The evolution of the European leveraged loan market has brought some benefits like the advent of multi-billion corporate issuers and an active secondary market, as well as some unwelcome features including the dilution of structural protections, like maintenance covenants.
Assuming that a loan manager is alive to the robustness of the borrower’s credit profile and the inherent protections of seniority and security – and assuming efforts to push for excessive documentation flexibility can be successfully resisted or declined – there remains a strong rationale to invest in this relatively stable, high income-generating part of fixed income, despite the late-cycle position of developed markets.
Read the paper
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.