In 2024, we believe investors can be constructive on the loan market without being overly bullish on fundamentals, as the current yield profile provides a cushion against volatility. On top of that, the growing narrative supporting a soft landing, the high current coupon, and spreads wide of non-recession historical averages all make loan valuations still attractive. Even assuming a return to historical long-term default rates, lower-than-average principal recovery rates, and eventual rate cuts, the current jumping-off yield appears adequate enough to result in a net positive outcome over the next twelve months—this, while also maintaining the benefits of seniority in the capital structure as we head into a possible shift in the cycle.

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Bank loans may be unsecured or not fully collateralized, may be subject to restrictions on resale, may be less liquid, and may trade infrequently on the secondary market. Bank loans settle on a delayed basis; thus, sale proceeds may not be available to meet redemptions for a substantial period of time after the sale of the loan.

The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

All investments carry a certain degree of risk, including possible loss of principal.

Past performance is not indicative of future results.