The Credit Edge by Bloomberg Intelligence Barings Is Seeing More Credit Investor Interest in Europe Amid US Policy Mayhem
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Jun 26, 2025 In this discussion, Mike Best, a seasoned portfolio manager at Barings, reveals a growing interest in European corporate debt as investors shift focus from the US. He explains that concerns over US economic policies are driving this trend. The conversation dives into potential risks within European credit markets, the impact on various sectors like retail and communications, and strategies for navigating liability management. Best emphasizes the importance of careful investment amid global economic uncertainty, highlighting the unique opportunities in Europe's landscape.
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Idiosyncratic Risk in Communications
- Communications sector risk is idiosyncratic, with winners focused on fiber and streaming demand.
- Legacy firms with outdated infrastructure face high risk and potential downside.
Liability Management Exercise Realities
- Many liability management exercises (LMEs) are short-term fixes delaying inevitable restructuring.
- Successful LMEs require underlying business growth or cash flow improvement.
Proactive Risk Management in LMEs
- Exit positions early when stress appears before distressed prices deepen (e.g., exiting at 90 cents rather than 80 or 70).
- Proactively assess risks ahead of severe price declines to avoid losses in liability management situations.