The Melbourne-based Catholic Super has awarded over $70 million to a local manager of global syndicated loans.
The recipient is the wholesale syndicated loan fund of Bentham Asset Management, made up of former Credit Suisse Asset Management executives whose fixed income business was spun out into a Challenger-backed boutique last year.
The managing director of Bentham AM, Richard Quin, said returns from syndicated loans had picked up on tightening credit spreads and recovery in the US corporate sector, which is “under-banked” in comparison to Australia and therefore more reliant on these floating-rate, senior-secured notes.
Bentham’s syndicated loans fund, which is hedged into $AUD, returned 16 per cent last calendar year against 13.95 per cent for its benchmark, the Credit Suisse Leveraged Loans index. Quin said despite the low LIBOR base of the US loans which make up the majority of the portfolio, swaps into Australian dollars were able to deliver a runnng yield closer to this country’s 5 per cent-plus cash rate.
Quin said super funds were using syndicated loans as a low-risk, income-producing way of protecting against inflation, given the notes were floating rate, and high enough up the capital structure to rate comparably with national taxation offices, Quin said.
A downside of the loans was that they were “callable”, meaning borrowers could refinance at a lower rate, in which case investors were repaid.