Senior Loan Funds – These are not loans made to OAP’s but large, ultra-short duration loans made to non-investment grade businesses primarily in the U.S. and Europe.
Senior loans are classified as non-investment grade assets, so they typically pay a higher rate of interest than other short-term debt instruments. This rate of interest is based on a fixed spread over a base rate, which floats with market rates and resets every 45-60 days on average. Unlike high yield bonds, senior loans are secured by collateral and hold the highest rank in a borrower’s capital structure, giving them priority over other creditors, bonds, and all preferred and common stock.
The unique combination of floating rates and secured collateral helps senior loans complement fixed-income portfolios and can provide valuable portfolio diversification for institutional investors.
Have your advisers incorporated this type of fund in your investment portfolio ?
Typically these funds are hedged and so care is required when you select the particular fund that is suitable for you, as always take advice.
This blog was published while UnaVida Wealth Management Ltd was authorised and regulated by the Financial Conduct Authority. It is retained for reference only. UnaVida Wealth Management Ltd has since withdrawn from the FCA and does not provide financial advice to retail clients. Nothing in this blog should be relied upon as advice.