Voya Credit Income Fund Quarterly Commentary - 3Q25

• The third quarter of 2025 marked a turning point for the U.S. economy, as cracks in the labor market began to surface after several quarters of resilience.
• Class I shares of the Fund underperformed the benchmark on a net asset value (NAV) basis, the 50% Bloomberg High Yield Bond—2% Issuer Constrained Composite Index/ 50% Morningstar LSTA US Leveraged Loan Index (benchmark).
• The macro outlook remains stable, but caution is warranted heading into the final quarter of the year.

Class I shares of the Fund underperformed the benchmark on a NAV basis for the quarter. Fees and normal Fund expenses resulted in underperformance on a NAV basis, as the Fund outperformed based on gross returns. Across sectors, the Fund benefited from security selection within automotive as well as paper and packaging, primarily due to the avoidance of select underperforming credits. In contrast, the Fund was negatively impacted by security selection within media and entertainment as well as energy. Asset allocation impact was modestly negative given the Fund’s slight overweight to the loan market during the quarter.

The third quarter of 2025 marked a turning point for the U.S. economy, as cracks in the labor market began to surface after several quarters of resilience. The June jobs report initially appeared strong, but a series of revisions later revealed a net decline during the month, and a much softer trend in subsequent months. This shift prompted the U.S. Federal Reserve to resume rate cuts at its September meeting, with projections indicating further easing through year end. Fed Chair Jerome Powell’s Jackson Hole remarks emphasized a fragile labor market equilibrium—where a decline in hiring is being offset by reduced labor force participation and a decline in immigration. Powell cautioned that this balance could unravel swiftly if layoffs accelerate, underscoring the Fed’s renewed dovish stance. Trade policy continued to shape inflation dynamics, with the pause on reciprocal tariffs coming to an end in July and partial rollbacks via deals with Japan and the European union later in the month. Meanwhile, inflation data released during the quarter began to indicate the first signs of pass through to consumers, with inflation (particularly core goods inflation) rising month over month. Despite these headwinds, financial markets continued to reflect investor optimism. Rates rallied, led by the front end of the curve, and credit spreads tightened across sectors. As a result, most fixed income sectors delivered positive total and excess returns. 

The backdrop remained supportive for the below investment grade segments of the fixed income market. High yield (HY) bond spreads tightened by 23 basis points (bp) during the quarter to an option-adjusted spread (OAS) of 267 bp. Spreads traded in a relatively tight range for much of the quarter after briefly widening above 300 bp in early August following the release of a weak July jobs report. Within loans, secondary loan prices started the quarter off on a strong note and advanced by 34 bp in July before a more cautious tone emerged in the last two months. As a result, the weighted average bid price declined by 35 bp during August and September, with bids ultimately finishing the quarter at 97.06—roughly the same level it started the quarter with. Given the rally in rates, HY bonds outperformed loans for the period, as the Bloomberg U.S. High Yield 2% Issuer Constrained Index returned 2.54%, while the Morningstar LSTA US Leveraged Loan Index lagged, but still produced a solid return of 1.77%. Across credit quality, HY returns were relatively uniform across BB and B rated issuers, while CCC rated issuers were notable outperformers given an increased appetite for risk and were a key driver of the spread rally within the broader HY market. Returns were more dispersed within the loan market, as single-B rated loans outperformed both BB and CCC rated loans during the quarter. The new-issue market experienced a notable uptick, with repricings being a key driver of issuance within loans and traditional refinancings making up the bulk of issuance within HY. Merger and acquisition (M&A) activity did increase compared to the prior quarter in both markets, but overall volumes remained modest. Investor flows remained healthy across both asset classes, but increased supply resulted in a more balanced market towards the end of the quarter.

The macro outlook remains stable, but caution is warranted heading into the final quarter of the year. Overall, recent economic data has continued to demonstrate resilience, while disruption from tariff and trade headlines from early in the year has yet to meaningfully show up in the hard data. One key concern is the growing weakness in employment numbers, as job gains have decelerated notably. However, the Fed will continue to provide a backstop should labor conditions worsen from here and growth slow more than expected. Fundamental factors remain supportive across leveraged credit, as balance sheets continue to be in good shape given stable leverage and interest coverage metrics. The technical environment is positive, as demand is expected to remain elevated given still attractive all-in yields. 

In terms of asset allocation, we remain slightly overweight to loans, which continue to have a carry advantage over HY. By rating, we maintain a single-B average credit profile and remain focused on name-specific risk given the increased bifurcation in performance among borrowers. With policy uncertainty and tight spreads remaining a key theme in the market, we maintain our preference for more defensive business models and balance sheets, such as healthcare as well as food and beverage. We maintain our cautious stance within cyclicals and structurally challenged media and telecom business models. Within energy, we favor midstream over exploration and production (E&P) and natural gas over oil.

Companies mentioned in this report—percentage of Fund investments, as of 09/30/25: N/A.