Must Read Research

Business development corp. (BDC) redemption requests are picking up and we unpack the risks. Higher gas prices may be an annoyance, but relative to the past, they're less likely to land the economy in the rough. In Japan, the new administration’s reforms aim to move the country out of the bunkers and into the fairway.

 

Business development corp. (BDC) redemption requests are picking up, sales are slowing, and for the first time, unlisted BDCs may see net flows turn negative in Q1 as more cash exits than enters.

At some BDC platforms, 10–20% of assets under management have already faced withdrawal requests. While the industry is still in the early innings, U.S. Credit Strategist Neha Koda outlines a stress progression in which liquidity pressures can evolve into severe credit problems. BDCs still have options, including deploying cash and revolvers, redirecting repayments away from new loans and toward redemptions, or selling their most liquid assets. Each step, however, carries costs such as lower future income, potential credit downgrades, and increased contagion risk. Portfolio impact worsens when selling becomes forced, typically after five or more quarters of sustained maximum redemptions, with shorter timelines if leverage is elevated or credit losses rise. Portfolio mix also matters: over 40% of BDC assets are high- or medium AI-risk holdings, including names with elevated paid-in-kind exposure following the 2023 rate hikes, increasing future credit loss risk.

 

Compared with the 1970s, producing a unit of global GDP (gross domestic product) now requires one-third as much oil.

Using a VAR (Vector Autoregression) approach, the economics team finds that while a 10% oil price shock boosted U.S. inflation by 90 basis points (bps) during the OPEC (Organization of the Petroleum Exporting Countries) crisis 50 years ago, the impact today would be closer to 25 bps. Growth is even less affected, at roughly 5 bps today for a 10% oil price move, compared with 70 bps in the 1970s. The U.S. shale boom helps cushion these effects domestically. Europe, by contrast, is more exposed as a net oil importer where energy comprises a larger share of consumption, leaving it roughly twice as sensitive. Our recent GDP estimate cuts and inflation forecast increases reflect these dynamics. More broadly, while the global economy has become less oil-intensive over time, it has grown more sensitive to natural gas and fertilizers, with Europe again more vulnerable to gas price spikes.

 

Japan's transformation under the new administration is broad-based.

Its once-praised healthcare system is under strain from inflation, labor shortages, and demographics, with 61% of hospitals loss-making in 2025, up 10 percentage points (ppts) year over year. The Takaichi administration is responding with policy shifts ranging from hospital downsizing and higher co-pays to pharmacy consolidation and healthcare digitalization, with Japan Pharmaceuticals Analyst Ritsuo Watanabe arguing that clear winners and losers will emerge in 2026. Defense strategy is also evolving, as Japan Machinery Analyst Kenjin Hotta points to rising global tensions pushing Japan to boost military readiness, potentially lifting spending from 2% of GDP toward 3%. This shift could add roughly 0.2 ppts to growth over five years while increasing total defense spending by as much as 122%, raising fiscal pressure and testing Japan’s labor and procurement capacity.