According to Man Group's outlook for the second half of 2026, the rapid increase in bond issuance from artificial intelligence and hyperscaler companies necessitates careful investment strategies. The firm points out that public market credit investors are exposed to execution risks and delays in project buildouts without the benefit of equity upside if the anticipated growth materializes.
This mispricing of risk could lead to a severe market correction, especially as enthusiasm for AI investments grows. Man Group expresses particular concern regarding high yield and leveraged loan markets, where many borrowers are still generating negative free cash flow.
Despite these risks, the firm does not recommend avoiding AI investments altogether; instead, it advocates for rigorous credit selection and a diversified portfolio to mitigate potential losses. They suggest that European and emerging-market credits may provide attractive diversification opportunities away from AI.
Additionally, Japan and Hong Kong are identified as promising areas for credit investment, while caution is advised for China and Indonesia due to tighter spreads and sensitivity to commodity prices. The firm also maintains a moderately positive outlook on emerging-market currencies, although it acknowledges risks from speculative positioning and the possibility of a more hawkish Federal Reserve