Senior loans are often used simply as a hedge against rising interest rates. But as portfolio manager Joe Welsh points out, their long-term track record demonstrates they offer the potential for attractive income and diversification benefits in a variety of markets.
While senior loans are below-investment-grade debt, many of the companies in this market are large companies and household names. The size and scale of OppenheimerFunds’ senior loan franchise enables it to get access to companies for on-site visits and strong allocations to new loan deals that the portfolio management team deems worthy of investment.
Senior loans are typically lower-rated and may be illiquid investments (which may not have a ready market). Risks associated with rising interest rates are heightened given that rates in the U.S. are at or near historic lows. When interest rates rise, bond prices generally fall, and a fund’s share prices can fall. Fixed income investing entails credit and interest rate risks. When interest rates rise, bond prices generally fall, and a fund’s share prices can fall. Diversification does not guarantee profit or protect against loss.