Brian Carney, lead portfolio manager of the global credit opportunities strategy, explores the current credit market environment characterized by tight spreads and low defaults despite global uncertainties. He discusses the concept of "convergence and complacency"—where large pools of capital chase lower-quality borrowers while markets overlook serious warning signs including political pressure on central banks and hidden leverage. The conversation covers key crisis indicators, the weakening of credit covenants over the past decade, and the risks associated with private credit. He outlines the portfolio's defensive positioning with high-quality, short-duration securities and highlights Saturn Oil and Gas as an example of selective opportunities that still favor lenders. He concludes with insights on how AI is enhancing the investment process while emphasizing that technology cannot replace the importance of human relationships in credit analysis. Key Takeaways: • How the Global Credit team approaches today's tight spread environment by focusing on capital preservation rather than reaching for yield, positioning for future market dislocations when opportunities will emerge. • The key early warning indicators to monitor for potential credit market stress, including hedge fund liquidations, counterparty credit reductions, and central bank intervention patterns. • The reality behind private credit's popularity: —understanding whether the additional ~200 basis points over public high yield adequately compensates for illiquidity, reduced transparency, and higher fees. • The critical importance of credit covenant analysis in the investment process, and how the shift toward borrower-friendly terms over the past decade has reduced lender protections. • The rationale behind the Saturn Oil and Gas investment, highlighting how disciplined management, forced deleveraging through quarterly bond buybacks, and attractive spreads create value in a challenging market. • How AI technology is being integrated to enhance the investment process through improved issuer triage and covenant comparison, while maintaining the essential human relationships that drive successful credit investing. This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Host: Kevin Minas, CFA - Institutional Portfolio Manager Guest: Brian Carney, CIM – Portfolio Manager Visit Mawer at https://www.mawer.com. Follow us on social: LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ Instagram - https://www.instagram.com/mawerinvestmentmanagement/

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