In this Q&A, Andrew Boughen, leveraged loans fund manager, explains why European leveraged loans are increasingly popular with pension funds and insurers globally, what makes the loan asset class different to others and the reasons why it could be an opportune time to invest.
European leveraged loans have similar characteristics to the larger US loans market, but have a more stable, institutional-only investor base, which has resulted in higher returns and lower volatility over a long period of time. In addition to offering investors risk-adjusted returns and relatively stable returns, European loans offer institutional investors a range of benefits; including:
- Senior ranking security over a borrower’s shares and assets
- Low interest rate duration
- Liquidity and short ramp-up periods
Why invest now?
In our view, the investment case for European loans persists, underpinned by solid market fundamentals. Corporate performance is strong, loan defaults are very low, and boosted by strong European corporate activity and a significant level of private equity fundraising, the outlook for M&A-related leveraged loan issuance remains very supportive.
Healthy supply keeps the market in balance, helping to ensure that returns and terms remain attractive for investors.
Read the full Q&A
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.