Bank Loans: A Stable, Long-Term Total Return History
From the longer term perspective, floating rate bank loans have a striking track record of relative total return stability, producing positive total returns in 89% of all quarters since 19921, as shown in the chart below.
- The three worst quarters (< -5%) all occurred in 2008, a period marked by a global credit crisis and the “Great Recession”
- The three best quarters (> +5%) all occurred in 2009, a time when capital markets had begun to thaw and the U.S. economy slowly started to heal.
Bank Loans Quarterly Cumulative Total Return (%) – 1Q 1992 to 3Q 2013
Source: Credit Suisse Leveraged Loan Index. Past performance is no guarantee of future results.
While there is certainly more price volatility in the bank loan market today compared to years past, bank loans have demonstrated resilience, weathering numerous negative global macro events over the last 21 years, including the Mexican peso devaluation, Russian financial crisis, liquidation of hedge fund manager Long Term Capital, the dot-com bubble, early 2000s recession, 2007-2008 financial crisis, the European recession and sovereign credit risks, the U.S. credit downgrade, and multiple global political crises.
11992 is the inception of the Credit Suisse Leveraged Loan Index, an unmanaged index that tracks the performance of senior loans.