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Are Leveraged Loans Becoming Less Safe?

August 2018
By Michael Bacevich

While many claim that the future of bank loans is bleak, we caution investors against extrapolating higher default rates for bank loans.


Recent articles in The Wall Street Journal have painted a dire picture for future bank loan recovery rates given the recent growth of the loan market and less covenant protection for loan investors.

While we acknowledge that the share of covenant-lite bank loans and loans without maintenance covenants has grown markedly over the past decade, we believe the implications for bank loan investors will be less onerous than suggested.

Michael Bacevich
Managing Director Portfolio Manager of Hartford Floating Rate Fund and Hartford Floating Rate High Income Fund

 

Investing involves risk, including the possible loss of principal. ● Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall; these risks are currently heightened because interest rates are at, or near, historical lows. 

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