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Leveraged Loans: Potential Total Return Opportunities Remain Well Intact

From a purely credit risk perspective, as measured by excess returns, loans actually outperformed high yield five of the seven months through July of 2020, and have outperformed high yield bonds historically during downturns.

We believe loans deserve space in every investor’s fixed income portfolio, regardless of the direction of interest rates. Active managers with long-term records of strong risk-adjusted returns have shown they can weather historic volatility and economic uncertainty. And they 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.

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