FICC Focus Sail Tariff, Default Seas with Alternative Credit: Credit Crunch
Jun 10, 2025
Craig Scordellis, CIO of Credit at CQS UK, brings his expertise in managing $15 billion in credit to discuss the evolving landscape of alternative credit and leveraged finance. He and Mahesh Bhimalingam delve into how recent tariff changes influence global inflation and currency dynamics. They explore credit market risks, the impact of central bank policies, and provide insights on default predictions for Europe and the US. Their conversation highlights emerging investment opportunities despite the prevailing financial challenges.
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Engage Businesses, Avoid Macro Calls
- Focus credit portfolios on lending to resilient businesses with strong management teams.
- Prioritize risk-adjusted returns over attempting to predict precise macroeconomic cycles.
Contained Euro Default Rates Expected
- European default rate stands at about 3.3% and expected to remain contained around 3% by year-end.
- Distressed assets in Europe are low, supporting a sanguine default outlook compared to the US.
US Credit Stressed More Than Europe
- US businesses face more stress from higher borrowing costs and private equity behavior.
- European corporates feel less pressure due to lower borrowing costs and different creditor relations.