Low Beta, Alpha Driven Credit Strategy

In the 2011 movie Moneyball, Billy Beane (Brad Pitt) crystallises the challenge of competing in a competitive game: "If we try to play like the Yankees in here, we will lose to the Yankees out there." It's a reminder that the edge rarely comes from matching the crowd's playbook, but from building a disciplined process that finds mispricings, embraces evidence over narrative, and stays adaptable when conditions change.

Markets, of course, have their own version of the Yankees: dominant narratives, consensus positioning, and periods where risk appears deceptively easy, until it isn't. The question is not whether surprises will arrive, but whether portfolios are constructed with the discipline and flexibility to respond when the regime shifts. With that lens, here are our perspectives as we move from the noise of 2025 into the opportunities and uncertainties of 2026.

2025 was a year that kept markets and headlines buzzing. Political shocks and renewed tariff tensions kept negotiations swinging between escalation and compromise, repeatedly injecting volatility as outcomes remained uncertain. Alongside the long-awaited prospect of progress toward ending the Israel-Hamas conflict and the relentless AI race, investors navigated a landscape that was anything but dull. Credit markets, in particular, saw periods of exuberance punctuated by bouts of volatility, reminding us that cycles rarely move in straight lines.

As we turn the page to 2026, debating whether AI is a bubble or breakthrough, whether growth remains K-shaped, and watching geopolitical flashpoints from Venezuela onward, the question remains: how do we prepare for what lies ahead when shocks and uncertainties can surface very quickly? At Selaris Capital, our answer is rooted in agility, discipline, and a fundamental and alpha-driven approach. We believe that uncertainty is not something to fear, it is the raw material from which alpha can be generated.

Many investors feel that the market is in a low-spread regime, and while some expect a turn soon, there are many levers that governments can pull to extend the cycle. Interest rates remain higher than the post-GFC norm, and governments have been more willing to use fiscal policy to smooth growth and employment. At the same time, the AI revolution is translating into massive investment, not only in America but globally. Together, these forces could extend the cycle well beyond what many anticipate.

Credit markets in Europe are also likely to face rising net issuance across investment grade and leveraged finance as issuers fund data centres, infrastructure, and refinancing. That supply can challenge market capacity and widen dispersion between quality balance sheets and opportunistic borrowers, precisely the backdrop where fundamental selection and hedged long/short positioning can add value.

While late-cycle dynamics are increasingly discussed, it is worth remembering that this cycle is still only around half the length of the prior one. That makes timing inherently uncertain, and reinforces the value of a nimble, hedged approach that can adapt as conditions evolve.

Europe is particularly compelling because it is not a single regime: politics, growth paths, and fiscal choices differ meaningfully across countries, creating structural inefficiencies that active managers can exploit. Germany is undergoing a clear fiscal inflection point, breaking from years of conservatism with a large infrastructure push that is likely to reshape sector and issuer outcomes across the economy. France, by contrast, faces tighter fiscal constraints and a greater need for consolidation, with politics adding another layer of uncertainty around the budget path. The UK continues to navigate post-Brexit frictions and an evolving policy mix, while parts of Southern Europe still contend with distinct debt dynamics and periodic political volatility. This heterogeneity is fertile ground for a long/short credit strategy: it naturally increases dispersion, widens the gap between winners and losers, and creates repeatable relative-value and hedging opportunities. Uncertainty breeds opportunity, and Europe has plenty of it.

Over my 25-year career, I've navigated five major market selloffs (2000, 2009, 2011, 2020 and 2022). At Selaris Capital, we don't build portfolios on the assumption that we can time the next crash or wait for one to appear before acting. Instead, we construct portfolios to exploit inefficiencies and idiosyncratic opportunities throughout the cycle, harvesting alpha from mispricings day by day while keeping net exposure flexible. As macro signals strengthen or fade, we adjust beta dynamically, seeking to participate when the risk-reward is compelling and to protect capital when conditions deteriorate. When spreads are tight, we prioritise defence and selectivity, when they widen, we lean in with conviction. The ethos is constant: identifying asymmetric long and short trades that can generate alpha across all stages of the market cycle.

As we have already witnessed, 2026 will not be without surprises. But surprises are what we prepare for. Our portfolio is structured to generate steady returns in benign conditions while maintaining liquidity and flexibility to deploy aggressively when volatility returns, within a tight risk framework. In an environment where politics are increasingly intertwined with financial markets, our disciplined top-down and bottom-up investment process allows us to turn uncertainty into opportunity with rigour, adaptability, and precision.

Just as Moneyball wasn't about making a single bold prediction, but about repeatedly finding value where others weren't looking, our objective is to apply a consistent, risk-aware process through changing regimes. When spreads are tight, that means selectivity and protection, when dispersion and volatility return, it means being ready to deploy with conviction inside a tight framework. The point is not to "play like the Yankees" by following the consensus playbook, but to compete by doing the hard, repeatable work: identifying mispricings, expressing them with asymmetry, and staying agile as the market rewrites the narrative.

We welcome an opportunity to share more details about our Long/Short European Credit Strategy.

Contact us at investors@selaris-capital.com

Wishing you a prosperous and resilient 2026.