Most economies have proven surprisingly resilient. Corporate profitability has remained largely intact, labour markets are still firm, and financial markets are providing an opportunistic window for capital raising — but risks remain that could derail our base case of a soft landing.
For the better part of two decades, alternatives were a satellite allocation. The 60/40 portfolio held the centre, and credit, real estate, infrastructure and private equity sat on the edge — modest line items adding diversification without disrupting the orthodoxy.
That hierarchy is changing. With listed credit spreads compressed and equity valuations stretched in pockets, the marginal dollar of risk capital is increasingly finding its way into private credit and infrastructure debt — strategies that offer contractual cash yield and protection from secondary-market mark-to-market volatility.
Three forces are at work. First, banks continue to retrench from middle-market lending, leaving non-bank lenders structurally positioned to capture share. Second, allocators are recognising that the income profile of private credit — floating rate, monthly distribution, senior secured — complements rather than competes with their equity book. Third, the macro setup of higher-for-longer policy rates means base rates alone deliver meaningful yield before any spread.
Soft landings are not guaranteed. We continue to monitor labour market deterioration, signs of distress in commercial real estate, and any acceleration in corporate default rates. The MIIF portfolio is constructed with these risks explicitly in mind — heavily senior secured, diversified across sub-sectors, and biased toward shorter duration in segments where workout risk is elevated.
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