Concerns about the disruptive impact of artificial intelligence on the technology landscape have seeped into the credit markets. The resulting barrage of headlines in the financial media has some investors questioning the quality and stability of private credit portfolios given the large exposure many traditional private lenders have to the software industry borrowers.

Private credit encompasses a wide array of assets beyond senior-secured corporate loans, and the characteristics of these disparate assets can have a significant impact on the management of fund structures that offer periodic liquidity, such as interval funds.

We believe potential liquidity effects may snowball over time, which include:

• The potential for faster paydowns on outstanding loans can help the loan manager to 1) rebuild liquidity between windows rather than simply depleting it over time, and 2) opportunistically redeploy assets in times of stress for the broader markets.
• With active liquidity management not an issue, the manager can allocate a greater proportion of private assets than strategies with longer loan maturities held in semi-liquid structures.
• Even if a traditional private loan portfolio is able to meet a quarter’s redemption demand without forced asset sales, ongoing elevated demand may slowly pressure the manager to more actively manage liquidity.
• The high level of organic principal collection enables the residential real estate loan manager to potentially allow a higher level of redemptions without selling assets at unattractive prices.

Geopolitical shocks in the Middle East are typically viewed through the lens of oil and gas, but this may overlook a more important consequence: agriculture. Global food production depends on a tightly interconnected chain of energy, fertilizer and crops. The Strait of Hormuz sits at the center, with roughly one-third of global seaborne fertilizer trade.¹ When that flow is disrupted, its impact extends well beyond energy prices and into food supply.

We have already begun to see early signs of strain in the fertilizer market with a sharp rise in nitrogen prices.² While this does not yet resemble the broad-based disruption that followed Russia’s invasion of Ukraine in 2022, such shocks tend to build over time as supply chains tighten and buyers secure inventory.³ The risk extends beyond export disruptions because Gulf producers are critical suppliers of nitrogen, phosphates and sulfur—key inputs in global fertilizer production. When those flows are constrained, production capacity tightens across regions, potentially turning localized disruptions into a global agricultural issue.

Against this backdrop, we believe North America is more resilient than most regions. The US benefits from domestic natural gas, strong nitrogen production and secure potash supply from Canada.⁴ However, the region is not immune to global fertilizer dynamics, and even partial disruptions can raise domestic input costs, particularly during the spring planting season.

As a result, even small cost increases can influence farmer behavior, affecting application rates, margins and ultimately crop yields. North America plays a critical role within this fragile system because its scale, productivity and relative security of inputs position the region as a stabilizing force in the global food supply when other regions face constraints. In our view, this underscores the role that reliable agricultural producers and equipment manufacturers that support producers—such as those in the US and Canada—play in resilient portfolios as geopolitical risks continue to escalate.