As head of Macro Credit Research within Private Markets at BlackRock, Amanda Lynam is responsible for assessing how the broad picture of risk impacts credit markets and the securities within them. In doing so, she marries the top down with an understanding of company fundamentals, a skillset developed during her time in a sell-side research role focused on the insurance and healthcare sectors. Our discussion takes stock of the current opportunity set in corporate credit, exploring Amanda's process for finding value amidst an environment of middling credit spreads, but high all-in yields. As most of the heavy lifting is currently being done by the risk-free component, her team sees this continuing, with a view that the bar is high for Fed rate cuts well into 2024.
Expecting a higher cost of capital to prevail for some time, Amanda expects more dispersion of returns across issuers in credit, with a view that certain capital structures that added considerable leverage when rates were low will struggle as they ultimately need to refinance. She notes that to some extent, higher rates are already biting, with defaults picking up and with the maturity wall beginning in earnest in 2025, corporates will need to engage markets on rolling paper in the not-too-distant future.
Next, we talk about the supply and demand for funds in credit markets. First, on the demand for capital side, she states that 2022 was the lowest issuance year in high yield since the GFC, a favorable technical backdrop that is fading as a tailwind this year and next. With respect to the supply of credit, a topic that has received more attention post the SVB debacle, Amanda shares her team's focus on opportunities in private credit, a market she sees as expanding amidst the contraction in bank lending and offering higher spread compensation.
We finish the discussion with some of Amanda's views on the progress of empowering careers for women in finance. She says it is important for females to have both a mentor who helps you in the day to day and a sponsor who can help you advance on a longer-term basis. I hope you enjoy this episode of the Alpha Exchange, my conversation with Amanda Lynam.