(Bloomberg) — Oaktree Capital Management’s Danielle Poli says the moment for the distressed debt shop to scoop up the asset class in droves isn’t here yet as global credit markets remain relatively resilient.
“There are opportunities currently to step in, but I think that the bigger opportunities for bigger price movement may be further down the line,” the portfolio manager said on Bloomberg TV’s Real Yield on Friday. “We haven’t seen a significant selloff in any way.”
Parts of the global credit markets have come under pressure from escalating geopolitical tensions, software debt defaults and fear around private credit funds limiting redemptions. Distressed debt managers make money when other investors need to sell credit assets — often at a large discount — to raise liquidity and redemption requests.
While discounts are “sizeable” for software and some professional services firms that are vulnerable to disruption from artificial intelligence, the highest quality part of the market is trading up, Poli said, therefore it’s difficult to say that it’s currently a “big step-in opportunity.”
Spreads on high-yield bonds have widened by roughly 3 basis points this week through Thursday, but are still hovering near historically tight levels, according to data compiled by Bloomberg, with average sub-investment grade yields around 7.1%.
Instead, Oaktree sees opportunities in diversifying credit, liquid debt and opportunistic situational lending. Poli said the firm is focusing on selectivity and picking individual securities, and pairing that within a multi-asset strategy where investors can shift toward relative value as the market moves.
“Things are moving relatively quickly, especially on the geopolitical front,” she said. “Today things may be calm, tomorrow things could get a little bit more choppy and we may want to step in a little more aggressively to buy.”
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