As investors who have been involved in securitized credit for three decades, we’ve witnessed significant growth and development in the asset class. In our view, its depth, breadth, and liquidity can complement other fixed-income sectors in delivering income and diversification. We believe market conditions for 2026 appear favorable; explore the asset class characteristics and tailwinds below.
1. What factors could reinforce continued momentum in securitized credit?
In our view, several positive factors, both broad economic trends and those specific to the sector, point to a pathway that could lead to further positive momentum for securitized credit:
Supportive Economic Environment Beyond Near-Term Risks: While uncertainty currently persists, we see the fundamentals underpinning credit markets as supportive, and anticipated government spending could continue to fuel economic growth. This economic strength can be particularly beneficial for assets across the securitized landscape, especially if this growth translates into increased consumer spending.
Selective Opportunity Set with Solid Underpinnings: The strength of securitized credit is also built on improving technical and fundamental pictures. Collateralized loan obligations (CLOs), for example, have remained relatively resilient so far this year; despite turbulence, the J.P. Morgan US CLOIE Index returned 0.74% in the first quarter of 2026, while euro index returns were 0.74%, despite wider volatility.1 However, diligent security selection remains critical, particularly with segments where careful analysis of borrower performance is warranted.
Potential Policy Boosts: Changes in government policies could also provide a positive push. For instance, new rules in the European Union, particularly changes related to Solvency II, have the potential to open the securitized credit market to a broader range of large investors as well as lower the cost of capital for holding securitized assets.
Today’s environment, although uncertain, provides opportunities for active managers to take advantage of the opportunity set that it provides. We see the opportunity today in particular as being selective carry across low-duration spread assets, with specialist securitized exposure standing out.
2. How can securitized credit boost your income?
We believe securitized credit can be an appealing option for individual investors looking to earn additional income.
You can see this extra income potential clearly in CLOs. The extra interest on offer on an AAA-rated CLO index above their risk-free benchmark rate (known as the “spread”) was comfortably above 120 basis points near the end of April.2 By contrast, bonds in the Bloomberg US Corporate Bond Index—made up of securities BBB- or higher—had an average spread of only 77 above an equivalently dated US Treasury bond, giving CLOs a ‘spread premium’ of nearly 45 basis points.