Discipline over complacency in syndicated credit

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Invico Capital Corporations’ disciplined loan strategy balances yield, liquidity, and risk in a complacent market

“PANIC TO MANIC.” That’s how Tyler Gramatovich, portfolio manager and vice president of investments at Invico Capital Corporation, describes the drama that played out in credit markets during the second quarter of 2025. It began with a shock. Liberation Day and sweeping tariff announcements from President Donald Trump sent tremors through global markets. Stocks sank, credit spreads widened, and investors rushed for cover. “It was a very rational market move,” Gramatovich says, reflecting on how tariffs raised fresh concerns about economic growth, inflation, and the knock-on effects for corporate borrowers and consumers. Yet within weeks, sentiment reversed. Negotiation delays and a sense of temporary calm around the tariffs prompted risk assets to rally sharply. By late June, markets were not only recovering but behaving as though the risks that had sparked April’s selloff had evaporated. “That’s where we

Invico Capital Corporation is an award-winning Canadian investment fund management firm providing alternative investing and financing solutions in Canada and the US. With over $4.0 billion in assets under management, the firm offers private debt, syndicated credit, secondaries, and energy financing solutions. Invico supports corporations in pursuing strategic acquisitions, financing capital expenditures and growth programs, and managing working capital needs. As a recognized leader in alternative investments, Invico is committed to delivering innovative capital solutions and long-term value for both investors and businesses.

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ICOLP by the numbers

9-12% target total return

“Everyone seems to have this inkling that there’s a beating around the corner, but no one knows when. This is where we think the Fund shines – in a low-growth, uncertain economic environment where consistent monthly yield is the primary driver of returns”

Tyler Gramatovich, Invico Capital Corp.

commented on the manic nature of it,” Gramatovich explains. “The tariff implications were still there, and the inflation pressures hadn’t disappeared. Someone, somewhere, still has to absorb those costs.” For Invico Credit Opportunities LP (“ICOLP” or the “Fund”), the firm’s syndicated credit strategy, this swing from panic to manic was more than a headline. It was a demonstration of how a portfolio built on first-lien, senior secured term loans can maintain stability even as broader markets convulse. Whereas business development companies (“BDCs”) and equities posted double-digit drawdowns in April, syndicated term loans fell by just two points before regaining lost ground. The Fund itself outperformed the Morningstar U.S. Loan Index during the quarter, delivering steady monthly returns split between cash distributions and net asset value appreciation.

For all its resilience, the syndicated loan market is hardly immune to complacency. Years of low defaults and strong recoveries have lulled many investors into treating the asset class as a beta play. The complacency shows up most clearly in highly levered credits trading at tight spreads. These are names that may look fine on the surface but leave little margin for error if growth slows or costs rise. With tariffs yet to be fully reflected in corporate valuations, Invico is hyper-focused on the risk side of the risk/reward equation in what feels like late-cycle activity. If volatility defined the quarter, complacency defines the cycle. “Weakening job data, slower growth, sticky inflation, and all-time highs across most financial assets − it’s a weird time,” Gramatovich says. “Everyone seems to have this inkling that

there’s a beating around the corner, but no one knows when. In the meantime, risk premiums are tightening, and yield on cash can’t keep up with inflation, so investors are left with a tough decision. This is where we think the Fund shines – in a low-growth, uncertain economic environment where consistent monthly yield is the primary driver of returns.” The macroeconomic and financial asset valuation disconnect worries him. Across risk assets, investors continue to fund highly levered borrowers at ever-tighter spreads. “To me, that’s complacency,” he says. “People are putting capital to work because they’ve raised it, not because the opportunities justify it. And that is being seen in both private and public credit.” The Fund has taken the opposite tack and remains highly disciplined. Out of 180 new-issue term loans that priced in July, the Fund participated in just one. “That tells you everything about our process,” Gramatovich says. “We’re not indexing the asset class. We’re not here to put money out the door. We’re here to underwrite selectively and avoid the highly levered, tight-spread deals that could unravel.”

