Comparing the investment cases for European and US leveraged loans

25/04/2017

Leveraged loans offer investors a broad and relatively liquid market of private, sub-investment grade debt that can deliver attractive returns with lower volatility compared with public markets.

The search for yield has undeniably been one of the main drivers of increased interest in the asset class in recent years, while institutional investors have recognised the potential benefits of making a strategic allocation to leveraged loans as part of a wider fixed income portfolio. This is owing to their inherently attractive structural and market features, which include:

  • Floating rate structure and low duration – serving as a natural ‘hedge’ against rising interest rates
  • Seniority in the capital structure
  • Security over assets and / or equity of the issuing companies

The investment opportunity set is global, but it is important that investors understand the differences between the two loan markets of the US and Europe, and what it takes to invest successfully in each.

In our latest paper, we look at the key differences between the US and European leveraged loan markets and whether now is an opportune time for investors to increase their allocations to Europe.

Read the full paper