Investing Ideas

What leveraged loans can do for your portfolio

How the high starting yields of loans could add value even if rates continue to move lower.

By: David Hays Brian Donnelly Nils Bierkamp Jonathan Cain

Updated: 7/1/2025

Key Takeaways

Leveraged loans offer relatively low interest-rate-sensitivity and have generated a positive return for shareholders in 26 of the past 28 years.
It’s true that loans offer floating-rate coupons, which tend to move along with the fed funds rate, although we believe that trying to time the market in this asset class based on what the Fed might do could be a mistake.
Starting yields for loans as of the second quarter of 2025 are the highest of any major fixed income sector at about 8.5%, providing a cushion against potential price declines.
New-issue activity for collateralized loan obligations (CLOs) is running at a fast historic pace so far in 2025 (possibly topping the 2024 record), which we believe provides solid support for the leveraged loan market.

Get the full paper

What leveraged loans can do for your portfolio

Next steps to consider

Fixed Income: Investment Grade

Fixed Income: Investment Grade

Get help giving your clients a more competitive edge with our full spectrum of fixed income investments.

Learn more

High Income: Fixed Income

Fixed Income: High Income

Help meet your clients income and capital appreciation goals head-on with our high-income investment capabilities.

Learn more

Separately Managed Accounts

Separately Managed Accounts

Showcase your value to clients with SMAs, which allow you to offer personalization, tax-efficient investing, and transparency into their portfolios.

Learn more

Related insights

View all

Investing Ideas

Opportunities in bonds

Despite recent volatility, the fixed income outlook looks bright.

Investing Ideas

What leveraged loans can do for your portfolio

How the high starting yields of loans could add value even if rates continue to move lower.

Investing Ideas

What to make of the recent bond market volatility

We’ve seen some unusual behavior amid yields that have been above their historical average.

For important information, see the full linked content.

1144114.2.0

708CA34D016C4541A79638B5B6978604

Past performance is no guarantee of future results.

Unless otherwise expressly disclosed to you in writing, the information provided in this material is for educational purposes only. Any viewpoints expressed by Fidelity are not intended to be used as a primary basis for your investment decisions and are based on facts and circumstances at the point in time they are made and are not particular to you. Accordingly, nothing in this material constitutes impartial investment advice or advice in a fiduciary capacity, as defined or under the Employee Retirement Income Security Act of 1974 or the Internal Revenue Code of 1986, both as amended. Fidelity and its representatives may have a conflict of interest in the products or services mentioned in this material because they have a financial interest in the products or services and may receive compensation, directly or indirectly, in connection with the management, distribution, and/or servicing of these products or services, including Fidelity funds, certain third-party funds and products, and certain investment services. Before making any investment decisions, you should take into account all of the particular facts and circumstances of your or your client's individual situation and reach out to an investment professional, if applicable.

Registered investment products (including mutual funds and ETFs) and collective investment trusts managed by Fidelity Management Trust Company (FMTC) are offered by Fidelity Distributors Company LLC (FDC LLC), a registered broker-dealer. Fidelity Institutional Asset Management (FIAM) investment management services and products are managed by the Fidelity Investments companies of FIAM LLC, a U.S. registered investment adviser, or Fidelity Institutional Asset Management Trust Company, a New Hampshire trust company. FIAM products and services may be presented by FDC LLC, a non-exclusive financial intermediary affiliated with FIAM and compensated for such services.

Before investing have your client consider the funds', variable investment products', exchange-traded products', or 529 Plans' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or a summary prospectus, if available, or offering statement containing this information. Have your client read it carefully.

The use of the term "advisor(s)" throughout this site shall refer to both investment advisors and broker dealers as a collective term.