Table of Contents
As the investing landscape evolves and interest rates continue to hover at near-record lows, it’s important to consider alternative asset classes that may help investors reach their financial goals. One such asset class growing in popularity among the retail investing community is senior loans.
Are senior loans leveraged loans?
Senior loans—also referred to as leveraged loans or syndicated bank loans—are loans that banks make to corporations and then package and sell to investors.
Is loan an asset class?
Like any risky asset class, if we get a macro event or shock to the system, loans will trade down. The good news is that loans, by the virtue of their design, have traditionally been less volatile than other risky assets like high-yield bonds.
Is private debt an alternative investment?
Figure 2: Development in outstanding bank loans (to non-financial businesses) Private debt is the third largest alternative asset class globally, after private equity and direct real estate. [1] Investments in this category can provide a higher return than liquid bonds.
What is a senior loan in real estate?
Senior debt is borrowed money with precedence over any other debts owed by an issuer. It takes priority for repayment if the company goes out of business or needs to sell the property. If the issuer becomes insolvent, it has to pay back this debt before other creditors receive any payment.
Are senior loans a good investment?
Senior loans are a great way to add a layer of diversification to an investment portfolio. As an asset class, senior loans typically have low historical correlation to other asset classes. Correlation measures how different investments react to the same market conditions.
What is senior leverage?
“Senior Leverage Ratio” shall mean the ratio of Senior Debt of the Parent and its Subsidiaries on a consolidated basis to EBITDA for the twelve (12) month period most recently ended.
What is alternative asset class?
Alternative assets are less traditional and more unexpected investment options. Alternative asset classes include commodities, real estate, collectibles, foreign currency, insurance products, derivatives, venture capital, private equity, and distressed securities.
What asset class are loans?
At Mintos, we’re making loans an accessible asset class for regular investors on a truly global scale. In this article, let’s take a look at how loans can complement ‘traditional’ investment asset classes like stocks and bonds in any investors’ portfolio.
What are the 3 types of assets?
Different Types of Assets and Liabilities? Assets. Mostly assets are classified based on 3 broad categories, namely – Current assets or short-term assets. Fixed assets or long-term assets. Tangible assets. Intangible assets. Operating assets. Non-operating assets. Liability.
Are options alternative investments?
Investors can buy and sell commodities directly on the stock market or via derivatives such as futures and options. Commodities are another great alternative investment because they’re one of the few asset classes that actually benefit from inflation.
What is considered distressed debt?
Distressed debt is debt that belongs to companies or government entities that are struggling financially. These entities may be in bankruptcy or in danger of having to file bankruptcy because their financial obligations are too great.
What asset class is private debt?
Debt strategies were previously a sub-category of private equity investing, becoming an established asset class in its own right post-crisis.
Why do banks issue senior debt?
Senior debt is generally funded by banks. The banks take the lower risk senior status in the repayment order because they can generally afford to accept a lower rate given their low-cost source of funding from deposit and savings accounts. Conversely, unsecured debt is not backed by an asset pledged as collateral.
Are bonds senior debt?
Loans and bonds can be issued as senior debt or subordinated debt. Senior debt is repaid first if the borrower encounters a default or liquidation. It is usually secured debt with collateral; however, it can also be unsecured with specific provisions for repayment seniority.
What are US senior loans?
A refresher on US senior loans Simply put, senior loans are floating-rate notes issued by companies with high financial leverage. They are also referred to as leveraged or syndicated loans. Loan coupons adjust periodically based on changes in short-term interest rates.
What is a floating-rate senior loan?
By definition, senior floating rate loans are debt instruments made by banks and other financial institutions to large corporations that feature a variable interest rate that is tied to a market reference rate and adjusted periodically.
What is Senior loan ETF?
OVERVIEW. Fund Information. Pacific Global Senior Loan ETF seeks to provide a high level of current income. FLRT invests primarily in floating-rate loans of non-investment-grade companies. These investments can serve as both an income driver and a hedge against rising interest rates.
What is a senior unsecured loan?
Senior Unsecured Loan . Any Assignment of or Participation in or other interest in a loan that is not subordinated in right of payment and is not a Senior Secured Loan. Senior Unsecured Loan means a Loan (which is not a Senior Secured Loan) that is senior to any unsecured, subordinated obligation of an Obligor.
What is senior debt on a balance sheet?
Senior Debt, or a Senior Note, is money owed by a company that has first claims on the company’s cash flows. It is more secure than any other debt, such as subordinated debt (also known as junior debt), because senior debt is usually collateralized by assets.
Is senior unsecured debt subordinated?
Senior Unsecured Debt means indebtedness for borrowed money that is not subordinated to any other indebtedness for borrowed money and is not secured or supported by a guarantee, letter of credit or other form of credit enhancement.
What is a senior secured debt?
Senior secured loans are debt obligations generally issued by non-investment grade businesses. These loans are usually “secured” by a company’s assets, and are typically used to fund a company’s growth or cover general operating expenses.
What counts as alternative assets?
Introduction to Alternative Assets Alternative assets typically refer to investments that fall outside of the traditional asset classes commonly accessed by most investors, such as stocks, bonds, or cash investments.
What are examples of alternative assets?
An alternative investment is a financial asset that does not fall into one of the conventional equity/income/cash categories. Private equity or venture capital, hedge funds, real property, commodities, and tangible assets are all examples of alternative investments.
Which of the following is a typical characteristic of alternative assets?
Characteristics common to many alternative investments, when compared with traditional investments, include the following: lower liquidity, less regulation, lower transparency, higher fees, and limited and potentially problematic historical risk and return data.
