Corporate bond investors are increasingly turning to leveraged loans to reduce their risks and get more yield in an environment of tight spreads, Glenn Reynolds, chief executive and co-founder of research firm CreditSights, said on Monday.
"More and more institutional investors think, Maybe I should be in the loan business," Reynolds said at the Reuters Investment Outlook Summit in New York. "Maybe I have higher recovery rates and less downside by moving down the credit spectrum than being at the top of the capital structure."
One reason loans are attractive is that loan holders are paid off before unsecured bond investors in the event of an issuer’s bankruptcy.