Fixed Income

It’s time to consider leaving leveraged loans

Leveraged loan prices have begun to decline, and the sector faces liquidity headwinds.

12/19/2018

Michelle Russell-Dowe

Michelle Russell-Dowe

Head of Securitized, US Fixed Income

Leveraged loan prices have begun to decline, and the sector faces liquidity headwinds. Therefore, what can investors in leveraged loans do to protect themselves from the challenges the sector will face as quantitative tightening (QT) takes hold. These challenges include valuations inflated by quantitative easing (QE), credit challenges and substantial supply/demand imbalances. We think the solution is to diversify this exposure from corporate-focused credit risk to a consumer-focused asset class that has not been as distorted by capital flows driven by QE, namely securitized credit.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.