A word about recent regional bank events

Recent developments in the credit markets, highlighted by the revelations from Zions and Western Alliance about fraudulent exposures, have stirred concerns reminiscent of early 2023's banking challenges. While these issues are seen as isolated incidents, they bring attention to broader trends in credit underwriting, particularly involving Non-Depository Financial Institutions (NDFIs). This growing sector has raised questions about potential vulnerabilities due to its complex nature and rapid expansion. Despite these worries, regional banks remain fundamentally strong with robust capital reserves and healthy asset quality trends.

The current market environment suggests that while credit spreads may experience volatility akin to recent equity fluctuations, the foundational health of regional banks should provide stability. Our investment strategy continues to prioritize a defensive stance across fixed income sectors with a focus on risk-adjusted returns over complete business cycles. This approach is guided by rigorous assessments of underlying credits within sub-sectors of fixed income markets.