A primer brought to you by S & P Global that dissects all aspects of syndicated loans.

Syndicated Loans: The Market and the Mechanics, a primer created for the Loan Market participant.

The U.S. senior secured institutional term loan asset class provides a number of benefits to investors, including a floating-rate coupon, a large and liquid market, lower credit and interest-rate risk than high-yield bonds, and many ways to gain exposure.

Investors in loans like their short duration, high position in the capital structure and their floating-rate attribute that has resulted in better returns than other fixed income instruments. LSTA Executive Director Bram Smith met with four leading loan market participants to discuss the current state of the market, the issues it faces, and how senior loans can enhance institutional portfolios.

Following a momentous start to the year across most asset classes, investors were aggressively “selling the rally” by the end of February. In loan land, secondary prices began to pull back from their recent highs in mid-February, ending a 56-day streak of positive returns in the Morningstar/LSTA Leveraged Loan Index (LLI).

It’s been a rough go in March where volatility first spiked around the banking sector following the collapses of Silicon Valley Bank and Signature Bank. And just as markets were digesting the broader economic damage, Swiss authorities were forced to step in and cut a deal with UBS to acquire Credit Suisse, one of the 30 GSIBs – Global Systemically Important Banks.

Over the past three decades, the senior loan market has grown  from relatively modest beginnings into an essential element of corporate finance, playing a core-plus role in institutional fixed-income allocations.  In 2018, the S&P/LSTA Leveraged Loan Index, an indicator of market size, surpassed $1 trillion in outstandings.

The LSTA presents the results of the fourth quarter Secondary Trading & Settlement Study and discuss key trends and analysis that will shape the direction of the market in 2022. Presented by Ted Basta, EVP of Market Analytics and Investor Strategy of the LSTA.