DoubleLine and Oaktree Building Defensive Credit Positions to Hedge Against AI-Driven Market Dislocation

Two of the world's leading credit fund managers — DoubleLine Capital and Oaktree Capital Management — are actively positioning their debt portfolios to perform well in the event that the artificial intelligence boom tips into a credit bust. The strategy, described by Robert Cohen, portfolio manager at DoubleLine, involves buying bonds now at valuations that are not yet stretched, in anticipation that prices will become frothy as technology companies pour trillions of dollars into AI infrastructure buildout. Cohen's thesis is that credit markets will eventually price AI-linked debt at levels that no longer reflect underlying risk — particularly in sectors reliant on AI capital expenditure — and that building defensive positions early provides optionality before the market becomes crowded. Oaktree, one of the largest alternative credit managers globally, is taking a similar approach. For banking and finance practitioners, the story captures a structural tension in private credit and corporate bond markets: the same AI investment wave driving record corporate issuance and loan volumes is also creating concentrated sector risk that sophisticated managers are beginning to hedge. The shift from risk-on positioning to selective defensive construction is an early-cycle signal that credit documentation — covenants (contractual borrower restrictions), cross-default provisions, and collateral structures — will come under closer scrutiny as the cycle matures.