Black Creek Global Balanced & Fixed Income Update as of June 8, 2026

Transcript

RSH: Hello everyone, it’s Monday June 8^th 2026 today and thank you for taking the time to listen to an update on the CI Global Balanced Fund.  We are Richard Schulte-Hostedde and Melissa Casson from Black Creek Investment Management.  I am the co-portfolio manager responsible for fixed income and asset allocation and Melissa is the co-portfolio manager responsible for the equity component of the Fund and is also a senior team member collaborating with the entire global equity team here at Black Creek. Before we kick it off, perhaps a reminder that our Black Creek funds invest in diversified, but concentrated portfolios of global winning businesses that are underappreciated by the market, and that we believe, have attractive future return potential.

MC: Thanks, Richard. The outline for our podcast today has three parts. First we’re going to give an overview of the market. Second, we’re going to drill down into the portfolio, getting granular on a few of our winning businesses. And third, we are going to discuss our outlook for the rest of the year and beyond.

So, Let’s start with the headlines and the market overview. Richard, please share with us what are you seeing.

RSH: Sure, Melissa. There are 2 crosscurrents seemingly opposing each other currently.  First, we have the new theatre of war in Iran.  This conflict impacts several fronts including increasing the cost of oil, and increasing the fiscal stress on US government spending, both headwinds to medium term growth, generally.  The second cross current is the continued unabated strength of US equity indices.  The excitement of massive spending on AI data centers by US tech companies and other companies globally is providing many investors sufficient reason to keep buying equities, particularly deemed to be winners of the AI revolution. Finally, it’s worth noting, consistent with buoyant equity markets, corporate bond spreads remain quite compressed and are at levels considered rich by historical standards, generally speaking.

MC: Great. So, let’s dig into this a little bit more – first with the Iran War. Clearly, this has led to outperformance of energy stocks in the equity markets, but have you seen an impact in the fixed income markets?

RSH: So Melissa, the underlying theme has been rising interest rates.  Government bond yields have increased.  As an example, market participants have sold U.S. 10-Year Treasury bonds since the outbreak of the war causing the benchmark 10-Year bond yield to increase from 4% to 4.5% corresponding with a 4% decline in the dollar price of the bond – wiping out a whole year of income. The prospect of central banks lowering policy rates has now come off the table as rising energy prices have generated inflationary pressures around the globe.  At least for now.  Pre Iran-war the market was pricing expectations of further rate cuts by the Fed, however as the war continues, expectations have shifted so that now a Fed rate hike is expected by the end of the year.  Higher rates put downward pressure on the economy by increasing borrowing costs on consumers and businesses in an effort to put a lid on inflationary pressures.  Similar dynamics exist in Europe and Japan.

And Melissa, I know you have been meeting with a lot of energy companies at conferences recently and companies that operate in the Middle East. What insights have you gathered about the situation?

MC: Yes, most are surprised this conflict is still ongoing, especially with it driving higher gas prices into the U.S. midterm elections. I have met with many energy executives and analysts recently and all are reporting crude inventories are now at record lows. Some predict inventories will deplete in only a few weeks, which will cause energy prices to spike much higher.

RSH: Thanks Melissa, let’s talk about the AI trend briefly the market has seemingly bifurcated into AI winners and losers.  For example, companies in the semiconductor space have increased significantly year to date whereas many software companies are down during that same time period. In a bifurcating market like this, it is incredibly important to know and understand the portfolio holdings at a granular level. Melissa, how has AI affected the equity part of the portfolio?

MC: Richard, as of today the portfolio year-to-date is ahead of our index despite being underweight technology. We have had some large AI winners in the portfolio that were underappreciated coming into this year. For example, STMicroelectronics is a semiconductor company that is up nearly +200% year to date. STMicroelectronics is a global leader in many different types of semis, including microcontrollers, power semis and sensors, and has always had leading research and development capabilities. Today, STMicro is working closely with Amazon Web Services to supply several semiconductor components into their AI data centers. On the other side, we have had software-exposed companies like NiCE Ltd. That have derated significantly. We still see NiCE as an AI leader but continue to search for contrary evidence. Net-net, we are happy with how the portfolio has performed with our positioning. But perhaps just as importantly, we are happy with how our companies are integrating AI into their operations and products to become even more competitive for the long-term.

At a high level, how has AI affected the bond markets?

RSH: Generally speaking, AI has dramatically increased corporate bond issuance by the large technology companies.  For example, historically companies like Alphabet, Meta, and Amazon have internally generated enough cash to fund their growth strategies.  However, with such large capital spending programs for data centers and AI investments these companies are now being forced to borrow money by issuing bonds.  We are watching this dynamic closely as large scale borrowing with unknown returns on investment can lead to significant credit market turbulence.

