Leveraged Finance: Snapbacks, Agility, Rising Defaults, and Focus on Quality
- Leveraged loans bounced back in the second quarter, led by the previously battered energy and retail sectors, as well as metals and mining.
- Retail outflows abated. CLO formation provided modest support. Index pricing rebounded off the low point in March, and LIBOR levels remained low.
- The high yield market had its best quarter since 2009, with CCC’s, distressed high yield, and energy among the top performing segments. BB’s also finished strong, partly thanks to the fallen angel universe which continue to present potential opportunities.
- Investors understanding the potential opportunity have pumped nearly $30 billion into high yield year to date, which materially reversed negative trends we saw through much of March. We continue to believe now is a good time to invest in high yield as a core investment or an income enhancement addition to a broadly diversified portfolio..
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.