Credit Exchange with Lisa Lee

Lotfi Karoui, multi-asset credit strategist at fixed-income behemoth PIMCO, says the top risk to markets and the economy is the potential unwinding of the AI capex cycle, on the latest episode of Credit Exchange with Lisa Lee.
“Then you’re going to tighten financial conditions,” says Karoui, which is bad news for equities. That will have wealth effects and probably affect the broader economy. The market isn’t blindly rewarding all capex financing announcements, he says. Right now, markets are seeing some indigestion regarding data centre financing – Karoui recommends looking at dollar versus other currency debt to see whether that’s fundamental or technical.
Karoui, who is also co-head of client solutions and analytics at PIMCO, is watching six-month oil futures and diesel prices to gauge whether the resumption of the Iran war is choking up economic activity. We discuss his inflation expectations (moderating), the direction of Federal Reserve monetary policy (on hold), and private credit (seeing some stress). He also finds pockets of fixed income in emerging markets such as Brazil and South Africa compelling.

“We certainly have noted from an oil price or fuel price perspective, just how comfortable businesses have gotten with oil price or gas price pass-throughs,” says Aaron Kless, CEO and CIO of direct lending specialist Andalusian Credit Partners, on the latest edition of Credit Exchange with Lisa Lee.
“They’ve really been able to manage that price volatility, and price spikes, quite well.”
Andalusian has a unique perspective on the macro-economic backdrop. Its executive chairman is Roger W. Ferguson, Jr., a former vice-chairman of the Federal Reserve, who also sits on its investment committee.
“Our view certainly is that there’s really no expectation of rate cuts, [and the] possibility of rate increases,” says Kless.
The firm focuses on the so-called middle market segment, which drives around 40% of US GDP and 30% of US employment.
“We continue to see real resilience in the consumer, even at the lower part,” says Kless, who was formerly head of non-sponsor direct lending at Apollo Global Management.
Kless also discusses the attractiveness of sports investing due to the recurring, predictable and sticky nature of the cashflow. The World Cup will help boost soccer in the US.
“We’re on the precipice of something really exciting around soccer,” he says.
“We get to participate in the market, or at least in the deal flow in the market. [There are] lots of smart and interesting things happening around what I would call ‘minor league’ soccer.”
Kless also talks about what makes a good investment in sports. For instance, pickleball as an amateur sport is interesting, but remains too emergent from a professional perspective for a credit investment.

“Last frontiers of alpha is in the sports and entertainment-related real estate,” says Jonathan Fascitelli, founder and CEO of sport and entertainment real estate firm Seregh, on a special edition of Credit Exchange with Lisa Lee, recorded at the FII Institute’s conference in Rome. Just 18 months since founding, Seregh already has more than $35 billion in their pipeline.
Seregh, which has the backing of Creative Arts Agency (CAA), Apollo co-founder Josh Harris, and Blackstone’s David Blitzer among many others, seeks to develop and invest in infrastructures around stadium and arenas. That means building communities that include residential homes, office buildings, restaurants, and more.
Fascitelli, who was formerly the CEO of Harris Blitzer Sports & Entertainment real estate, also talks about FII PRIORITY Europe 2026, of investing in the “collective effervescence” (the shared moment when everyone experiences the same thing at the same time – think recent moments involving the New York Knicks or English Premier League club Arsenal), and how that can combat the rise of AI.

“We’re clearly in late cycle, but we’re not obviously at the turning point,” says Ariadna Stefanescu, co-head of Permira Credit, in the latest edition of Credit Exchange with Lisa Lee. Permira is a global investment firm with buyout and credit businesses holding nearly €90 billion in committed capital.
The current environment provides an opportunity for different managers to differentiate themselves, says Stefanescu. Not only will there be more dispersion, but some shops will either fold or face consolidation.
“Ultimately, some people will be priced out of the market,” she predicts.
While Stefanescu expects defaults in sub-investment grade debt to increase, she also notes there have been structural changes that have served to reduce the default rate, most notably more pockets of liquidity.

Middle-market direct lending finances growing businesses, says Gauthier Reymondier, head of European credit at Bain Capital, a private equity and credit powerhouse with more than $225 billion in assets under management.
Reymondier speaks about the fundamental difference between US and European economic growth, the impact of artificial intelligence and capex spending, and consumer habits. While European growth expectations have been very mediocre, more political stability would prompt consumers to spend more, he says, as has been the case in Spain, Portugal or Poland.
“Trust would be the biggest growth driver,” Reymondier says. “I think stability is important because we see in our market that without stability, people don’t spend.”
Bain Capital’s private equity arm this week announced a major deal to acquire Everllence, a marine power and turbomachinery manufacturer, in a carve-out from Volkswagen Group, and Reymondier also weighs in on the future prospects for M&A and LBOs.