That restraint has meant passing on opportunities that fail to clear Invico’s underwriting hurdles. Instead, the Fund has focused in the secondary market on loans with shorter maturities, strong free cash flow, and conservative leverage metrics − often underwritten to EBITDA levels well below management projections or equity analyst consensus estimates. In practice, that means choosing credits where the fundamentals can withstand not just a baseline slowdown but a harsher downside scenario. The Fund remains fully covered on its 9–10 percent base distribution through interest income, while tilting toward credits designed to dampen volatility and outperform in down markets. Unlike private equity, where investors often wait years to see cash returned, ICOLP pays monthly distributions funded by interest from North American corporate borrowers. “The distribution is tangible because it comes from contractual interest payments under credit agreements,” Gramatovich says. “As long as the borrower pays, that flows to investors. Default risk is always the initial step in our analysis, but

The strategy also distinguishes itself from traditional private credit funds in the liquidity of its underlying loan investments. By operating in the syndicated term loan market, the Fund maintains access to a deep institutional secondary market that allows active trading and capital deployment efficiency. That flexibility proved crucial during the April selloff, when Invico could buy selectively at discounts rather than sit idle. Against that backdrop, the Fund is concentrating on what Gramatovich calls “places to hide.” The best opportunities in this market, he argues, are in credits priced around par. Loans trading between 98 and 100 cents on the dollar, with strong coupons that deliver reliable cash flow at the top of the capital stack. “In this market, success isn’t about chasing capital gains or yields that aren't there – we think now is a time to go up in quality,” he says. “It’s about sitting in high-quality loans, clipping those coupons, and making sure those loans outperform when the tide goes out.”

Liquidity also reinforces transparency – both in pricing and investor reporting. Unlike private credit funds that may mark assets internally, the Fund’s holdings are independently priced daily, with detailed loan-level disclosure provided to investors. “It’s rare in private markets to be able to see exactly what you own every reporting period,” Gramatovich notes. “That’s been a differentiator for us.” Leverage, too, is handled with caution. While many peers lean on higher debt-to-NAV ratios, ICOLP has deliberately limited its use of borrowing at this point in the cycle. A new US$100 million financing facility with a major Canadian bank offers scalability and lowers the current cost of capital, but Invico has no intention of maximizing leverage simply

A chessboard with debt-related symbols (coins, wallets) as chess pieces, illustrating the strategic

Discipline in a complacent market

Liquidity, leverage, and the long game

Published October 6, 2025

“We’re not indexing the asset class. We’re not here to put money out the door. We’re here to underwrite selectively and avoid the highly levered, tight-spread deals that could unravel”

Tyler Gramatovich, Invico Capital Corp.

9-10% base monthly distribution, with potential for quarterly specials

Outperformed the Morningstar U.S. Loan Index since inception

Monthly distributions from net interest income

Designed to deliver consistent monthly yield through investments in first-lien senior secured loans

ICOLP by the numbers

Outperformed syndicated loan benchmarks during Q2 2025, recovering quickly from April’s volatility

Strategy emphasizes active management, security selection, and avoidance of levered credits over broad-based indexing

Monthly distributions funded by contractual interest payments, not speculative capital gains

Built for advisors seeking yield, liquidity, and transparency in an uncertain macro environment

because it’s available. “We’re not trying to be the highest-octane fund in the market,” Gramatovich says. “We’re trying to deliver consistent yield with a rational risk profile – both on the underlying loan-level investment and at the fund level.”

For wealth managers and advisors, the appeal of the Fund lies not just in its high base distribution but in its balance of yield, liquidity, and transparency. As traditional bonds remain volatile and equities look fully valued, syndicated corporate credit is finding a new role as a core income allocation rather than a niche sleeve, given the high starting yield. Education remains limited, especially in Canada, where this institutional market is much less familiar. “Advisors in Canada haven’t had much access beyond big index products. The asset class has been around for over three decades in the US, but it’s dominated by large institutional investors,” Gramatovich says. “We’ve built a structure that combines institutional-grade credit with transparency and liquidity for the advisor. It’s an active manager’s market, and that’s exactly what this strategy is built for.” Since inception in 2023, the strategy has delivered a double-digit gross annualized return, with momentum supported by both strong net interest income and selective capital gains. But the team is quick to emphasize preparation over performance. Defaults are edging higher in certain corners of the market, and the lagged effects of tariffs could weigh more heavily on corporate borrowers in the quarters ahead. “We don’t rely on economic growth to make our models work,” Gramatovich says. “We rely on security selection and making sure we have a large margin for error at the time of underwriting.” Looking forward, he expects the opportunity to be coupon-driven rather than price-driven until we see a risk-off event. “The best trade right now is in income,” he says. “Strong credits with strong coupons and shorter maturities. When markets reprice, those loans should outperform and discounted loans will be widely available. But in the meantime, investors are getting paid a yield every month that far exceeds inflation.”

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the real value we bring to investors is in security selection and our ability to price risk and manage loan price volatility in an already low volatility asset class.”

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