Loan market opens up to new investors
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Loan market opens up to new investors

The growing involvement of institutional investors in leveraged loans is bringing liquidity and transparency to markets traditionally seen as clubby and opaque. As an asset class, leveraged loans have a lot going for them - despite the current dearth of supply. But there is still a lot of work to be done.

       
Loan market opens up to new investors

When the $150 billion California Public Employees' Retirement System (Calpers) pension fund moves into a new asset class, the rest of the world tends to sit up and take notice. So it was when, last December, Calpers announced that it was allocating $1.5 billion to five carefully screened high-yield fund managers.

Four of the five - Shenkman Capital Management, Pimco, Nomura Asset Management and ING Ghent Asset Management - were given mandates to invest in high-yield bonds.

But the fifth mandate - to Highland Capital Management - marked a step into the unknown.

The Texas-based fund manager was awarded $300 million to invest in leveraged loans, marking the first involvement by a US public pension fund in the bank loan market.

One year earlier, in December 2000, the Ontario Teachers' Pension Plan had become the first public pension fund in North America to invest in leveraged bank loans.

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