Yield opportunities
Credit investments such as bank loans and distressed securities have been touted as attractive investments for yield-seeking investors.
Sources: Fitch Ratings Ltd.; Bloomberg LP; EDHEC-Risk Institute; Preqin Ltd.
Leveraged loan issuance was up 50.4% in 2011, driven largely by borrowers looking to refinance and extend loan maturities. Despite the increase, issuance was down 18% from its '07 high.
Recovery rates for defaulted loan issues have increased to almost 60% from a near-term low of 34% in 2009.
Monthly returns for distressed securities hedge funds feature a greater distribution of losses than bank loans. During the past three years, hedge funds had monthly losses in 10 months, compared to bank loans, which had losses in six months.
Distressed private equity returns by vintage year demonstrate the cyclical nature of the asset class and its dependence on downturns to produce strong returns.
