Loans: A Tactical Investment Opportunity

“At Insight we believe that senior loans in Europe will return 5% in 2014 despite tightening spreads across most credit markets, with the benefit that loans are typically senior in the capital structure with a higher implicit
credit rating.

“This is an investment opportunity that has arisen due to the hunt for yield across asset classes and many investors lacking the specialist expertise to access the loan market. Five years on from setting up the fund, the asset class remains as relevant as ever,” says Singh Lakhpuri.

The appeal of loans is likely to increase as investors anticipate the normalisation of monetary policy. Loans are floating rate products, meaning that the interest they pay intermittently resets with market rates, thus offering some protection against rising interest rates. The Insight Loan Fund is benchmarked against three-month Libor and targets absolute returns.

The Fund has returned an annualised 6.0% in the last three years compared to 0.7% for three-month sterling Libor, with a one year return of 6.3% vs. 0.5% for three-month sterling Libor. These returns have been produced with exceptionally low volatility with a Sharpe ratio of 2.4 vs. 1.6 for the Credit Suisse Institutional Western European Leveraged Loan Index (“CS Loan Index”) over the three-years to 31 December 2013 proving the strong risk-adjusted performance of the fund.