Leveraged Loan Beta Exposure Through Indexing

Due to technological advancements in fixed income trading, the leveraged loan market is now a viable option for indexing.

At State Street Investment Management, we take advantage of our experience as an index manager to efficiently sample the risk profile of the LSTA Index, and we also use value-add approaches such as investing in the primary market. Our approach to leveraged loan indexing can provide loan beta exposure with lower costs and potentially higher risk-adjusted returns.

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Indexed Leveraged Loans

Leveraged loans can help plans enhance yield, reduce duration risk, and improve diversification – and new developments make this asset class more accessible than ever.

Fixed Income

Unlocking opportunity in the leveraged loan market

Learn how investors are now able to harness leveraged loan exposure through indexing.

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Fixed Income

Improving Fixed Income Portfolio Resilience with Leveraged Loans

We discuss key considerations for investors allocating to leveraged loans, and explain how loans can serve as diversifiers to other fixed income sectors.

Advancements in Fixed Income Trading

20

Live Leveraged Loan Dealers on the Octaura Platform ¹

25%

Increase in CLO Volumes from 1H23 to 1H24

$0.50

Median Bid-Ask Spread for Leveraged Loans in June 2024

¹ Sources: Barclays CLO and bid/ask spread data as of 1H2024. Octaura dealer data as of September 30, 2024.

Comprehensive Fixed Income Platform

Under our broader fixed income platform, we manage strategies across the entire fixed income universe, leading to breadth in our offerings, strong trading relationships, and in-depth insights into market liquidity and flow dynamics.

As the market structure (depth, breadth) for loans has continued to evolve and the asset class has expanded in both size and adoption by investors, many of the challenges to leveraged loan investing have become more manageable. Our flexible investment vehicles — including commingled funds, separately managed funds, separately managed accounts, single investor vehicles, and ETFs — allow investors to access the benefits of leveraged loans such as still-low default rates and attractive coupons.

Loans Traded per Month

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Make the Complexities of the Leveraged Loan Market Work for You

While the loan market remains an over-the-counter market with challenges such as illiquidity, low transparency and long settlement times, State Street Investment Managements' decades of experience as an index manager allow us to harvest the premiums available in the market and create a loan solution that best meets the specific goals of our clients.

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Marketing Communication.

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Investing involves risk including the risk of loss of principal.

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The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EU) and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.

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