Credit Exchange with Lisa Lee

“We have this great tool out there called AI, and we haven’t 100% figured out how to implement it yet,” says Mark Jenkins, co-president and head of global credit & insurance at Carlyle, on the latest edition of ‘Credit Exchange with Lisa Lee’. Jenkins predicts that the next stage is going to be how corporates implement AI into their workflows, and that the process is “really in the first innings of implement”.
OpenAI, Anthropic, and many others are developing tools for workflow, and Jenkins predicts they will take “not years, but several months” to impact systems. Carlyle, for example, is already using AI to help its investment group be more efficient, and to consume massive amounts of data in ways that would be difficult without AI, says Jenkins. But one has to use AI appropriately, he adds. “It’s not going to make the decision for you.”
While change has been a constant feature during Jenkins’ 35-year career, nothing has been like AI in the past three years. Embrace the change and incorporate it into what you do, because typically, those are the ones that prosper, he counsels.
On the broader investing climate, Jenkins is positive about the macroeconomic environment for the next 12 months. But moving out to 2027 and 2028, inflation may rear its head again.

“Whether it be in the high yield bond market or in the leveraged loan market, even the hint or threat of AI impeding on really any sector – you see pretty significant downside,” says Mitch Garfin, co-head of leveraged finance at the world’s largest asset manager BlackRock, on the latest episode of Credit Exchange with Lisa Lee.
Garfin is constructive on the market generally, with growth continuing to “chug along” and inflation currently well-contained. He also identifies significant opportunities from AI, including ongoing data centre build-outs contributing to a significant uptick in supply in the high yield market that is likely to continue.
But, he notes, there have also been situations where bonds and loans are down anywhere from a couple of points, and in some cases 5 or even 10 points, on “the immediate sort of threat” from AI. “It’s something to keep an eye on,” he says.
Discussing the high yield market specifically, Garfin observes that consumer and retail continue to lag. “We’ve been underweight retail, consumer products, restaurants, leisure – a lot of the sectors that are going to be more impacted by a declining or weaker low-to-middle-class consumer,” he says.
He also gives advice to younger industry hopefuls, including staffers and investors.

“It’s going to be a slow build, and we think a sustained multi-year increase in activity,” says David Miller, head of private credit and equity at Morgan Stanley Investment Management, on the latest episode of Credit Exchange with Lisa Lee, speaking about M&A and LBOs.
The geopolitical headlines haven’t yet changed the economic picture, says Miller. But over time, they may impact on confidence and fan uncertainty.
“As uncertainty rises, risk premium will rise. So that can change the calculus - but we’re not seeing it in the markets yet,” he observes.
Miller also discusses running both the private equity and private credit businesses at Morgan Stanley’s asset management arm, a team that numbers more than 150 strong, and what it’s like being part of a global bank.

R.J. Gallo, deputy CIO of fixed income at Federated Hermes, addresses the recent DOJ move to investigate Federal Reserve chairman Jerome Powell and the possible impact on monetary policy, on the latest episode of ‘Credit Exchange with Lisa Lee’.
Gallo, who will take up the fixed income CIO role in May, says we might see a more divergent FOMC where the votes actually matter.
“Does that make them more hawkish? I don’t know. I’ll tell you this. It certainly won’t make the hawks more dovish,” he says.
“It’s important to realise that many presidents get frustrated with the Federal Reserve,” adds Gallo, who prior to joining Federated Hermes in 2000, was at the Federal Reserve Bank of New York. But what has been extraordinary in the Trump administration has been the full-on verbal assault of the Federal Reserve and the resultant “feud between the White House and the Fed.” And the most recent development of the DOJ subpoena has to be viewed in that context.
On fixed income, Gallo takes a bit more of a cautious view. While his base case is for the US economy to grow in 2026, he is keeping some powder dry to reassess, in case there’s spread widening. “We don’t just want to chase an already highly-valued market.”
Another thing to watch is AI, which has accounted for a large portion of equity returns and stimulated the US economy through high capex spending. If we see poor returns to AI capex, that could challenge equity and credit valuations, Gallo says.

“I come into the year extremely bullish about fixed income and credit in general,” says John Lloyd, global head of multi-sector credit at Janus Henderson, on the latest episode of Credit Exchange with Lisa Lee. The asset manager oversees nearly half a trillion dollars of AUM.
Lloyd speaks about how markets are shrugging off some recent big geopolitical events because they do not impact earnings today and are viewed as one-off events, bespoke to a single country. Instead, they are focused on positive GDP growth as well as the Fed, which will be a tailwind to investing, as the US central bank is now injecting liquidity back into markets.
Artificial intelligence is also a focus. The hyperscalers will increase their capex budgets because they are in a race over the next several years.
Google, Facebook, Oracle and others are all issuing a tremendous amount of debt to support that capex growth. “You are going to see a lot of supply increase this year from AI,” Lloyd says. “I think that’s going to be a little bit of a negative supply technical in the fixed income markets this year, especially in the investment grade space.”