What is MAC?

Multi-asset credit (MAC) is an established, credit-based strategy that seeks to enable investors to navigate uncertain market environments and capture income-driven investment opportunities regardless of the macroeconomic backdrop. With the flexibility to invest across both traditional and alternative credit markets, we believe that MAC strategies can be a core allocation in any investment portfolio, which offers the potential to provide strong risk-adjusted total returns versus strategies that only invest in single asset classes or geographies.

The ABC of MAC investing

Investing in MAC isn’t about market timing; rather, MAC strategies should be seen as a strategic, long-term strategy that seeks to balance risk-adjusted returns and liquidity primarily through securities that provide high levels of income. We believe a MAC portfolio manager should demonstrate an investment process discipline through fundamental, bottom-up security selection and complement this with thoughtful asset allocation. 

It may be useful to think about MAC in terms of ABC:

• Accessing income
• Best geography, asset class, and sector
• Capital preservation potential

Accessing income

In a world in which we’re often bombarded by conflicting economic data and geopolitical issues, it’s important not to lose sight of the primary responsibility of a MAC manager: seeking to generate consistent, repeatable income for investors. Having a broad investment universe enables MAC managers to identify high-quality, risk-adjusted investments, rather than being limited to a single asset class within credit markets.

Understandably, the goal of MAC managers is to seek higher yields from alternative credit markets as long as the risk/reward dynamic is appropriate. Due to higher interest rates in both North America and Europe, investors may reasonably expect more income from their MAC investments compared with most of the past decade. What’s more, many securities in the MAC universe pay floating-rate income, which means investors may receive higher coupons should interest rates rise (and vice versa). This can potentially buffer investment portfolios in inflationary environments.

The sheer size of the combined MAC universe—which reaches into trillions of dollars—allows a portfolio manager to be fundamentally selective when seeking potential income opportunities while maintaining the integrity of a diverse portfolio.

Best geography, asset class, and sector

MAC strategies are typically benchmark agnostic and, as such, enjoy the flexibility to rotate between what the manager considers to be the best geography, asset class, and sector. In pursuit of the best risk-adjusted returns for investors, MAC managers can often select higher-income asset classes with equivalent or lower credit risk profiles. When seeking optimum risk-adjusted returns, historical data shows that:

• Investors in MAC strategies achieved higher returns by allocating to alternative credit, as they were paid income exceeding the relative fundamental risks. As an example, European loans have outperformed European high-yield bonds by around 0.7% per year and 11.7% cumulatively over the past decade.¹
• Investors in MAC strategies achieved higher returns by allocating to European credit markets as they received an income premium over U.S. assets. This was consistent across a variety of credit asset classes, including investment-grade bonds, high-yield bonds, and—notably—loans, where European assets have outperformed their U.S. equivalents by 1.2% per year and 19.5% cumulatively over the past 10 years.¹

Best geography

Geographic relative value can shift: Economic cycles, political changes, market sentiment, and global events can all affect regional credit markets differently. As such, flexibility and responsiveness are essential for optimizing risk-adjusted returns. Crucially, a MAC strategy must have the conviction—based on the manager’s resources and skill set—to pivot when needed.

One such example is the shift in relative value between European and U.S. secured loans. European loans offered higher income for most of the last decade; however, between late 2015 and mid-2017, U.S. secured loans offered a better return profile until European loans began outperforming again in 2018. In this instance, a well-resourced and skilled MAC manager should have the flexibility to rotate between geographies and sectors to seek the best returns regardless of market conditions. 

Best asset class

Credit assets are far from homogeneous. They each respond differently to technical factors, sentiment, and market fundamentals, which is why their income profiles are different. MAC portfolio managers therefore have the potential to exploit higher income opportunities through asset allocation without necessarily increasing credit risk.

A good example is in the collateralized loan obligations (CLOs) space. Market data has shown that CLOs with a high-yield credit rating of BB have consistently paid a higher income than global high-yield bonds, which carry the same level of credit risk, for more than a decade. Sometimes even investment-grade CLOs (with a credit rating of BBB) pay more income than riskier global high-yield bonds.

This market phenomenon has created the opportunity for MAC strategies investing in the CLO space to achieve higher income for investors while enabling MAC managers to take on equivalent or lower levels of fundamental loss risk.

Best sector

It isn’t unusual for an individual sector within credit markets to experience a macro-led dislocation, creating an opportunity for a MAC manager to reallocate capital within a portfolio. A good example is what happened in the European financials sector during COVID-19 and subsequent banking sector turmoil in 2023. In both circumstances, herd investment mentality resulted in significant—but temporary—underperformance. MAC strategies with a long-term fundamental outlook could invest more in European financials following these dislocations, leading to higher returns for those investors.

Capital preservation potential

A core component of any MAC strategy is its approach to help preserve investor capital. A MAC manager will attempt to mitigate the downside risk of credit investing with a view to ensuring that higher levels of income available from sub-investment-grade assets aren’t eroded by the impact of credit defaults. This is only consistently possible through extensive, bottom-up, fundamental credit research. A MAC portfolio manager will seek to avoid credit instruments that pose excessive risks and, as such, achieve lower default rates than high-yield credit indexes. Combined with high-yield levels of income, this has the potential to generate attractive risk-adjusted returns.

What are the potential risks associated with MAC?

A dynamic income strategy for investors

We believe investors seeking a consistent, attractive, risk-adjusted return profile driven by high income should consider a long-term strategic MAC allocation. A MAC strategy—which allows managers to exploit potential opportunities across a variety of asset classes, geographies, and sectors alongside disciplined fundamental credit analysis—may result in better risk-adjusted returns compared with passive index-tracking strategies (e.g., index funds), traditional investment-grade corporate bonds, and government bonds. As such, we believe that MAC strategies should be seen as a dynamic potential opportunity for an investor’s income and growth requirements.

1 Structured Credit Investor (SCI), Bloomberg, as of 3/31/25.