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Investing with Style in Liquid Private Debt

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  • Thomas Mählmann
  • Galina Sukonnik

Abstract

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.

Suggested Citation

  • Thomas Mählmann & Galina Sukonnik, 2022. "Investing with Style in Liquid Private Debt," Financial Analysts Journal, Taylor & Francis Journals, vol. 78(3), pages 94-114, July.
    • Handle: RePEc:taf:ufajxx:v:78:y:2022:i:3:p:94-114
    DOI: 10.1080/0015198X.2022.2085017
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