The surge in corporate bond issuance by artificial intelligence and hyperscalar companies will require greater caution in investment choices, according to fund firm Man Group. In their outlook for the second half of 2026, Man Group strategists said: “Public market credit investors in the AI space face an uncomfortable asymmetry. “If the boom unfolds as expected, they won’t get any benefit from rising stocks,” he said. “The mispricing of risk is the springboard. The greater the enthusiasm today, the more violent the final correction is likely to be.” They said they are “particularly concerned about issuance in the high-yield and leveraged loan markets, where many borrowers still have negative free cash flows.” But Man Group, which has been in business for more than 240 years and has $228.7 billion in assets under management, says it is not advocating avoiding this space. “What we believe is needed is rigorous credit selection across public and private markets, a clear understanding of which borrowers are ahead of the AI curve, and a sufficiently diversified portfolio to avoid being held hostage to an AI story that predictably unfolds,” the strategists said. European and emerging market credits appear to offer “increasingly attractive” diversification possibilities away from AI, they said. Man Group also said Japan and Hong Kong offer the “most fertile ground” on the credit front, but investors should be more selective with China and Indonesia, which require higher selectivity due to spread compression and commodity sensitivity. The bank also remains reasonably positive on emerging market currencies, supported by interest rate differentials with the US, but said the main risks are the expansion of speculative positions and the possibility that the US Federal Reserve could become more hawkish than expected.
