An active approach: High loan yields signal buying opportunity

The case for loan funds

In two previous articles, we outlined some of the reasons loans are the highest-yielding major fixed income sector, as of 30 September 2019, eclipsing both high yield bonds and emerging markets debt.

Loan yields are also high relative to their own historical returns. Investors who are considering investing in the loan market, or adding to a position, face the question of whether to do so through passive funds (typically ETFs) or through actively managed loan funds. In this final article of the series, we outline Eaton Vance research that suggests a decisive advantage for the active approach. Outperformance The chart below shows that since the first passive loan ETFs were introduced in 2011, the active loan funds in the Morningstar category have consistently outperformed, exce...