Case Study
How Investcorp Credit Management transformed credit selection with advanced analytics
Corey Geis, Global Co-Head of Liquid Credit and Head of Investcorp Credit Management US
Navigating market complexity
Investcorp Credit Management (Investcorp), the credit-focused division of the global investment manager Investcorp, is a top 25 global CLO manager with over $21 billion in assets under management. Guided by Corey Geis, Global Co-Head of Liquid Credit and Head of Investcorp Credit Management US and Neil Rickard, Global Co-Head of Liquid Credit and Head of Investcorp Credit Management Europe, the firm manages $12 billion of AUM in the US and $9 billion of AUM in Europe.
As spreads remain tight for incremental risk, Investcorp maintains an “up in quality bias.” This strategy has required smaller average hold sizes and increased portfolio diversity to remain fully invested. By staying attuned to market risks and opportunities and leveraging advanced tools, Investcorp believes it is well-equipped to navigate the complex market, maintain its competitive edge, and achieve continued success.
A challenging market landscape
The credit markets are undergoing significant structural changes, creating a complex environment for investors. To maintain its competitive edge, Investcorp Credit Management US, led by Corey and his team, has taken a nuanced, laser-focused approach to identifying both risks and opportunities in the current and near-term credit landscape.
Degrading covenants and LME risk
A significant concern remains the ongoing erosion of covenant protections within the loan market. Many safeguards that were standard prior to the Global Financial Crisis have yet to be reinstated, leaving investors in a more vulnerable position. This fragility is further exacerbated by the growing prevalence of liability management exercises (LMEs), allowing borrowers and lenders to exploit credit agreements to their benefit, often at the expense of other lenders. As Corey says, “[LMEs are] really destroying value for investors. I’m hopeful the loan investor community will look to claw back some of those protections.” In such an environment, maintaining rigorous diligence and adopting a defensive investment strategy are paramount to mitigating potential risks posed by increasingly aggressive financial engineering.
Loan supply and hopes for an M&A revival
Despite a tightening market, the technical backdrop for loans remains strong, supported by robust CLO issuance. A significant portion of the market’s performance has been driven by carry, which has been impacted by a tightening of spreads. Looking ahead, Corey shares “I do think 2026 is the year we may finally see the beginning of the reversal of this secular tightening cycle in credit as markets begin to normalize.” This revival would fuel the new loan supply the market craves. While private equity sponsors have been hesitant to deploy capital amid valuation uncertainty, a pickup in M&A would provide fresh investment opportunities, drive market momentum and potentially course correct the current trends in documentation: “I think what would ultimately serve to help normalize the market would be an increase in the supply of underlying loans in which we invest… And if we see more supply, that will allow investors to eventually be more discerning about the credits in which we invest.”
The AI and tech boom
The market is also witnessing a large influx of tech-related loans, largely driven by the financing needs of the AI boom and broad expansion of data centers. This trend, for many, evokes memories of the media and telecom boom and bust of the late 1990s, a period defined by speculative investment and inflated valuations. Key risks associated with the current AI wave include uncertain monetization paths, rapid technological obsolescence, and a complex regulatory landscape. While the transformative potential of AI is undeniable, a disciplined, fundamentals-based approach is crucial to distinguish sustainable business models from speculative ventures. Regardless of whether the M&A revival and more favorable covenant trends take shape, the Investcorp team has stayed committed to their strategy and equipped themselves to act decisively in any market. With a focus on thorough fundamental credit analysis and a disciplined approach, they are prepared to navigate uncertainty while seizing opportunities that align with their long-term goals.
“I think what would ultimately serve to help normalize the market would be an increase in the supply of underlying loans in which we invest… And if we see more supply, that will allow investors to eventually be more discerning about the credits in which we invest.”
The solution: Comprehensive platform integration
Investcorp implemented a multi-faceted solution using advanced analytics and data management tools to address its challenges:
Bottom-up investment process enhancement
The firm enhanced its strict bottom-up credit manager approach with sophisticated analytical tools. They continued developing internal financial models while incorporating advanced data analytics to support credit selection. Key credit attributes remained focused on issuers that demonstrate high returns on invested capital, market share leadership, high barriers to entry, low capital expenditures, and strong free cash flow generation, seeking a loan-to-value of 50% or less.
