Insight

Senior secured loans: Attractive current income coupled with a short duration profile and low correlation of returns

27 March 2022
Bjoern Wolber
Bjoern Wolber
Head of EMEA Investment Analysis
Sanyog
Sanyog Yadav
Manager, EMEA Investment Analysis
Senior secured loans
Overview
1
Bank loans can provide attractive current income coupled with minimal interest rate duration.
2
Bank loans have outperformed other fixed income asset classes in periods of rising interest rates.
3
Bank loans are currently attractively priced, in our view, with spreads above pre-COVID levels.

Investors are facing growing challenges in the current capital market environment characterised by a mix of compressed risk premiums, low-yielding ‘safe-haven’ investments, high inflation and heightened volatility. In this environment, it is challenging to consistently reach targeted returns. Due to low yields on high-quality government bonds, actuarial discount rates — used to value future pension liabilities — have also decreased, causing the present value of future pension liabilities to increase significantly. This forces institutional investors to consider new asset allocation strategies to manage the growing size and increasing volatility of their liabilities.

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  • The information in this document has been prepared without taking into account any investor’s investment objectives, financial situation or particular needs.  Before acting on the information the investor should consider its appropriateness having regard to their investment objectives, financial situation and needs.

     

    You should note that this information:

    • may contain references to dollar amounts which are not Australian dollars;
    • may contain financial information which is not prepared in accordance with Australian law or practices;
    • may not address risks associated with investment in foreign currency denominated investments; and
    • does not address Australian tax issues.

    Issued in Australia by Invesco Australia Limited (ABN 48 001 693 232), Level 26, 333 Collins Street, Melbourne, Victoria, 3000, Australia which holds an Australian Financial Services Licence number 239916.