Leveraged Loans
Leveraged Loans
Leveraged loans are a form of senior secured corporate debt issued by companies rated below investment grade. These loans are typically arranged by a group of banks which syndicate and distribute the debt to institutional investors.
As senior secured instruments, leveraged loans rank ahead of unsecured creditors in the capital structure and are generally backed by collateral. Most leveraged loans carry floating interest rates, making the asset class less sensitive to changes in interest rates than traditional fixed-rate bonds.
Mandatum Senior Secured Loan Fund
Mandatum’s Senior Secured Loan Fund offers a defensive, income-oriented allocation within credit, positioned between public and private markets. The strategy provides floating-rate, short-duration (lower interest rate sensitivity) exposure through an open-ended liquid structure.
The fund invests primarily in senior secured loans and combines strong in-house credit selection with a focus on generating stable income while preserving capital through investments in high-quality companies.
Designed for institutional investors, the strategy complements traditional high yield bond allocations by enhancing underlying asset diversification, senior secured protection and interest rate risk mitigation.
About the asset class
The European leveraged loan market has developed significantly since the early 2000s, becoming a well-established institutional asset class. Its growth has been driven by the expansion of private equity activity, as leveraged loans remain a primary source of financing for leveraged buyouts and other acquisition-driven transactions. Alongside the broadly syndicated loan market, a meaningful share of issuance takes place through smaller, relationship-driven structures such as club deals and private debt arrangements. This has created a diverse and expanding investment universe that is not fully covered by traditional fixed income instruments.
For institutional investors, leveraged loans offer access to a large and growing segment of corporate credit, combining floating-rate characteristics with structural seniority in the capital structure. The market depth, diversification, ongoing primary deal flow and secondary trading provide a broad opportunity set for active credit investors.
2025: Positive returns, yet below expectations as asset dispersion widens and coupons reprice
European leveraged loans delivered a year of contrasts in 2025. Strong and opportunistic issuance, amid supportive technicals, led to record repricings alongside extensions, recapitalisations and increased M&A activity. At the same time, asset dispersion contributed to price consolidation, offsetting some of the still-attractive coupon carry and reinforcing the growing importance of credit selection. Looking ahead to 2026, we remain constructive: coupon carry has compressed but remains above long-term averages, credit fundamentals are overall benign, and technicals and dispersion continue to offer credit-picking opportunities to drive relative performance.
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