Can you give an overview of the team running the fund and your investment process?
The strategy is managed by portfolio manager Ji He, CFA, who has 15 years of investment experience, including 9 dedicated to public BDC portfolio management and research. She is supported by an investment committee that combines portfolio management, US private debt expertise and public credit research.
The strategy also draws on the resources of Muzinich's broader global credit platform, including more than 60 private debt professionals alongside dedicated public credit analysts, traders and risk specialists. This enables the team to combine bottom-up company analysis with insights from both public and private credit markets.
Our investment process is built around an integrated underwriting framework that evaluates the manager, underlying portfolio and listed valuation. We assess manager quality through factors such as underwriting discipline, management capability, dividend sustainability and shareholder alignment. We then conduct detailed portfolio look-through analysis, examining sector and lien composition, borrower exposures, credit quality trends and non-accrual levels. Finally, we evaluate the listed security, focusing on valuation, liquidity, yield and the relationship between market price and net asset value.
By combining private credit fundamentals with public market valuation discipline, we seek to identify attractive opportunities while maintaining a strong focus on risk management and downside protection.
What do you see as the big opportunities and risks for your fund for the rest of the year and moving into 2027? How are you positioned in this environment?
We believe the opportunity set for the remainder of 2026 and into 2027 remains compelling. Market volatility has created attractive entry points in listed Business Development Companies (BDCs), with many continuing to trade at discounts to net asset value despite underlying private credit portfolios that remain fundamentally resilient. This combination of elevated income levels and discounted valuations provides investors with the potential to be "paid to wait" while markets reassess fundamentals.
A key opportunity is the growing dispersion across the BDC sector. As private credit matures and economic conditions become more differentiated, we believe active managers can add value through selective allocation, identifying BDC managers with strong underwriting discipline, resilient portfolios and attractive valuations. The ability to access middle-market private credit through liquid, listed securities remains an attractive feature in an environment where investors continue to seek income, diversification and flexibility.
The principal risk is that higher interest rates and slower economic growth translate into weaker borrower fundamentals, resulting in rising non-accruals and pressure on valuations. In addition, market sentiment toward private credit can create short-term volatility regardless of underlying portfolio performance.
We are positioned conservatively, focusing on BDCs with experienced management teams, robust underwriting standards, strong balance sheets and portfolios concentrated in higher-quality borrowers. Our process combines manager assessment, detailed portfolio look-through analysis and valuation discipline, allowing us to remain selective while seeking to capture attractive income and long-term capital appreciation opportunities.
Can you identify a couple of key investment opportunities you are playing at the moment in the portfolio?
We continue to see an attractive opportunity set within the BDC market. The asset class currently offers a double-digit dividend yield, with the S&P BDC Index yielding approximately 12% as of the end of May 2026 (while the valuation was at 0.84x price-to-net asset value), providing investors with a compelling source of income. Beyond yield, we see two particularly attractive opportunities.
First, we find value in listed BDCs trading at discounts to their underlying net asset value despite resilient portfolio fundamentals. Market volatility has created a disconnect between share prices and the value of the underlying private credit assets, creating potential for both attractive income generation and capital appreciation should discounts narrow over time.
Second, we are focused on the growing dispersion across the BDC market. As private credit matures, performance is becoming increasingly differentiated between managers. This creates opportunities to identify BDCs with strong underwriting discipline, resilient portfolios, conservative balance sheets and sustainable dividend profiles, while avoiding weaker managers. Our approach emphasises bottom-up security selection and detailed portfolio analysis to uncover mispriced opportunities.
In our view, the combination of elevated income, discounted valuations and increasing manager dispersion provides a compelling backdrop for active BDC investing.
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2026-06-24-18815