Centralized data management platform
- FinDox™ provided a centralized, single point of access for all data rooms, which proved extremely helpful for efficiency and managing public/ private access compliance.
- FinDox Transcripts offered a first-mover advantage with early access to earnings call transcripts, providing critical insights for investment decisions.
Advanced legal and credit analysis
Legal document review through Octus Covenants Analysis expedited the review of term sheets and credit agreements by highlighting off-market terms and comparing them to previous documents, saving significant time.
Octus Liquid Credit Fundamental Data’s research and diligence tools provided quick assessments to determine if a company warranted further analysis or was outperforming its peers.
Real-time portfolio monitoring
Flash Earnings Results proved useful during busy earnings seasons for prioritizing earnings reports, enabling more efficient resource allocation.
CLO Insights’ news stories and email alerts provided holistic reviews of the market, helping identify key themes and shifts in market share.
Active portfolio management enhancement
The firm enhanced its active portfolio management approach with tools that supported constant relative value exercises between portfolio holdings and the broader market. This enabled daily portfolio optimization while maintaining their rigorous investment process. Geis noted: “[This is the] same process that allowed us to avoid First Brands or Tricolor. We’ll need to remain true to our process and not stretch for product or stretch for yield…it really comes down to the investment process, the credit process, that bottom-up analysis, and just remaining true to it.”
It really comes down to the investment process, the credit process, that bottom-up analysis, and just remaining true to it.
Measurable outcomes: Operational excellence and strategic advantage
Geis shared, “Octus has significantly enhanced our investment process. The platform’s tools are intuitive and incredibly effective, making our analysis faster and more precise… We use a lot of those tools in helping us get started or formulate our opinion. As a bottom-up credit manager, one of the primary metrics we look for is a margin of safety…free cash flow generation is also extremely important because it will help determine whether or not that issuer is going to be able to service and ultimately repay their debt.”
1. Enhanced analytical efficiency
The centralized platform eliminated manual, multi-database research, transforming processes that previously took weeks into streamlined workflows. The team could now focus on higher-value analysis rather than data gathering.
2. Improved decision-making speed
Access to real-time insights enabled faster identification of investment opportunities and risks, enhancing the firm’s ability to perform daily relative value exercises.
3. Strengthened risk management
Enhanced legal review and credit analysis tools supported Investcorp’s strict underwriting standards, providing the firm with the ability to avoid potentially significant credit losses through a disciplined, analytics-supported approach.
4. Competitive positioning
The combination of team expertise and advanced tools strengthened Investcorp’s competitive position in deal sourcing and execution, enhancing their relationships with sell-side and private equity firms.
5. Portfolio optimization
Comprehensive monitoring and analysis capabilities supported the firm’s ability to maintain higher diversity scores while focusing on large, liquid issuers with an average facility size of $1.9 billion.
“We’re an extremely active portfolio manager…constantly performing a relative value exercise between our holdings and the broader market to optimize portfolios on a daily basis. The tools enable us to continually optimize our portfolios.” He added, “Octus makes portfolio management seamless. It allows us to focus on decision-making rather than spending unnecessary time on data collection or processing.”
Setting the standard for modern credit management
Octus makes portfolio management seamless. It allows us to focus on decision-making rather than spending unnecessary time on data collection or processing.
Investcorp’s successful integration of advanced analytics with its proven investment philosophy shows how technology can enhance, not replace, fundamental credit analysis. By pairing their disciplined bottom-up approach with sophisticated data capabilities, the firm is in a better position to navigate complex markets and maintain a competitive advantage.
The firm’s ability to manage portfolio diversity, maintain strict underwriting, and execute active trading strategies demonstrates the power of combining experienced professionals with cutting edge tools, providing a blueprint for maintaining investment discipline while embracing technology.
Discover Octus credit market intel and data
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