The leveraged loan market continues expanding, supported by robust index frameworks and ETF wrappers that enhance accessibility and liquidity. Frans Scheepers at S&P Dow Jones Indices details the S&P USD Select Leveraged Loan Index, a curated subset focused on liquidity with a $500m minimum loan size, three-month observation for consistent trading, and liquidity scores above two for at least 50% of days. Caps limit concentration: 2% per loan, 5% per issuer, 15% per industry.

The broader S&P/UBS family, integrating prior Credit Suisse and iBoxx indices, covers more than 2,000 products and $1.6tn in market cap, backed by premium data from S&P Global sources. This ecosystem supports major ETFs, active strategies, and total return swaps trading over $30bn in 2024, with growth expected in 2025.

Marcel Benjamin at State Street Investment Management explains leveraged loans' appeal: high income potential, near-zero correlation to core bonds, senior secured status for resilience in stress, and floating rates that buffered volatility. Loans posted minimal losses in 2022 while aggregate bonds fell double digits, delivering strong yield per unit of volatility.

ETFs provide efficient exposure with daily transparency in pricing and holdings, suiting loans' access challenges. State Street Investment Management's expertise in below-investment-grade fixed income underpins these strategies.

Liquid indices and ETF structures position leveraged loans as a durable income diversifier amid rate and credit dynamics.

Source: Video - Exploring an Index-Based Path to Leveraged Loans