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The HALO (heavy assets, low obsolescence) trade has gained traction in recent months — particularly in the equity markets — as investors turn away from software businesses amid AI displacement concerns.
In this week’s episode of Syndication Nation, 9fin’s podcast on all things leveraged finance, LevFin reporter David Westenhaver joins US deputy editor Sasha Padbidri in unpacking HALO for our side of the market — which credits are actually benefitting from the trade, and whether this is truly a safe haven for LevFin investors.
Have any feedback for us? Send us a note at podcast@9fin.com. Thanks for listening!
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Sasha Padbidri: Sasha Padbidri, Hello everyone. My name is Sasha Padbidri and I'm Deputy Editor with 9fin. Welcome to another episode of Cloud 9fin's Syndication Nation podcast, where we unpack all things leveraged finance. Today's episode, we'll be diving into the HALO trade with LevFin reporter, David Westenhaver. Welcome, David. David Westenhaver, David Westenhaver: Happy to be here. Thanks, Sasha. Sasha Padbidri: Awesome. Let's get straight into it. So everyone's been talking about the HALO trade, especially in the equity world, but in the debt world, things are a little different. So David, just for our listeners, we keep hearing the word HALO everywhere, but what does it actually mean and why has it taken off now? David Westenhaver: So HALO is an acronym that stands for heavy assets, low obsolescence. And the point of this trend is essentially to invest in companies that might be protected from AI disruption. It was recently coined by an investor who highlighted names like Walmart and McDonald's and Exxon Mobil as examples in the equities market, as they've all been outperforming the market this year. But it's something that we're seeing in leveraged finance as well to a certain degree. But essentially, we've seen software disruption to start 2026. And these names are essentially those that aren't going to be disrupted by AI in the same way. Sasha Padbidri: Great. So it's essentially the anti-AI trade. David Westenhaver: Yeah, it's sort of seen as a safe haven to AI disruption. Sasha Padbidri: Yeah, perfect. Okay. So one thing that's still on your reporting is that this isn't necessarily about conviction. It's also about capital needing a new home, if I'm not mistaken. So can you just unpack all of that, please? David Westenhaver: Yeah. So like I said, the software disruption has been obvious in leveraged finance. That's probably been the major story of the year, at least up until the war in Iran. And that capital needs a place to go. And so this has a lot to do with just finding a new home for that capital, more so than deep conviction in these broader HALO industries. Because, you know, HALO, it's somewhat of a vague term. For some investors, they see it simply as industrials. Others would say names like McDonald's that you might not think of as... Sasha Padbidri: Blue collar trade, right? David Westenhaver: Blue collar trade, exactly. You know, manufacturing and those kinds of companies. But the benefits haven't really been even throughout those different spaces. Sasha Padbidri: So if they haven't been that even, what does that say about the HALO trade in terms of benefiting any left in credits? Or would you just say this is an equity story? David Westenhaver: It's definitely not just an equity story. It's something that's already playing out in leveraged finance. But again, it's not as evenly as the name suggests. We spoke with a banker at Barclays who pointed to a deal that they did in Europe earlier this year for a company called Ramudden, which essentially supplies concrete blocks and traffic cones for roadside construction. It's a very simple business. And, you know, the deal did well. It priced tighter than the debt was trading prior to the deal. But there was some suggestion that had that deal come to market late last year, it might not have been received as well. You know, that was a time where in some ways AI was still hot. It was hot and a lot of those software companies were benefiting from the AI trade. And then obviously that narrative has flipped this year. So now people want to, in some ways, they want to insulate themselves from AI. We'll get into that in a minute, I'm sure. But it's essentially, yeah, looking to get into these companies that are protected from that. And it already has begun to play out in recent months. Sasha Padbidri: Great. So what about the trade is actually working and what kinds of credits are seeing real demand? David Westenhaver: So there's really two buckets of credits that are benefiting here. One are those that are essentially the pick and shovel plays for AI energy providers, you know, those that are tied to data center construction. And then the others are examples like Ramudden, where it's essentially an industrial or manufacturing name that is just essential to the global economy. Another source we spoke to mentioned waste management names, right? You're going to need waste management companies, regardless of whether AI blows up or peters out in the next few years and doesn't disrupt as many industries as people might fear. So those are the two buckets that are really benefiting from the overrotation. It's companies that really fall into that low obsolescence bucket, or those that are really benefiting from the increased investment into AI infrastructure. Sasha Padbidri: Got it. And what about those that haven't quite, you know, benefited from this trend? David Westenhaver: Yeah. So in some ways, this list is longer than the list of industries that have benefited. So, you know, an obvious example would be chemicals. There's been trouble in that space since the end of 2025. Building materials has been another one. You know, sources said outside of data center construction, you know, we're not exactly in a great period for construction. And so a lot of building materials companies, they're not seeing the same benefit. And manufacturing names as well. We mentioned some manufacturing names that are doing well, but it's not lifting up the whole sector like some might suggest it has. Sasha Padbidri: Got it. So based on the conversations you've had with other sources, can we consider these asset-heavy businesses a safe haven? David Westenhaver: So I would say they're a relative safe haven compared to software names that are clearly ripe for disruption from AI. But in general, no, they're not a safe haven. There are a lot of risks here. And most of them are macro related. The kind of risks that no company can escape if things turn the wrong way. Much of this has to do with rising input costs, the rising cost of energy. That's already led some CEOs to delay capex spending on big projects, which of course filters down to manufacturing names. But they're also seeing that on the consumer level, or at least they're preparing for disruption on the consumer level in that, you know, if prices rise in energy, then that has a downstream effect and consumers might cut back on spending. And we don't necessarily think of manufacturing as being super exposed to consumer sentiment, but many of those names are. Sealed Air was an interesting example, you know, without getting into the deeper details of that deal, that company has exposure to consumer packaging. And so consumer demand has an impact there as well. And so that's something that's going to going to filter out across, across a lot of those names. Sasha Padbidri: Got it. Um, just one last question. Do you, do you see any like cracks derailing this movement, if at all? David Westenhaver: The, the energy risks are the big ones. Um, you know, inflation, uh, again, cutbacks in consumer or corporate spending. Um, I would say those are the key risks there. Obviously we don't know what's going to happen throughout the rest of the year, particularly with Iran. So it could go either way. It does again, seem to be like a relative safe haven to a lot of these software names that investors just can't increase their exposure to. But some of those names that don't fall into those two buckets, the AI picks and shovels play or the essential industrial services play, those credits could be at greater risk. Sasha Padbidri: Got it. Well, David, thank you so much for unpacking this with me. If you like to check out this story on the 9fin platform, please email us at podcast at 9fin.com. Thank you listeners for tuning into this episode of Syndication Nation. We hope to see you next time.