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Update

Barrow Hanley Credit Partners October 2025 Monthly Update

In this post:

11.14.2025
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Executive Summary

  • Tariffs reintroduced volatility into the market as the Fed continued to provide support through rate cuts
  • Business Development Company underperformance has the market looking deeper into private credit concerns
  • High Yield and Loans performed relatively steady, while Barrow Hanley received recognition for strong CLO performance

Market Recap

In late October, the Federal Reserve cut rates with broad support, citing the labor market. The Fed also announced it will end the reduction of its asset portfolio on December 1st. Economic growth remained moderate, while inflation, though higher than earlier in the year, remains only somewhat elevated. The government was shut down for all of October, leaving the Fed without key economic data, but Chairman Jerome Powell downplayed the likelihood of any additional cuts through year-end. Forward rate expectations declined slightly, with the forward curve falling roughly 5 bps over the next two years. Meanwhile, the government shutdown has not slowed the Trump administration’s efforts to reshape international trade policy. New tariffs on China were introduced but following the late-month meeting between Presidents Trump and Xi, both sides agreed to reduce tariffs to 47%. China also pledged to resume limited soybean purchases and maintain rare earth exports for one year.

Most asset classes performed well during the month, though some areas showed signs of stress—most notably Business Development Companies (BDCs). These publicly traded private credit vehicles were pressured following the bankruptcies of First Brands and Tricolor, prompting investors to re-evaluate credit quality. First Brands was both a public and a private credit issuer. Fitch published a report stating that the $3trillion shadow banking system has developed bubble-like characteristics, marking a shift from its earlier view that private credit posed limited systemic risk. BDC indices finished down 12% from their highs in July of this year, with the low point down 17% during the month. Morningstar data show that 10% of middle-market borrowers currently operate with covenant relief from their lender, with another 18% still compliant but stressed. Paid-in-Kind (PIK) interest now represents 8% of aggregate BDC investment income—a growing indicator of credit stress. PIK elections by an issuer permit the company to replace cash interest with payment-in-kind by increasing the loan balance by the interest payment. Our team continues to emphasize that, across the spectrum of below-investment-grade assets, broadly syndicated loans generally carry more credit risk than high yield bonds, while private credit carries the most. However, over the medium to long-term, absolute returns are likely to be roughly equivalent, though more volatile in private credit. To illustrate the differences in fundamentals, Barclays notes that just 5% of issuers in the broadly syndicated loan market have interest coverage ratios below 1x, compared to 14% in the Houlihan Lokey Private Performing Credit Index.

High Yield

High Yield returned +0.20% in October, though intra-month performance was volatile. Returns climbed in the first few days of the month before tariff headlines re-emerged, widening spreads to pulling returns down to a low of -0.67% on the 10th. Markets then recovered, ending the month at +0.20%. Quality led the month with BBs up 0.47%, while Single-Bs slipped -0.06% and CCCs lagged at -0.42%. Spreads for High Yield ended the month at 310 bps, 11 bps wider than September. Yields closed at 6.82%, up 9 bps from the beginning of the month. Containers and Consumer Products were the weakest sectors, down -0.97% and -0.86%, respectively, while Healthcare outperformed, gaining +1.10%. Fund flows for HY were positive at +$2.1bn, helping to keep the market well bid.

Loans

Loans gained 0.30% during the month, with roughly half the volatility of HY. Like HY, higher quality loans led performance: BBs rose +0.47%, Single-Bs gained +0.31%, and CCCs lagged at -0.39%. Spreads ended at 454 bps, 3bps wider for the month, while three-year yields widened 5 bps to 7.87%. Retail and Consumer Durables were notable outperformers, up +1.01% and 0.89%, respectively, while Chemicals was the primary laggard, down -1.23%. Loan flows were negative -$1.6bn for the month, likely influenced by the Fed rate trajectory.

CLOs

CLO issuance totaled $51bn in October, driven largely by refinancings and resets of deals. Net new issuance was $15bn. CLO liabilities continued to compress through October, helping to drive volumes. Tier-1 AAAs were pricing around 120 bps by the end of the month. Nomura notes that first-half 2025 manager performance was influenced by exposure to tariff- affected industries, while second-half results have been shaped by avoiding idiosyncratic problem credits. Encouragingly, our team was again recognized by Nomura in 2025 as one of the top- performing CLO managers for excess market value returns.

