an uncertain economic environment will inevitably generate in the next few quarters.
We believe active management is important when attempting to avoid defaults or capitalize on opportunities.