A welcome surge in investor demand propelled 1Q returns
Leveraged loans returned 2.65% in the first quarter, benefiting from steady retail inflows and solid collateralized loan obligation (CLO) origination. The market is divided on the Fed’s rate cut path, with opinions ranging anywhere from no cuts to around two. Even assuming the Federal Reserve cuts rates two or three times, we still think this leaves the bank loan market well-positioned in terms of yield and total returns for the year.
The high yield market’s 1.5% return for the quarter was largely helped by its coupon. Minus the coupon, high yield had an essentially flat performance in January and February as strong economic data and high CPI drove markets to push out rate cut expectations. However, as recession fears began to subside in March, there was more of a beta grab as investors reached for risk in the CCC-rated portion of the market.
Investment Partner
High Yield Fixed Income Securities: There is a greater risk of issuer default, less liquidity, and increased price volatility related to high yield securities than investment grade securities
The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.
All investments carry a certain degree of risk, including possible loss of principal.
Past performance is not indicative of future results.