The Tech Trade Is Just Fine, CVC Marathon's Richards Says

CVC Marathon's Bruce Richards said the technology trade remains sound despite rising published private-credit default rates. He argued that higher-for-longer interest rates are improving risk-adjusted returns across both investment-grade and non-investment-grade debt, creating an attractive environment for credit investors.

Analysis

The relevant signal is not that private-credit yields are attractive in isolation, but whether incremental spread compensation exceeds the rising probability of restructurings. Public credit vehicles can reprice daily while private marks typically lag; if defaults migrate from smaller sponsor-backed borrowers into broadly syndicated loans, BKLN and lower-quality CLO debt should absorb the repricing before reported private-credit NAVs do. The near-term beneficiary is higher-quality duration-adjusted carry in LQD and short/intermediate investment-grade credit, not indiscriminate exposure to floating-rate or below-investment-grade assets.

For technology, elevated rates remain a valuation sorting mechanism rather than a blanket sector headwind. Cash-generative mega-cap software and semiconductors can fund growth internally, while unprofitable software, venture-dependent infrastructure vendors, and highly levered data-center buildouts face a higher refinancing hurdle over the next 6-18 months. Consensus may be underestimating the second-order risk that private-credit stress curtails sponsor financing and IT-project budgets, creating a delayed demand risk for lower-quality SaaS; this becomes investable only if loan spreads widen, restructurings accelerate, or enterprise software guidance weakens.

Key Decisions for Investors

• Favor a 1-3 month quality-carry tilt: long LQD versus short HYG in equal duration-adjusted dollars. The trade benefits if default concern drives quality dispersion; reassess if the HYG-LQD relative spread tightens materially despite rising leveraged-loan defaults.
• Avoid adding broad exposure to BKLN or lower-rated CLO risk solely for floating-rate income until monthly leveraged-loan default and distressed-exchange data stabilize. A widening of loan-market spreads alongside continued benign private-credit marks would be an alert for delayed NAV repricing, not a buy signal.
• Within technology over the next 6-18 months, maintain long exposure only in cash-rich, self-funded leaders such as MSFT and GOOGL versus a basket of unprofitable software via ARKK or IGV as the short proxy. The thesis fails if long-duration Treasury yields fall sharply and funding conditions ease enough to restore multiple expansion in non-earners.
• Do not initiate a directional tech trade from this commentary alone. Monitor HY/leveraged-loan spreads, private-credit restructuring announcements, and upcoming enterprise-software guidance; synchronized deterioration would support increasing the MSFT/GOOGL versus IGV quality pair.