Buffering Fixed Income with Bank Loans
Loomis Sayles examines how a flexible bank loans strategy may help lessen the impact of rising rates in fixed income portfolios.
- Bank loans are variable-rate instruments, which means that when interest rates increase, so do payments to lenders – which can be translated to investors.
- Bank loans have the potential to help manage interest rate risk in investment grade portfolios and principal risk in high yield fixed income portfolios.
- While high yield fixed income investments and bank loans can generate similar yield for portfolios, many high yield fixed income investments are junior, unsecured loans while many bank loans are senior, secured loans.
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