MC: Yeah I guess, this could also drive equity market turbulence, so yes important to watch closely. So now we’ll go into the second part of the podcast and dive deep into one of our portfolio companies, Aramark. Aramark has been a major contributor to performance this year and demonstrates an investment process unique to Black Creek. Why don’t you kick it off Richard.

RSH: Thanks Melissa. Aramark is a great story for Global Balanced because we first took a position in the bonds and later we added the equity to the Fund. A unique feature specific to this CI Global Balanced Fund is that we can work together to assess both the equity and the credit of the Company which can help to uncover hard to see opportunities and risks.

Aramark is a leading global provider of food and facilities services to education, healthcare, business & industry and sports, leisure & corrections clients.  Aramark runs concessions in stadiums, they run cafeterias in schools, universities and hospitals.  And they also serve business customers in office buildings and corporate campuses.  Our initial position in Aramark in the Fund was in 2018.  Management had just completed 2 large acquisitions and paid for them by taking on a large amount of debt.  Aramark’s credit rating was below investment grade.  We assessed that despite the high level of leverage; Aramark was operating in a fairly stable industry with adequate cash flow visibility making Aramark’s bonds attractive.  Black Creek took a position in the bonds and continues to earn an attractive yield today.  Although in 2018 we thought Aramark had to the capacity to service its debt better than the market thought, the high leverage made the growth rate of cash flow less certain and ARMK stock was not an attractive enough candidate to add to the portfolio.  However, in 2019 a new CEO joined ARMK with a comprehensive strategy to grow the Company profitably.  Importantly, he came from a large competitor where he had a track record of executing on honest profitable growth.

MC: That’s right, Richard. We liked the Strategy of the new CEO to focus much more closely on its customers, and we could see early signs that this strategy was translating to execution improvement. Then suddenly in early 2020, Covid-19 hit, and Aramark had to shut down major parts of its operation. Despite this traumatic setback, the new management team persisted, and we started to see more evidence that the company was becoming more effective with its existing customers, and with winning new business. The new management team was significantly improving the service culture and the operating performance of the business. With valuation down but its prospects improving, this gave us the confidence to invest in the equity. The headwinds abated and turned into tailwinds... first, Aramark benefited from the world reopening, and second, Aramark has been well-placed to help customers manage very volatile food inflation and labor markets, and so, the Company has successfully driven an increase in first-time outsourcing customers.

In-line with our initial thesis, new management has successfully executed an operational turnaround and has become better at serving its customers. NPS scores are up. Aramark’s retention rates have improved from the low 90s to the high 90s. Aramark has increased organic revenue growth rates to outperform its major public competitors (from consistently lagging over the prior decade). Aramark is also expanding margins and driving increased free cash flow growth. Aramark is a winning business.

RSH: Totally agree Melissa, and I’ll also add by highlighting the importance of the balance sheet.  As ARMK reduced its leverage by growing profitability, by definition it gave itself more financial flexibility allowing for greater opportunities for investment.  For example, Aramark recently announced it is launching a new service to provide food and facilities services to AI data center construction sites.  Launching this brand new division positively surprised the market and now looks to become its largest and fastest growing segment.  Capitalizing on this opportunity wouldn’t have been possible, in our view,  without prudent balance sheet management while also delivering incredible customer value.

MC: Exactly. This is exactly the global winning business flywheel that we look for at Black Creek, and as a reminder, we are constantly looking to identify these flywheel opportunities when they are underappreciated by the fixed income and/or equity markets.

So, now shifting to the final part of this podcast: our outlook. Overall, we see pockets of exuberance/frothiness in the market expressed in the index, where we find many reasons to be cautious especially if the Iran War continues to limit global energy supply. Furthermore, we see the index overexposed to an AI return on investment that remains unclear. In contrast, we find our portfolio attractive, with many global winning businesses with great growth prospects at attractive valuations. Many of our companies are poised to benefit from AI, either through applying the technology to their operations to make it better and/or servicing the AI data center “build-out” profitably. We discussed Aramark as an example of capturing the growth in this market in a profitable way.

RSH: From a fixed income perspective, our view is that the coupon or income generation is going to do the heavy lifting in driving performance since corporate bond spreads are sitting at very low levels making spread tightening likely a smaller performance contributor. Furthermore, the direction of government yields remains uncertain with high levels of debt and continued fiscal spending appearing to be unsustainable in G7 countries, in our view.  Our strategy of fixed income remains unchanged: that is, lending to higher yielding winning businesses with highly visible cash flows over the long-term is an effective way to generate attractive and durable fixed income returns.

MC: Thanks Richard, and Thank  you very much for your time and attention and support.  If you have any questions or comments please reach out to your CI representative.  We look forward to our next update.