The Case for Senior Secured Loans: Q1 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. Recent developments, including escalating trade policy uncertainty following the reimposition of broadbased tariffs, heightened geopolitical tensions in the Middle East, and sector-specific stress tied to AI-driven disruption of legacy software business models (commonly referred to as the 'SaaSpocalypse'), have amplified concerns around credit risk and the resilience of corporate issuers. 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.