Bridge over ocean
23 June 2022 Financial Analysts Journal Volume 78, Issue 3

Investing with Style in Liquid Private Debt

  1. Thomas Mählmann
  2. Galina Sukonnik, CFA
  3. Sina Ehsani
Analysis of syndicated leveraged loans shows that exposures linked to short-term momentum and valuation styles are well compensated. Active credit managers with momentum- and value-neutral trading strategies neglect a source of additional return.
Read the Complete Article in the Financial Analysts Journal CFA Institute Member Content


This paper extends the analysis of systematic investment approaches to broadly syndicated leveraged loans. We find that exposures linked to (short-term) momentum and valuation styles (and a combination thereof) are well-compensated: monthly rebalanced long-only portfolios of high value and momentum loans generate Sharpe and information ratios well above one and economically and statistically significant alphas. Factor portfolio performance deteriorates but remains significant over longer investment horizons. An important implication of our research is that active credit managers employing loan trading strategies that are momentum- and value-neutral do not make use of a viable source of additional return.

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