“The devil’s in the details”: How to spot opportunities in a hot market

Please note this interview was filmed 25th July 2025.

"The devil's in the details," says Jeremiah Lane, Co‑Head of Global Leveraged Credit at KKR. 

And in today’s market, careful credit selection is everything.

Global credit markets have been through a whirlwind of disruption in recent years, but for Lane, the through‑line is resilience.

In the interview above, he shared how his team is navigating today’s environment, where to find opportunity, and why caution remains paramount.

A market that has bounced back

The first big theme discussed was, of course, trade tensions. According to Lane, tariff announcements saw the markets sell off significantly, but since then, they have been surprisingly quick to recover.

“We've seen double Bs very quickly reset by the market. Single Bs have now been accepted by the market… Triple Cs have been slower to be accepted.”

He likens the current rebound from Liberation Day to a compressed version of the post‑COVID bounce:

“Maybe it took 18 to 24 months coming out of COVID. It's taken three months this time, and maybe it'll take another three months for the balance of the market.”

Rising risks

Lane pointed out that tariffs don’t create a blanket sector effect. It’s far more nuanced than that.

“The devil's in the details,” he explained. “It's a credit‑by‑credit assessment of how companies can raise price and reposition their supply chain.”

He recalls an example of a retailer that initially sold off hard, only for the market to quickly conclude that its supply chain was no worse than its peers. The loan price snapped back accordingly.

That said, Lane remains cautious in a few key areas, such as building products. “Those companies saw cycle highs in ’21 and ’22, and now they're having to give back both volume and price. It's impacting profitability.”

The healthcare sector is also on the watchlist. “There's just a lot of pressure on the system and revenue model over the last handful of years,” he said, pointing to Medicaid rollbacks. “You need to be alert to changes in reimbursement and how the market is performing.”

U.S. vs Europe: A tale of two markets

On asset allocation, Lane doesn’t see a glaring relative value differential between U.S. loans and high yield right now. “US loans at an index level could provide about 100 basis points excess spread than US high yield,” he said, “but loans have also had more storied credits… It's a little bit of a lower quality market.”

Lane sees the appeal lies in Europe. “European high yield could provide an increased spread opportunity relative to the US, given it's a higher‑quality credit rating composition,” he explained. “Depending on when you're entering, it can offer consistent spreads, sometimes a little bit more spread, and has over time been less volatile.”

“The tide always goes out at some point”

A sharp rally has brought plenty of demand back into credit markets, but Lane sees this as a moment to tread carefully.

“We want to stay invested in the highest‑quality businesses so that when the tide goes out - and the tide always goes out at some point - we’re in businesses that have resilient cashflow and mitigate downside risk.”

He noted that credit markets are running hot, with muted deal activity since Liberation Day creating a steepening supply‑demand imbalance, even allowing lower‑quality businesses to raise capital at tight spreads.

One of KKR’s approaches in a market like this is a multi‑asset credit (MAC) strategy. Lane sees real opportunity in employing a flexible asset allocation approach, highlighting opportunities in 2023 when the team tactically repositioned as the market whipsawed to lean into thematic and relative value opportunities. 

Balancing fixed and floating

Today, Lane says the real decision is less about structure and more about credit quality.

“We don’t see a significant relative value differential between where loans are and high yield is today. That puts us back into more of an assessment of the credit quality of the individual companies.”

“We’re not a high‑velocity trading shop. We seek to deliver return for our investors by identifying good businesses that will produce consistent income over time.”

The sweet spot: short-dated credit

Lane is especially enthusiastic on short‑dated high yield at the moment. Many securities issued when rates were low now trade with spreads around 150 basis points but offer significantly higher returns, thanks to early refinancing.

“It’s constantly turning back into cash at a pretty high velocity,” he said, noting focus on double‑B and single‑B securities.

A vintage problem

Defaults are creeping higher, but KKR’s Jeremiah Lane doesn’t expect a broad wave of distress just yet.

“In the loan market, we’ve seen modestly elevated defaults over the last year, and I think that’s going to continue,” he said.

The key issue, in his view, is vintage. Many sponsor‑backed deals from the low‑rate period of late 2020 to early 2022 were priced for strong growth and cheap refinancing that never materialised.

“We believe that vintage is going to have a lot more default activity than the long‑term average.”

A dividing line

Another hot topic in the loan market has been liability management exercises (LMEs). Lane sees a clear split in sponsor behaviour.

“There’s a big range of how you can approach the market,” he said. “There’s one version that really pits half of the lenders against the other half. There’s another that is much more collaborative.”

This matters because the market is getting pickier. “The market has gotten more cautious sponsors who may employ a more aggressive approach,” he warned, leaving those businesses facing a tougher reception.

Looking ahead, while he believes “a lot of stuff looks pretty fully valued,” Lane’s focus is clear.

“This is a moment to be focused on investing in the best businesses - the businesses that will be resilient when we come to a moment when things are not so fully valued.”

LIT

KKR Credit Income Fund (KKC)

Global Fixed Income

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