June 2022

Floating Rate Update

Despite a poor performance in May, we view the floating-rate loan asset class—the shining star within corporate credit so far this year—as appealing, providing potential for price appreciation, as well as a compelling yield profile.

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As we approach mid-year, the floating-rate loan asset class has been the best performing asset class within corporate credit in 2022,supported by robust retail inflows and strong fundamentals. The asset class held strong for the first four months of the year (excluding a short stint in March that fully recovered in short order), offering investors a hedge from rising rates and an attractive yield profile. In May, the asset class finally experienced weakening. We view the causes of this weakening to be more ancillary effects of sympathetic selling by investors, capital raises to meet cash needs, and some repositioning further out on the risk spectrum.  We still view the floating-rate loan asset class as appealing, providing potential for price appreciation, as well as a compelling yield profile.