A Disciplined Framework to Capture Income While Preparing for a Shift in Market Regime 

Late-cycle credit markets rarely announce themselves clearly. Spreads remain tight, income is still available, and risky assets may continue to perform. Yet beneath this apparent stability, the balance is shifting: compensation is thinner, risks are more idiosyncratic, and the margin for error is narrowing.

For investors, the challenge is no longer whether to stay invested—but how.

What this paper explores

This third paper in our credit series focuses on portfolio posture in a late-cycle environment. Building on our previous analysis of risk and cycle dynamics, it provides a practical framework for navigating the current phase.

You will discover:

• Why late cycle is not the end of opportunity—but a change in its nature
• How income (carry) behaves when spreads are tight
• Why quality becomes more valuable as asymmetry builds
• How flexibility and active management can turn uncertainty into opportunity
• What typically follows late cycle—and why timing it is so difficult