From the Desk

With all the geopolitical risk roiling the world, you might think global fund managers could be a gloomy lot. But quite the contrary: they appear unequivocally bullish. The number of managers that are overweight equities is near a five-year high. The most recent monthly update from Bank of America’s survey of global fund managers profiles this bullish mood. Given that this survey has been conducted for decades, its results and investment trends are worth noting as a barometer for broad market sentiment.

While oil prices remain volatile, the consistent pace of growth, strong corporate earnings and AI progress are keeping investors happy. Cash balances are near all-time lows as managers remain fully invested for fear of missing out. Over 80% think the most crowded trade is semiconductors. And while they worry about an AI stock bubble, the majority don’t think we are there yet.

Fund managers expect performance to broaden beyond large-cap and momentum stocks. They’ve generally been increasing their exposure to the U.S. and Europe while cutting back on Asia. And an overwhelming number expect the U.S. Federal Reserve will keep rates on hold through the midterms. In aggregate, fund managers remain optimistic about growth and remain risk on.

Sources: Bloomberg, The Financial Times, 2026.

For the past year, a common refrain in credit markets has been that AI has yet to meaningfully impact portfolios. We’re not so sure about this.

J.P. Morgan reports that technology accounted for the largest share of leveraged loan defaults over the past 12 months to June 30, representing approximately 24% of default volume and 21% of defaulting issuers. First-lien technology loans that defaulted recovered just 33 cents on the dollar (including distressed exchanges), well below historical leveraged loan averages. While not every default can be attributed to AI, it's becoming increasingly difficult to dismiss AI and other competitive pressures as factors weighing on certain software business models.

The takeaway, however, is not that investors should avoid leveraged loans or technology exposure altogether. Rather, it underscores why active management matters. Technology is a broad and diverse sector, and manager exposures vary significantly. Some portfolios have meaningful concentrations in lower-rated software credits, while others have maintained limited exposure and have navigated the current environment well. As competitive dynamics evolve, credit selection, sector positioning and rigorous underwriting become even more important. In today's market, manager selection may matter just as much as asset allocation.

Source: JP Morgan Leveraged Finance Strategy, June 2026.