Fixed income

Invesco Global ESG Senior Loan Strategy

Global senior secured loans provide an alternative to traditional fixed-interest and high-yield bonds, offering the potential for consistent, inflation-hedged income independent of the market cycle.

At a glance

Investors are looking for senior secured loan managers which actively engage with issuers on ESG policies and progression. However, only a small pool of the investable universe is rated by ESG providers. Our global scale and experience give us a distinct perspective and have allowed us to develop our own, award winning, ESG rating framework. This enables our credit analysts to make more impactful investment decisions. The strategy is Article 8 compliant as per the Sustainable Finance Disclosure Regulation.


The strategy aims to provide a high level of current income, consistent with the preservation of capital, by investing primarily in adjustable-rate senior loans whose interest rates float at a spread above Libor and reset on average approximately every 60 days while integrating environmental, social and governance (“ESG”) criteria.

Senior loans’ characteristics

Relatively high yield and senior secured risk

As senior loans are debt obligations of below investment grade issuers, they typically pay a high level of current income. Additionally, they sit at the top of the capital structure, resulting in higher recovery rates in the case of default. 

Floating rate feature

Senior loans’ coupons float above a reference rate. As a result the asset class has an effective duration of just 0.25 years. The ability for coupons to adjust with interest rate movements can help reduce a fixed income portfolio’s duration risk.

Strong diversification properties 

Historically, senior secured loans have had low correlation with traditional asset classes. This means loans can provide diversification benefits when incorporated as a strategic long-term allocation in a diversified portfolio. 

Proprietary ESG ratings process

Invesco developed a proprietary, award winning, ESG rating framework to evaluate the ESG risk of a borrower and has incorporated these ESG ratings into the portfolio construction process. Our credit analysts are leaders in understanding the implications of ESG issues across the investable universe, which enables them in making more impactful investment decisions.

Investment process

Invesco’s senior loan investment process is based on a disciplined, fundamental approach to investing. Our analysts are structured by industry specialization and have a deep understanding of the companies that operate in the senior loan space.

The process is based in fundamental, bottom-up credit research resulting in two internal ratings:

  • Probability of default rating: grading of issuers with respect to the risk of default.
  • Expected recovery rating: grading of issuers with respect to the expected recovery rates in the event of default. In addition to credit selection, the process is based on active portfolio management and is designed to optimize portfolio returns while minimizing downside credit risk investing through a full credit cycle.

Concurrent with the fundamental analysis, each issuer undergoes a rigorous, multifaced ESG screening and evaluation process based on 16 different ESG factors. This process ultimately culminates in an ESG rating which is incorporated into the portfolio construction process. 

Why Invesco

Depth and breadth of resources

  • $32.9 billion* bank loan assets under management globally
  • One of the largest institutional and retail managers of bank loans
  • Exclusive focus of 32 seasoned investment professionals, 91 professionals in total
  • Investment Committee with average 29 years’ experience
  • Global platform with US and European bank loan expertise

Market presence and scale

  • Invesco has significant presence in all aspects of the bank loan market – Institutional, Retail, Exchange Traded Funds (ETFs), and Collateralized Loan Obligation (CLO)
  • Invesco has been managing bank loans for 30 years
  • Scale enables Invesco to obtain preferred allocations on new issues
  • Invesco is a top trading counterparty allowing for better execution inside market averages

Proven credit process and proprietary tools

  • Disciplined, fundamental research focus designed to measure risk and identify relative value across the universe of issues
  • Invesco’s customized proprietary tool suite, including Rock Bottom Spread (RBS), support a quantitative analytical framework and predictive credit research in bank loans

ESG analysis

  • We have developed a proprietary, award winning ESG rating framework and independently rate companies from an ESG perspective 
  • Our credit analysts are leaders in understanding the implications of ESG issues across the investable universe

Private side investor

  • Access to management and internal financial information and projections, aiding investment decisions through full credit cycle
  • Frequently offered an early look at new loan transactions as the arrangers seek feedback on pricing and terms
  • Afforded one-on-one discussions with management teams

Investment team

Invesco’s Senior Secured Management team has gained a distinctive perspective having managed loan assets since 1989 under a consistent approach executed through a variety of vehicles and strategies over multiple market cycles.

Experts in the loan asset class, the team has 91 dedicated and experienced members with 32 investment professionals averaging 18 years’ experience.

The investment team is led by a five-person Investment Committee, which has an average of more than 29 years’ industry experience and an average of 19 years at Invesco.

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Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange-rate fluctuations) and investors may not get back the full amount invested.

    The strategy is particularly dependent on the analytical abilities of its investment manager on senior loans. Many senior loans are illiquid, meaning that the investors may not be able to sell them quickly at a fair price and/or that the redemptions may be delayed due to illiquidity of the senior loans. The market for illiquid securities is more volatile than the market for liquid securities. The market for senior loans could be disrupted in the event of an economic downturn or a substantial increase or decrease in interest rates. Senior loans, like most other debt obligations, are subject to the risk of default. The market for senior loans remains less developed in Europe than in the U.S. Accordingly, and despite the development of this market in Europe, the European Senior Loans secondary market is usually not considered as liquid as in the U.S.

Important information

  • Data as at 31 December 2020, unless otherwise stated.

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.