Credit Exchange with Lisa Lee

The US Federal Reserve should not be tempted to overreact as it seeks to tackle rising inflation, says Cindy Beaulieu, CIO of Conning North America, on the latest episode of Credit Exchange with Lisa Lee.
A combination of rising energy prices and the lingering after-effects of the Trump administration’s tariffs agenda mean inflation continues to be a key issue for the economy. For Beaulieu, Fed Chair Kevin Warsh’s recent speech at Jackson Hole highlighted a focus on rising core personal consumption expenditures (PCE) remaining at an elevated level, and the need to address it as a priority.
However, she believes the Fed should tackle the issue cautiously. “Our thought is there’s a lot of noise [in the data], so be careful,” she says. “Don’t overreact, because overreaction could stifle the economy in a way of unintended consequences and actually cause a recession, which is certainly not what they want to do.
“Being patient would really put them (the Fed) in a much better position.”
She suggests that secular changes in the nature of the economy, such as an ageing population, deglobalisation, and a much riskier global geopolitical environment, mean that the Fed’s long-held 2% inflation target may no longer be achievable.
While Beaulieu believes that the transformative potential of AI across the economy is very real, she notes that “the last thing” you want to have is a portfolio that is overly-concentrated on the AI trade.
“I think some of the things that are really important... is first understanding exactly who the borrower is, where they sit, and what type of legal protections you have should things go in the wrong direction,” she says.
“Theres been a lot of issuance in the structured markets, and not every one of those deals is created equal. Some of those leases are much more favourable for the companies that are going to occupy the data centre, than they are for the lenders to that particular facility. So you have to be very, very careful as you are pursuing this trade.”
For Conning, an asset manager focused on the insurance industry with over USD 190bn in AUM, a key focus of the credit cycle since COVID has been ensuring their portfolios are positioned neutral to the duration they need to be for the liabilities of their various insurance clients.
“We’ve invested... across the investment-grade areas of the market, but we have been a little bit less focused on the below-investment-grade parts of the market now for a couple of years,” Beaulieu says. “We have given up a little bit of return in that, but we are also about protecting principal, and so we’re willing to give up a little bit of that incremental return.”
She says Conning’s focus, especially for the last 18 months, has been on the structured areas of the fixed income market. That has included investments in agency and non-agency mortgages, esoteric asset-backed securities, high-quality CLOs, and private placements.
She also discusses the shifting outlook for the upcoming US mid-term elections, recent regulatory developments in the insurance sector, and dynamics in the labour market.

Two pools of capital – the franchising of AI digital infrastructure buildout and government spending – are interest rate-insensitive and require a massive quantum of debt, says Gregory Peters, co-chief investment officer at PGIM Credit.
Peters, who in his role oversees $1.2 trillion of assets under management, says the Federal Reserve has to hike interest rates to remain credible. But even with a few more hikes, he doesn’t see the current policy as being restrictive.
“I’m not sure It quells inflation either,” Peters says.
A slowdown of the AI buildout and capex would be a positive for investors and also help to stem inflation, he argues. Whether that will happen, though, is “still very much an open question.” But he notes that this will be the key driver of investment returns here over the next 12-24 months.
“History shines a very poor light on excess capital being deployed in a short period of time,” he says. “It’s a trail of tears.”
In addition, Peters shares his insights on emerging markets, Europe, Asia, and public and private debt markets.

“Interest rate markets are telling you that they really are concerned about inflation, and to a certain degree, concerned about the size of government debt,” says Symon Drake-Brockman, co-founder and managing partner at Pemberton Asset Management, on the latest episode of Credit Exchange with Lisa Lee, taped on 9 September 2026.
The re-engagement of hostilities between US and Iran has set that back in place, he adds, especially since we are moving into winter, when demand for gas and energy will increase. Drake-Brockman says US Treasury yields look quite high, but potential buyers are trying to work out whether the political debate between the White House and the Fed is going to continue. “If it does, then rates could probably go a bit higher,” he predicts.
Europe will see more M&A. The world has fundamentally changed into three economic blocs – the US, China, and Europe, and the first two have been building large companies that operate through their entire economies and internationally, while Europe has lagged. But a new M&A framework will facilitate consolidation and that will ultimately bring Europe closer together, he contends.
Drake-Brockman also discusses private credit and recent regulatory scrutiny. He and Pemberton are in dialogue with the Bank of England, and he shares that “they felt very comfortable that the industry is in a good place.”

“The market clearly is saying that he (US Treasury Secretary Scott Bessent) didn’t threaten a bazooka, he didn’t bring a bazooka, and he hasn’t shown a bazooka,” says Alan Schrager, chief investment officer at Oak Hill Advisors, on the latest episode of Credit Exchange with Lisa Lee.
The US Treasury Department has the capabilities to make an impact on rising sovereign bond yields, but the world hasn’t seen a major or real commitment to buy the long end, Schrager says: “In the absence of a bazooka, it’s very hard to make too much of an impact.”
Schrager, who in his role as CIO helps oversee OHA’s $100bn+ of AUM, also discusses inflation, the health of corporations, the crowding out of capital by artificial intelligence investments, and private credit. While corporations are performing well and there’s no default cycle in near sight, there are idiosyncratic issues.
The upshot is that private credit managers are going to end up owning more companies “than we would have traditionally done”, Schrager predicts, and they have to be prepared for that.

“Here we are again,” reckons Kort Schnabel, co-head of US direct lending at Ares Management, on the surprising return of inflation. Still, the economy is in a good place to be able to manage through these inflationary pressures we’re seeing, Schnabel explains to Lisa Lee on the latest episode of Credit Exchange.
On artificial intelligence and disruption of software companies, Schnabel says we are “not out of the woods”. He adds, however, that there is some good news, in that “it’s not getting disrupted overnight.” Ares – an alternative asset manager with around $680 billion in AUM, and a private credit powerhouse – is open to lending to software firms, but the bar has risen higher, and he explains the factors.
Schnabel is now seeing, for the first time in many years, real dispersion in performance among different managers.
“I think you’re seeing the maturation of these portfolios, and you’re seeing the maturation of the portfolios that were ramped pretty quickly because there was a lot of money.”
And big players that perhaps ramped a bit too quickly and were able to invest with that same pace, may not get bigger: “They might suffer.”