HALO credits — issued by companies with heavy assets and low obsolescence — have become a go-to destination for investors rotating out of software and services, as fears around AI disruption push capital toward asset-heavy businesses.
But the trade is far from uniform, and in some cases it’s already showing cracks.
Much of the inflow appears driven less by conviction in these sectors than by a need to find a new home for capital. That has created a much narrower trade than the “HALO” label suggests, with gains concentrated in a small subset of credits while other blue collar companies lag.
Meanwhile, slowing corporate decision-making, rising input costs, and tighter financial conditions are already weighing on parts of the market, raising questions about how defensive the trade really is.
The risks may not be existential, as AI has been for many software companies, but they are enough to challenge the idea that HALO credits offer a true safe haven.
The strength of the trade(s)
Investors have decisively shifted into HALO credits in recent months. As concerns around AI disruption weigh on software and services, capital has rotated into asset-heavy businesses perceived to be more durable.
“People feel more comfortable deploying...
