Institutional investors tend to have long-term investment horizons which reflect their long-term portfolio objectives. Therefore, we believe that it is important to review long term returns across asset classes when considering allocations to sub-IG credit. In this analysis we compared historical sub-IG credit to public equity and evaluated the differences between loans and high yield bonds.
Please note: this research was updated in January 2024 with the new version available here.
Our analysis uncovered 3 reasons as to why it may make sense to have a long-term allocation to sub- IG credit
- Over rolling 3-year holding periods, sub-IG credit rarely exhibits negative returns and exhibits far lower volatility than public equities, which is particularly attractive during crises such as the Global Financial Crisis (GFC)
- Longer holding periods significantly reduce how often negative return outcomes occur in sub-IG credit
- Entry points matter and today’s credit spreads signal attractive prospective returns
Our findings are drawn from the analysis provided in the full PDF.