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Dispelling Myths About Bank Loans

Negative headlines notwithstanding, active managers of senior loans with long-term records of strong risk-adjusted returns have shown they can weather historic volatility and economic uncertainty.

Key Points

  • We believe senior secured, floating-rate leveraged loans deserve space in every investor’s fixed income portfolio, regardless of the direction of interest rates.
  • Now may be an opportune time to reconsider passive exposure and switch to an active manager with experience spotting relative value in challenging market conditions.
  • While passive strategies are designed to replicate indexes regardless of market conditions, active managers have the ability (and agility) to adjust to credit, liquidity, and trading risks that come with leveraged loans at different parts of the business cycle.
  • Against that backdrop, we feel compelled to address a number of misconceptions about this enduring asset class, which offered the best relative value of any fixed income asset class as of March 31, 2020, according to Credit Suisse.

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