The income fund that beat the chaos and where it’s heading next

There’s nothing quite like being thrown in the deep end in your first days on a new project. Now, picture doing it while overseeing hundreds of millions of dollars of other people’s hard-earned money.

That was the reality for Samantha Milner, Partner at Ares Management Corporation – which manages more than A$800 billion in assets – and Portfolio Manager of the Ares Global Credit Income Fund.

Milner has been with Ares since 2004, but the fund itself launched in May 2020 – right as COVID-19 was wreaking havoc on global trade and financial markets.

Her team drew on deep experience to steer through not just the pandemic, but also the interest rate shock of 2021-22 and the geopolitical tensions of 2025, marking the fund’s five-year anniversary without a single missed monthly payment or default.

“It has been quite the ride when it comes to macro and geopolitical events over the past five years,” she admits.

Now past that milestone, we sat down with Milner to discuss what’s next – where she sees opportunities in global credit and the key lessons from navigating one of the most volatile periods in modern markets.

How are you reading the current macroeconomic landscape as a global credit investor?

There is a lot of noise coming from heightened tensions in geopolitics, volatile soft data and the new US administration. This combination of factors has meant the first half of 2025 has seen a return of market volatility when compared to the end of 2024.

Looking ahead, we believe this more volatile environment will persist, which comforts us in our investment approach as we focus on current yield and downside protection.

As a credit manager, we aim to find great companies and assets that we believe will be resilient through cycles and bouts of market volatility. As such, our starting point is always to focus on the fundamental conditions of the companies or assets seeking to achieve downside protection through rigorous credit selection.

We then take the macroeconomic picture into account as an input to our portfolio construction process and in our hunt for attractive relative value opportunities. Having invested through multiple cycles, administrations, rate regimes and all kinds of uncertainties, we believe we have the playbook to take advantage of the current environment.

In short, despite the noise, we feel confident that we can find attractive opportunities across the US$6 trillion opportunity set of global credit asset classes that we are investing in, to generate regular income and higher yields, which can act as a ballast in investors’ portfolios.

What’s your playbook in this environment, and where are you playing offence and defence?

Overall, we have been reducing risk across our funds, taking advantage of market rallies to increase credit quality and reduce any exposure to more cyclical sectors. We continue to anchor returns in high levels of current income, as we believe it is a great way to maintain a defensive return profile.

As such, we have been favoring allocations to high yielding, floating rate instruments, including exposure to broadly syndicated loans and collateralised loan obligations (CLOs) where we can get outsized current yield.

In more recent months, we have started to progressively reduce that floating rate exposure to take advantage of the optionality and convexity available in the fixed rate part of global credit markets.

You could say this is where we play offence – we often take advantage of corporate bonds issued by companies we like trading at attractive discounts, not for credit reasons, but because higher interest rates and yields have driven their prices down. This can happen when a bond was issued in a lower rate environment with a lower coupon than what the current rate environment dictates.

The opportunity here is that these bonds can get refinanced early at par, especially as they approach their last year before maturity. For example, if you buy a bond at 90 cents on the dollar and it gets refinanced 6 months later at par because the company refinances its bonds, that’s a 10% uplift.

Finally, these fixed rate bonds also add some duration to our portfolio to balance our floating rate exposure as interest rates are starting to come down.

Which parts of the global credit market look particularly attractive to you right now?

From a geographic standpoint, we continue to view the U.S. as being very attractive to find opportunities as it is the largest and most liquid of the developed markets in which we invest. That said, we have selectively added to the exposure to Europe recently due to an attractive new issue environment.

Looking across credit asset classes in scope, we like high quality single-B loans in non-cyclical sectors, with low exposure to tariff risks.

In the structured credit universe, we like the excess yield in CLO debt over similarly rated corporate bonds. Finally, in the fixed rate corporate bond cohort, we like high quality shorter dated bonds trading at a discount, with a catalyst for early repayment.

What risks are you monitoring, and how does your focus on downside protection factor these in?

Credit selection is always top of mind – in this environment in particular and when uncertainty is elevated, we aim to avoid issuers in sectors that are most exposed to cyclicality, consumer headwinds, and discretionary spending.

Further, at a portfolio level, we are focused on managing our portfolios with acceptable levels of volatility vs. the risk-return profile on offer. We are able to do that thanks to a proprietary model that predicts excess return volatility across asset class, sector, lien type, ratings cohort and individual holding.

This allows us to be very thoughtful about risk and how any trade executed can impact the volatility profile of the fund.

For Australian investors, where does your global credit strategy fit within the income bucket?

We believe our liquid credit portfolios can provide the income ballast that investors are seeking in defensive strategies without taking on more of the same risk they might already have in other parts of their portfolios. For instance, we do not invest in banks or real estate and have virtually no exposure to Australia.

We invest only in liquid, tradable credit instruments of largely private companies. These instruments have active secondary markets which means we can buy and sell those instruments daily and provide daily liquidity at the portfolio level while still offering meaningful exposure to private companies or assets.

Lastly, congratulations on the strategy’s five-year anniversary. What have been the key lessons that you're taking into the next five years?

Thank you, and yes it has been quite the ride when it comes to macro and geopolitical events over the past five years!

There were probably three key moments to illustrate what investors experienced over those five years.

During the rising rate environment of late 2021 and early 2022, the fund delivered returns(1) in line with its current income, when most traditional fixed income strategies had negative returns, as we positioned the fund to hold mostly floating rate instruments benefiting from higher rates.

Then, despite the mark-to-market volatility experienced later in 2022 as credit spreads widened due to recession fears, the fund continued to distribute stable monthly income as we applied our rigorous credit selection and had zero defaults in the portfolio.

Finally, in 2023 and 2024, the Fund delivered returns with high levels of current income as the environment normalized and credit spreads tightened back closer to historical averages.

Overall, our overarching sentiment has been – “it does what it says on the tin” as the fund delivered regular income with no defaults and limited volatility.

Managed Fund

Ares Global Credit Income Fund

Global Fixed Income

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