senior secured loans

Without appreciating or accounting for nuances in the multitude of modern day investment types, opportunities are missed for optimal portfolio management according to Invesco’s Ashley O’Connor.

The contemporary notion of senior secured loans needs to be updated to reflect some of the inherent characteristics that make it one of the fastest growing asset classes in markets.

In this paper, Invesco debunks ten of the most common myths surrounding senior secured loans and explains why they think they’re a valuable addition to an investor’s portfolio. 

Contrary to popular misconception, senior secured loans actually sit at the safest part of the capital structure and remain backed by company assets. That they’re unsafe is one of several fallacies that needs to be busted, says Invesco’s Ashley O’Connor.

The uncertainty seen in markets over 2023 will likely continue over the calender year, but Invesco sees a lot of positives for loans that can only benefit investors.

Senior secured loans recover strongly from economic downturns and plenty of corporates are well prepared for any ructions ahead. Still, active management matters when it comes to selecting new deals.

There’s still ample opportunity for loans generate higher than historical average returns, with Invesco expecting outperformance over the next 6-12 months. And with a recession potentially on the horizon they come with downside protection included.

Senior secured loans make an attractive proposition in an inflationary environment, says Invesco’s Ashley O’Connor, especially when returns are stable and company defaults are at low tide.

Debt assets may be de jour, but the income they produce is fraught with peril if it doesn’t include the kind of diversity senior secured loans provide.

As inflation rises, senior secured loans offer a relatively undiscovered respite.