2023 European leveraged loans outlook

For many investors, 2022 represented the end of the more than decade-long bull run of the 2010s. Rampant inflation, hawkish monetary policies, geopolitical tensions, market volatility and spread decompression were the standout themes. The impact for European loans was a dislocation to yields of c.10%, levels not seen since the early 2010s. For long-term investors, we believe this provides an interesting investment opportunity for a senior secured defensive asset class with typically higher risk-adjusted returns than comparable credit risk asset classes. Here we present our observations on the trends and drivers of the European loan market in 2023.