Returns as of October 31, 2025

BH Strategy Returns Month QTD 1 Year 3 Year 5 Year 10 Year 20 Year Since Inception
High Yield Composite Gross -0.09% -0.09% 8.85% 11.45% 6.87% 6.67% 6.81% 6.64%
High Yield Composite Net -0.13% -0.13% 8.33% 10.92% 6.37% 6.16% 6.31% 6.14%
Bank Loan Composite Gross 0.13% 0.13% 7.36% 10.91% 7.97% 6.56%
Bank Loan Composite Net 0.09% 0.09% 6.83% 10.36% 7.44% 6.03%
Asset Class Month QTD YTD Index
HY Return0.20%0.20%7.27%ICE BAML HY Index
HY BB Return0.47%0.47%7.74%ICE BAML BB HY Index
HY B Return-0.06%-0.06%6.67%ICE BAML B HY Index
HY CCC Return-0.42%-0.42%6.60%ICE BAML CCC HY Index
Leveraged Loan Return0.30%0.28%4.96%S&P/UBS Leveraged Loan Index
LL BB Return0.47%0.45%5.09%S&P/UBS Leveraged Loan BB Index
LL B Return0.31%0.28%4.93%S&P/UBS Leveraged Loan B Index
LL CCC Return-0.39%-0.25%3.49%S&P/UBS Leveraged Loan CCC Index
HYG-0.01%-0.01%7.26%Ishares Iboxx High Yield
BKLN0.43%0.43%5.24%Invesco Senior Loan ETF
S&P 500 Return0.37%0.37%11.66%S&P 500
Russell 2000 Return1.81%1.81%12.39%Russell 2000 Index
10yr Beg4.15%4.15%4.57%10yr Treasury
10yr End4.08%4.08%4.08%10yr Treasury
10yr Return0.79%0.79%7.77%10yr Treasury
Asset Class Beg Mo Beg QTD Beg Year End of Month
HY YTW6.73%6.73%7.47%6.82%
HY BB YTW5.75%5.75%6.43%5.71%
HY B YTW6.75%6.75%7.54%6.93%
HY CCC YTW11.78%11.78%11.87%12.37%
HY STW299 bps299 bps310 bps310 bps
HY BB STW198 bps198 bps205 bps197 bps
HY B STW304 bps304 bps318 bps322 bps
HY CCC STW814 bps814 bps751 bps867 bps
LL YT3Y7.82%7.82%8.79%7.87%
LL BB YT3Y5.93%5.93%6.65%5.90%
LL B YT3Y7.43%7.43%8.36%7.48%
LL CCC YT3Y16.72%16.72%18.04%17.41%
LL ST3Y451 bps451 bps475 bps454 bps
LL BB ST3Y261 bps261 bps261 bps256 bps
LL B ST3Y411 bps411 bps432 bps415 bps
LL CCC ST3Y1351 bps1351 bps1406 bps1415 bps
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ABOUT BARROW HANLEY GLOBAL INVESTORS

Barrow Hanley is a diversified investment management firm offering value-focused investment strategies spanning global equities and fixed income. Recognized as one of the few remaining firms dedicated exclusively to value investing, Barrow Hanley enjoys a boutique culture with a singular focus to assist clients in meeting their investment objectives. Today, Barrow  Hanley has approximately 100 employees, over half of which are investment professionals managing assets for our valued clients. Barrow Hanley stewards the capital of corporate, public, multi-employer pension plans, mutual funds, endowments and foundations, and sovereign wealth funds across North America, Europe, Asia, Australia and Africa. For further information, please visit www.barrowhanley.com.

General Disclosures:

All opinions included in this report constitute Barrow Hanley’s (BH) judgment as of the time of issuance of this report and are subject to change without notice. This report was prepared by Barrow Hanley with information it believes to be reliable. This report is for informational purposes only and is not intended to be an offer, solicitation, or recommendation with respect to the purchase or sale of any security, nor a recommendation of services supplied by any money management organization. Past perfor- mance is not indicative of future results. Barrow Hanley is a value-oriented investment manager, providing services to institutional clients.

Barrow Hanley Credit Partners® is a legally assumed name for the Alternative Credit investment team and investment strategies of Barrow Hanley Global Investors®, including Bank Loan Fixed Income, Collateralized Loan Obligations, and High Yield Fixed Income.

