“I’ve continued to see large investors, both on the individual side [and] on the institutional side, continue to rotate their portfolios into fixed income,” said Wayne Dahl, co-portfolio manager of global credit and global credit investment grade strategies at Oaktree Capital Management, on the latest edition of the ‘Credit Exchange’ podcast with Lisa Lee.

Economic growth will slow, forecast Dahl, noting the challenges from tariffs and their impact on inflation, consumer sentiment, and the job market.

“We have to be eyes-wide-open to the fact that maybe some of those real positive factors in the first half might not have the same impact in the second half of the year,” he observed.

But that’s a good environment for credit. Despite credit spreads being near their tights, the sub-investment grade segment remains at a pretty attractive level, Dahl said. Investors can earn in the sub-investment grade credit space what some people would consider almost equity-like returns, but with less risk and less volatility.

High yield bonds, leveraged loans, structured credit such as CLOs, CMBS, RMBS – all these earn above seven percent. “And that’s a pretty good-trade-off for portfolios, to lock in that coupon, [to] be able to de-risk your portfolio, [and] still meet your objectives,” Dahl said.

That being said, Dahl cautioned there is stress building, pointing particularly to leveraged loans. “I think, as an active manager, that’s something you’re keenly aware of,” he said.