SSLs are loans issued to below-investment-grade companies by a bank or similar financial institution.
SSLs are secured by company assets and traditionally have the highest priority in repayment, potentially making them less risky than bonds.
SSLs have historically offered investors higher yields compared to traditional fixed income asset classes while also maintaining minimal duration risk due to the floating rate nature of the asset class.
Senior secured loans (SSLs) are often misunderstood by investors. Simply put, SSLs are loans issued to below-investment-grade companies by a bank or similar financial institution. SSLs have historically offered investors a diversified source of income potential that is secured by the assets of the company receiving the loan.
For example, one common myth is that bonds may be safer than loans. But in reality, SSLs are secured by company assets and traditionally have the highest priority in repayment, potentially making them less-risky than bonds.
Understanding the nature of senior secured loans can help investors make informed decisions and potentially leverage the benefits of this often-overlooked asset class. Read our complete analysis in Senior Secured Loans - 10 Myths-Busted.
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Important information
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.
Investment risk
For complete information on risks, refer to the legal documents.
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.
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.
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