Investing Ideas

What leveraged loans can do for your portfolio

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

By: David Hays Brian Donnelly Nils Bierkamp Jonathan Cain

Updated: 5/2/2024

Key Takeaways

Leveraged loans offer relatively low interest-rate-sensitivity and have generated a positive return for shareholders in 25 of the past 27 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 2024 are the highest of any major fixed income sector at about 10%, providing a cushion against potential price declines.
New-issue activity for collateralized loan obligations (CLOs) so far in 2024 is running at its highest pace ever, 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

1153190.1.0

708CA34D016C4541A79638B5B6978604

Past performance is no guarantee of future results.

Information provided in, and presentation of, this document are for informational and educational purposes only and are not a recommendation to take any particular action, or any action at all, nor an offer or solicitation to buy or sell any securities or services presented. It is not investment advice. Fidelity does not provide legal or tax advice.

Before making any investment decisions, you should consult with your own professional advisers and take into account all of the particular facts and circumstances of your individual situation. Fidelity and its representatives may have a conflict of interest in the products or services mentioned in these materials because they have a financial interest in them, and 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.

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.