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Hunting for yield in the direct loan space – part 1 of 2

Morten Christensen, investment management director at the Norwegian family office Aars, tells Expert Investor’s Tjibbe Hoekstra how he is navigating the pitfalls of the direct loan space.


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Christensen currently has “an interest rate duration of 8 or 9 months”, he says. “Already a year or two ago, we believed yields to be very low, so we have had a very low duration for quite some time.”

So where is Christensen finding returns? The Norwegian has allocated a significant chunk of his fixed income portfolio to the direct loan space. But caution is warranted when investing in this area. “When the cycle turns, illiquid products such as direct lending are impossible to sell and put real valuations on,” he says.

Within alternative credit, traded leveraged loans offer the best of both worlds, believes Christensen. “They are a good alternative to the more illiquid direct lending products, offering 6-7% yield with fortnightly liquidity”. 

In part two of this video interview, Morten explains why he prefers to invest in loans issued by large rather than small companies.