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.
Preview
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
