Senior Secured Loans: Looking beyond interest rates

Amid dovish US Federal Reserve’s expectations, Invesco Fixed Income’s bank loans team analyze the true value of bank loans and why the asset class is still relevant.

Apr 8, 2019 | Invesco Fixed Income

Investors warmed up to US senior loans as they believed that the asset class’s floating-rate nature could benefit from the US rate hike cycle. However, with the US Federal Reserve’s dovish tone dialing down expectations for a rate hike this year, some investors have questioned whether loans still belong in their portfolios.

Invesco Fixed Income’s bank loans team views that senior secured loans’ overall coupon, and not net increases in reference rates, have been the primary driver of returns and contributed to the asset class’s overall stability. The team believes that loans’ return profile consisting of a relatively high coupon rate, low volatility, and a low correlation to traditional asset classes supports the argument for loans to be a strategic allocation in investor's portfolios, with the opportunity to tactically position based on market conditions.

To read the team’s analysis, click on “Download PDF”.

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