We are often asked what sort of capacity we have to continue what we are doing in the high yield bond and leveraged loan market. While the misconception is that these are small, niche markets, the reality is quite different. Both the high yield and leverage loan market are large, growing, and liquid markets.
First let’s start with a breakdown of the entire fixed income market:
Outstanding U.S. Bond Market ($ Billions)1
So of the entire $38.7 trillion market, nearly a quarter of all bonds outstanding are corporate debt, which includes investment grade, high yield bonds, and leverage loans. Further breaking down the corporate debt market, of the $9.3 trillion, $1.5 trillion of that is high yield bonds2 and $1.3 trillion is leveraged loans3. This means just about 30% of corporate debt outstanding is non-investment grade. Additionally about 30% of all trading volume is also attributed to the non-investment grade market.4
In both the high yield bond and leveraged loan markets, we are seeing record issuance over the past year, with high yield issuance trending above last year’s record level and leverage loans already far surpassing all prior years of issuance, and this is only through the end of the third quarter: 5
So within this liquid, nearly $3 trillion, and rapidly growing market, we see ample capacity to execute our strategy of focusing on generating a high tangible income for our investors, with the potential for capital gains. Additionally, we benefit from the fact that we are not hampered by the constraints that limit access to the entire market for other players in the space. For instance, as we have mentioned before, some of the passive products are limited to investing in tranche sizes above $400mm or $500mm, when in fact is has been in the tranche sizes of $100 to $400mm that we often find some of the best investment opportunities. We look forward to years of growth and continued opportunity to execute our strategy in the high yield bond and leverage loan space.
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