This strategy invests in bank loans that are typically secured and have a floating rate structure—which can be particularly appealing when interest rates are trending up. Also know as leveraged loans, bank loans are the most senior part of a company’s capital structure, and can offer you the most investment protection .
Why choose this investment strategy?
Our team of high yield portfolio managers and analysts averages nearly two decades of industry experience. They manage our Bank Loans strategy, which can offer several benefits:
• A blended investment approach: Rooted in fundamental security selection, we go beyond typical bottom-up high yield asset class investing to incorporate key macroeconomic factors that have potential to drive performance. Using our internal framework that focuses on fundamental, technical, and relative value research, we’re able to take a forward-looking view and identify investment choices that strictly bottom-up managers might miss.
• An integrated, specialized team: Our high yield team doesn’t operate in a vacuum—they’re an integrated part of our broader Principal Global Fixed Income credit team. Our shared insights and specialized knowledge allow us to invest across the capital structure, in bonds and loans, offering diversified portfolios that can be customized to your investment needs and goals.
• Explicit risk controls: We use pre-set security and portfolio risk controls, and define clear exit strategies before investing in a credit. These dynamic risk measures allow us to help limit risk when needed, and increase risk when warranted.
Where Bank Loans invests:
The strategy leverages our high-yield research process to identify companies that have a positive fundamental outlook. We typically invest in larger, more-liquid entities that have fully developed capital structures (both loans and bonds). If we have unique insight into smaller entities , we will invest in those companies as well.
Our investment style is deeply rooted in fundamental research, which drives our decision-making process. Using our proprietary FTV (fundamental, technical, and valuation) research framework, we create a stable, repeatable, and unemotional investment foundation that delivers portfolios for up and down markets .