Published on: March 24th, 2021 • Duration: 62 minutes
The Broadly Syndicated Loan (BSL) market is relatively new, having been created less than two decades ago. It is also widely misunderstood. So, what exactly makes this market an interesting play? Peter Gleysteen, CEO and CIO of AGL Credit Management LP, joins Real Vision managing editor Ed Harrison to break down how the BSL market has emerged over time, its unique advantages as an asset class, and how to navigate it while maximizing returns. Gleysteen explains that broadly syndicated loans are not securities like investment grade and high yield bonds—they’re loans that are originated by banks, and borrowers range from medium to very large companies that are mostly private. He addresses some of the misconceptions in the BSL market around covenants, leverage, and diversification and how to view them. He also discusses the current macro picture, why BSL issuers are predominantly U.S.-based, and the market’s similarities to and differences from high yield credit.
Key Learnings: Gleysteen offers insight into why broadly syndicated loans are suitable and advantageous for investors with longer time horizons, describing bank loans as an “all-weather asset class”. Presently, fewer than 10% of borrowers have been affected by the pandemic, and most are U.S.-based, which, in a world where the U.S. is outperforming, provides valuable exposure. He also highlights how much more liquid BSLs are relative to similar instruments, emphasizing how they offer stable cash returns. Rather than considering a loan on its own, he advises to pay more attention to properly diversifying BSLs within a portfolio as it minimizes the impact of default and loss rates and provides the means to employ leverage and earn outsized returns