AI disruption and the hidden risk in long-dated credit

Is the familiar case for long-dated credit becoming less reliable?

For defined benefit (DB) schemes, long-dated investment-grade credit has long offered a combination of liability sensitivity, contractual income and additional yield over gilts. But rapid technological change could challenge some of the assumptions behind long-term credit decisions.

AI can reshape cost structures, barriers to entry and profit pools across industries. For long-dated bond investors, this creates questions around whether the additional spread available adequately compensates for the risks of extending maturity.

Download the publication to explore what AI disruption could mean for long-dated credit portfolios.

Download the publication here

In this publication, we explore:

• why long-dated credit may be particularly exposed to AI disruption.
• whether the market is adequately pricing the risks of long credit.
• how DB investors could assess credit duration and technological uncertainty.
• alternatives to a blanket long-credit allocation.

To discuss long-dated credit in more detail, please get in touch.

Important Information
This communication has been compiled by Hymans Robertson LLP® (HR) as a general information summary and is based on its understanding of events as at the date of publication, which may be subject to change. It is not to be relied upon for investment or financial decisions and is not a substitute for professional advice (including for legal, investment or tax advice) on specific circumstances. HR accepts no liability for errors or omissions or reliance on any statement or opinion. Where we have relied upon data provided by third parties, reasonable care has been taken to assess its accuracy. However, we provide no guarantee and accept no liability in respect of any errors made by any third party.

General Investment Risk Warning
Please note the value of investments, and income from them, may fall as well as rise. This includes but is not limited to equities, government or corporate bonds, derivatives and property, whether held directly or in a pooled or collective investment vehicle. Further, investments in developing or emerging markets may be more volatile and less marketable than in mature markets. Exchange rates may also affect the value of investments. As a result, an investor may not get back the full amount of the original investment. Past performance is not necessarily a guide to future performance.