These investment summaries are provided for informational purposes only and should not be viewed as representative of all investments by the firm. This report includes certain “forward-looking statements” including, but not limited to, BH’s plans, projections, objectives, expectations, and intentions and other statements contained herein that are not historical facts as well as statements identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, or words of similar meaning. Such statements and opinions contained are based on BH’s current beliefs or expectations and are subject to significant uncertainties and changes in circumstances, many beyond BH’s control. Actual results may differ materially from these expectations due to changes in global, political, economic, business, competitive, market, and regulatory factors. Additional information regarding the strategy is available upon request.

Index Disclosures:

Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this materi- al, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Credit Suisse Index data is permissible for use by Barrow Hanley for client reporting and marketing purposes. This data is not permitted to be re-distributed.

Merrill Lynch index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (“ICE Data”) and/or its Third Party Suppliers and has been licensed for use by Barrow Hanley Global Investors. ICE Data and its Third Party Suppliers accept no liability in connection with its use.

Standard and Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC, and these trademarks have been licensed for use by S&P and Dow Jones Indices LLC and S&P Dow Jones Indices LLC. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of Barrow Hanley. S&P Dow Jones Indices LLC is not responsible for the formatting or configuration of this material or for any inaccuracy in Barrow Hanley’s presentation thereof.

Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. The presentation may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a presentation of Barrow Hanley. Russell Investment Group is not responsible for the formatting or configuration of this material or for any inaccuracy in Barrow Hanley’s presentation thereof.

Please contact us for more information.

214.665.1900
contactus@barrowhanley.com

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Barrow Hanley Global Investors
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31st Floor Dallas, TX 75201
www.barrowhanley.com

11.14.2025
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Market Recap

In late October, the Federal Reserve cut rates with broad support, citing the labor market. The Fed also announced it will end the reduction of its asset portfolio on December 1st. Economic growth remained moderate, while inflation, though higher than earlier in the year, remains only somewhat elevated. The government was shut down for all of October, leaving the Fed without key economic data, but Chairman Jerome Powell downplayed the likelihood of any additional cuts through year-end. Forward rate expectations declined slightly, with the forward curve falling roughly 5 bps over the next two years. Meanwhile, the government shutdown has not slowed the Trump administration’s efforts to reshape international trade policy. New tariffs on China were introduced but following the late-month meeting between Presidents Trump and Xi, both sides agreed to reduce tariffs to 47%. China also pledged to resume limited soybean purchases and maintain rare earth exports for one year.

Most asset classes performed well during the month, though some areas showed signs of stress—most notably Business Development Companies (BDCs). These publicly traded private credit vehicles were pressured following the bankruptcies of First Brands and Tricolor, prompting investors to re-evaluate credit quality. First Brands was both a public and a private credit issuer. Fitch published a report stating that the $3trillion shadow banking system has developed bubble-like characteristics, marking a shift from its earlier view that private credit posed limited systemic risk. BDC indices finished down 12% from their highs in July of this year, with the low point down 17% during the month. Morningstar data show that 10% of middle-market borrowers currently operate with covenant relief from their lender, with another 18% still compliant but stressed. Paid-in-Kind (PIK) interest now represents 8% of aggregate BDC investment income—a growing indicator of credit stress. PIK elections by an issuer permit the company to replace cash interest with payment-in-kind by increasing the loan balance by the interest payment. Our team continues to emphasize that, across the spectrum of below-investment-grade assets, broadly syndicated loans generally carry more credit risk than high yield bonds, while private credit carries the most. However, over the medium to long-term, absolute returns are likely to be roughly equivalent, though more volatile in private credit. To illustrate the differences in fundamentals, Barclays notes that just 5% of issuers in the broadly syndicated loan market have interest coverage ratios below 1x, compared to 14% in the Houlihan Lokey Private Performing Credit Index.

High Yield

High Yield returned +0.20% in October, though intra-month performance was volatile. Returns climbed in the first few days of the month before tariff headlines re-emerged, widening spreads to pulling returns down to a low of -0.67% on the 10th. Markets then recovered, ending the month at +0.20%. Quality led the month with BBs up 0.47%, while Single-Bs slipped -0.06% and CCCs lagged at -0.42%. Spreads for High Yield ended the month at 310 bps, 11 bps wider than September. Yields closed at 6.82%, up 9 bps from the beginning of the month. Containers and Consumer Products were the weakest sectors, down -0.97% and -0.86%, respectively, while Healthcare outperformed, gaining +1.10%. Fund flows for HY were positive at +$2.1bn, helping to keep the market well bid.

