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.

After recording consecutive record highs during the fourth quarter of last year ($211 billion) and again during the first quarter of this year ($212 billion), secondary loan trading volumes decreased 10% in the second quarter, to $191 billion, according to the Secondary Trading & Settlement Monthly 2019 Executive Summary.

ll is well that ended well in the fourth quarter. Following its worst monthly print this year (-0.45% in October) the S&P/LSTA Leveraged Loan Index (LLI) produced a risk-on driven 0.6% November return and an eight-month best 1.1% return in December, according to the Secondary Market Monthly December Executive Summary.

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.

This presentation is for the Fourth Quarter 2019 LSTA Secondary Trading & Settlement Study.  Presented by Ted Basta, LSTA EVP –Analysis & Investor Strategy.