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I understand senior loans to be a class of unsecured debt instrument which a company has to prioritise payment of over other unsecured debt in the case of failure.

In principle, this appears to make senior loans an attractive high-risk fixed interest investment option. Investment in senior loans is possible through various ETF (e.g. BKLN).

What risks are associated with investment in senior loans compared to long-term corporate bonds ? Are there any good reasons why retail investors do not typically invest in senior loans ?

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There's a very nice investopedia article from a couple of years ago which analyses pretty much this very question. A few choice quotes:

You might be thinking that a default shouldn’t be much of a concern since the loan is secured. However, there is no guarantee that you will be paid in full. According to Credit Suisse, the recovery rate for senior loans since 1995 has been 70%. This is significantly higher than the recovery rate for junk bonds of 46% over the same time frame, but 70% is still not 100%.

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There appear to be a few interesting opportunities, but at what risk? Fixed income is supposed to be a stable part of an investment portfolio. The focus should be on capital preservation while earning a low yet safe return. It’s not a part of the portfolio where credit risk should come into play.

(that previous paragraph in particular would seem to explain why these things aren't so interesting for "ordinary" retail investors)

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The risk/reward for senior loans over the next 1-3 years isn't favorable. When seeking fixed income, it’s highly recommended that you look at investment-grade corporate bonds, high-quality municipal bonds, Treasuries and CDs before considering them. Investing in senior loans is like investing in a stock with limited upside potential and significant downside risk.

There's some analysis of BLKN specifically in the middle of it which includes (bear in mind this was written 2015):

The bad news is that BKLN has depreciated 4.53% over the past 12 months. Taking a look at a bigger picture, it has slid 7.73% since its inception on March 3, 2011. That being the case, how do you expect it to perform if conditions worsen?

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