European loans: Why now?

BSP-Alcentra believes the European loan market has a more defensive sector profile, and an allocation to European loans is still very attractive, even within a declining interest-rate environment.



Having delivered impressive 2023 returns of c. 13.2%, outperforming other fixed income counterparts with less volatility, European loans have carried that strong performance into 2024, returning c. 2.4% in the first quarter. This compares to first quarter returns of c. 2.2% and c. 1.7% for US loans (EUR hedged) and European high yield, respectively. Supportive technical dynamics and robust issuer fundamentals continue to drive these superior returns. At just 1.1% in 2023, defaults remain low relative to historical levels. We believe defaults will be low in 2024 and remain well below historical averages.

This whitepaper provides insight into why floating-rate assets like the European loan market have outperformed, even in the current interest-rate environment. We look at:

  • What’s behind the supportive technical dynamic?
  • How are issuer fundamentals looking across Europe?
  • What is the outlook for defaults for the remainder of 2024?
  • How do European loans compare from a relative value perspective to other fixed income asset classes, including European high yield?

You can now read the full whitepaper at the link below