20 Jan Voya Senior Loan Group – 2014 Recap and 2015 Outlook
Voya Perspectives Series – Talking Points – Voya Senior Loan Group
Notwithstanding a full year total return that fell short of initial expectations, the global loan market navigated 2014’s choppy waters in reasonably sound fashion. While credit fundamentals remained relatively healthy, overall investor sentiment and, in turn, average loan prices were buffeted by a series of external headwinds. These included, but were certainly not contained to: widely divergent views as to interest rate expectations and the health of the global economy; intensifying geopolitical risk globally; and escalating regulatory pressure on U.S. financial markets.
Adding a little extra drama to the equation was the post-Thanksgiving oil spill, and despite the loan market’s significant underweight to energy as compared to high yield bonds (4-5%, vs. 15-17%), loans were pressured by the stress and sell-off in both high yield and equities. As a result, the S&P/LSTA Leveraged Loan Index (the “Index”) returned 1.60% for the year. The final number was not what we and other managers were envisioning, but it was still in the black, marking another positive annual episode for an asset class with only one negative year in its recorded history (i.e., the watershed year of 2008).