The Case for Senior Loans: Q2 2026

Investors are increasingly reassessing the health and positioning of the global bank loan asset class amid a backdrop of macroeconomic uncertainty and headline-driven volatility. Several developments have kept credit risk and issuer resilience in focus through the first half of the year: an evolving trade policy landscape, in which the prior broad-based tariff regime was replaced mid-year by a new set of targeted duties following legal challenges, renewed geopolitical tensions in the Middle East that have pushed oil prices higher and added upward pressure on interest rates, and sector-specific stress tied to artificial-intelligence-driven disruption of legacy software business models commonly referred to as the "SaaSpocalypse." We view these developments as meaningful, but not uniformly negative for the loan market. Rather, they reinforce the longstanding need, in our view, to discover and invest in issuers with durable competitive positioning. Against this backdrop, three key questions have emerged:

1) How are underlying bank loan issuers performing in the current market?

2) How does a higher-for-longer rate environment affect loan returns?

3) What is the outlook for the loan asset class?

This piece provides our view on the current market environment and attempts to answer these critical questions.