Future-Proofing Your Funds: Credit for Tomorrow's Challenges

As we approach 2026, the financial landscape is evolving with unprecedented speed, demanding a proactive approach to safeguard and grow your wealth. The traditional playbooks of the past are no longer sufficient; instead, investors must embrace innovative credit strategies to thrive amid uncertainty.

Above-trend growth, easing policy, and accelerating productivity define the economic environment, offering both opportunities and complexities that require careful navigation. By understanding these shifts, you can position your portfolio for long-term success and peace of mind.

This article provides a comprehensive guide to future-proofing your funds, drawing on expert insights and practical frameworks to help you make informed decisions. From credit markets to real assets, we explore actionable steps to build a resilient financial foundation.

The 2026 Investment Landscape: A New Era Dawns

The coming years are expected to feature a more favorable policy environment, with interest rates slowly declining to support market conditions. This shift marks a departure from restrictive measures, creating a unique window for strategic investments.

Fiscal policy, monetary policy and deregulation are all working together simultaneously, a rare alignment that can drive growth and stability. However, it also means that inflation is no longer the central issue; labor dynamics and AI's distributional effects now take precedence.

This requires a fundamental rethinking of how you assess risk and construct your portfolio. The era when every investment seemed profitable is over, so adaptability is key to staying ahead.

Credit Markets: Navigating Opportunities and Headwinds

Fixed income and credit segments offer compelling avenues for yield and diversification, but selectivity is crucial. Investment grade credit, for instance, faces challenges due to tight spreads, yet opportunities exist in locking in high yields with solid balance sheets.

Extremely tight credit spreads and extended duration profiles present potential headwinds, making broad exposure less effective. Instead, focus on niche areas with stronger fundamentals.

Alternative credit segments provide attractive options, including:

• Senior loans, which combine attractive yields with value.
• Securitized assets like commercial mortgage-backed securities, offering strong fundamentals.
• CLOs that remain appealing due to relatively high yields.
• Emerging markets debt with continued tailwinds.
• High yield and preferred securities featuring solid long-term prospects.

High-yield corporate bonds are likely to outperform investment grade debt, as they are insulated from AI-related issuance spikes. This highlights the importance of diversifying across credit tiers.

Real Assets: Building Tangible Value

Real assets and infrastructure offer inflation-hedging potential and resilient returns, making them essential for future-proofing. Public infrastructure, such as electric utilities, is trading at a discount while delivering accelerating earnings growth.

Electric utilities trading at a discount while delivering accelerating earnings growth are particularly favored, with opportunities in data center buildouts and gas-powered generation. Private markets focus on clean energy, data centers, and sustainability-focused projects.

Key real estate opportunities include:

• Medical office and senior housing, benefiting from low vacancy rates.
• Neighborhood retail, with limited new supply and strong demand.
• Real estate debt offering attractive valuations and wide spreads.

Farmland remains a compelling long-term allocation for its differentiated returns and inflation protection, though price moderation is occurring in some regions.

Income Generation: The Backbone of Resilience

Generating durable income is critical for portfolio stability, especially when markets fluctuate. Durable yield is emphasized, as reinvested income helps pull portfolios back to their long-term paths over time.

Strategies involve owning cash-flow-generative assets and accepting occasional setbacks. Sourcing income across diverse avenues, such as EM debt, securitized assets, dividend stocks, and options strategies, enhances resilience.

This approach ensures that your funds remain productive, even during economic downturns. By prioritizing income, you can build a buffer against volatility.

Private Markets: Accessing Exclusive Opportunities

Private credit and alternatives provide higher yields and uncorrelated returns, but require careful selection. Despite compressed valuations, opportunities persist with strong deal structures and robust covenants.

Semi-liquid alternatives, like interval funds, are transforming access with flexible liquidity terms. They bridge the gap between daily liquid funds and long lock-up vehicles, making private markets more accessible.

Middle market private equity offers compelling opportunities due to:

• Lower entry valuations and operational improvement potential.
• Openings from rising interest rates for new entrants.
• Pathways through co-investments for high-conviction plays.

Recent credit events underscore the need for vigilant risk assessment in these spaces.

Portfolio Construction: A Holistic Approach

Adopting a Total Portfolio Approach (TPA) is essential for modern investing, as it evaluates investments based on their contribution to overall goals rather than siloed asset classes. TPA evaluates investments based on their contribution to overall goals, leading to better outcomes through deeper analysis.

Diversification should include a barbell approach, balancing growth-oriented U.S. tech/AI with defensive positions in dividend growers and listed infrastructure. This strategy mitigates risks while capturing upside potential.

The table below summarizes key asset classes for future-proofing your funds:

Incorporating passive, smart beta, and active strategies enhances flexibility and performance.

Regulatory Insights: Adapting to Change

Recent regulatory changes, such as the 2025 U.S. Budget Bill, introduce new opportunities in real assets through revised depreciation rules and tax subsidies. Over $25 billion in expected assets by end of 2025 for Pooled Employer Plans (PEPs) highlights the growing role of private assets in defined contribution plans.

These shifts require investors to stay informed and adjust strategies accordingly. By leveraging tax advantages and regulatory tailwinds, you can optimize returns and reduce liabilities.

Risk Management: Staying Ahead of Curves

Market valuations, particularly in AI and tech, demand cautious optimism. AI remains a high conviction theme, but diversifying into improving fundamentals elsewhere mitigates overexposure risks.

U.S. equities are expected to outperform globally in 2026, but a neutral view toward overall equities is prudent. Regular monitoring and adjustments based on economic indicators are key to managing volatility.

Liability-Driven Investing (LDI) is evolving to integrate with TPA, ensuring that interest rate and credit spread exposures align with broader portfolio objectives. This holistic risk management approach fortifies your financial position.

Conclusion: Empowering Your Financial Future

Future-proofing your funds is not about predicting every market move, but about building a resilient, adaptive portfolio that can withstand tomorrow's challenges. By embracing credit opportunities, real assets, and holistic strategies, you can secure growth and stability.

Take actionable steps today: diversify your holdings, prioritize income generation, and stay agile in response to regulatory and economic shifts. Your financial future is in your hands—navigate it with confidence and foresight.