Loans

Loans gained 0.30% during the month, with roughly half the volatility of HY. Like HY, higher quality loans led performance: BBs rose +0.47%, Single-Bs gained +0.31%, and CCCs lagged at -0.39%. Spreads ended at 454 bps, 3bps wider for the month, while three-year yields widened 5 bps to 7.87%. Retail and Consumer Durables were notable outperformers, up +1.01% and 0.89%, respectively, while Chemicals was the primary laggard, down -1.23%. Loan flows were negative -$1.6bn for the month, likely influenced by the Fed rate trajectory.

CLOs

CLO issuance totaled $51bn in October, driven largely by refinancings and resets of deals. Net new issuance was $15bn. CLO liabilities continued to compress through October, helping to drive volumes. Tier-1 AAAs were pricing around 120 bps by the end of the month. Nomura notes that first-half 2025 manager performance was influenced by exposure to tariff- affected industries, while second-half results have been shaped by avoiding idiosyncratic problem credits. Encouragingly, our team was again recognized by Nomura in 2025 as one of the top- performing CLO managers for excess market value returns.

Returns as of October 31, 2025

BH Strategy Returns Month QTD 1 Year 3 Year 5 Year 10 Year 20 Year Since Inception
High Yield Composite Gross -0.09% -0.09% 8.85% 11.45% 6.87% 6.67% 6.81% 6.64%
High Yield Composite Net -0.13% -0.13% 8.33% 10.92% 6.37% 6.16% 6.31% 6.14%
Bank Loan Composite Gross 0.13% 0.13% 7.36% 10.91% 7.97% 6.56%
Bank Loan Composite Net 0.09% 0.09% 6.83% 10.36% 7.44% 6.03%
Asset Class Month QTD YTD Index
HY Return0.20%0.20%7.27%ICE BAML HY Index
HY BB Return0.47%0.47%7.74%ICE BAML BB HY Index
HY B Return-0.06%-0.06%6.67%ICE BAML B HY Index
HY CCC Return-0.42%-0.42%6.60%ICE BAML CCC HY Index
Leveraged Loan Return0.30%0.28%4.96%S&P/UBS Leveraged Loan Index
LL BB Return0.47%0.45%5.09%S&P/UBS Leveraged Loan BB Index
LL B Return0.31%0.28%4.93%S&P/UBS Leveraged Loan B Index
LL CCC Return-0.39%-0.25%3.49%S&P/UBS Leveraged Loan CCC Index
HYG-0.01%-0.01%7.26%Ishares Iboxx High Yield
BKLN0.43%0.43%5.24%Invesco Senior Loan ETF
S&P 500 Return0.37%0.37%11.66%S&P 500
Russell 2000 Return1.81%1.81%12.39%Russell 2000 Index
10yr Beg4.15%4.15%4.57%10yr Treasury
10yr End4.08%4.08%4.08%10yr Treasury
10yr Return0.79%0.79%7.77%10yr Treasury
Asset Class Beg Mo Beg QTD Beg Year End of Month
HY YTW6.73%6.73%7.47%6.82%
HY BB YTW5.75%5.75%6.43%5.71%
HY B YTW6.75%6.75%7.54%6.93%
HY CCC YTW11.78%11.78%11.87%12.37%
HY STW299 bps299 bps310 bps310 bps
HY BB STW198 bps198 bps205 bps197 bps
HY B STW304 bps304 bps318 bps322 bps
HY CCC STW814 bps814 bps751 bps867 bps
LL YT3Y7.82%7.82%8.79%7.87%
LL BB YT3Y5.93%5.93%6.65%5.90%
LL B YT3Y7.43%7.43%8.36%7.48%
LL CCC YT3Y16.72%16.72%18.04%17.41%
LL ST3Y451 bps451 bps475 bps454 bps
LL BB ST3Y261 bps261 bps261 bps256 bps
LL B ST3Y411 bps411 bps432 bps415 bps
LL CCC ST3Y1351 bps1351 bps1406 bps1415 bps
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