Syndicated loans, which are organised by groups of banks to finance large companies for activities such as mergers, acquisitions, buyouts, or recapitalisations, provide senior secured, first lien exposure at a floating rate. This floating rate mechanism is particularly attractive as it limits downside risk, a feature that Quin believes is crucial in today’s volatile market environment.

"Credit selection is critical," Quin emphasises. "You must be highly diversified, but you also have to avoid the losers. That requires deep research and a network of experienced managers in this asset class." The importance of diversification and careful credit selection cannot be overstated, especially when dealing with loans that are part of a market trading billions of dollars daily.

Bentham Asset Management's approach to managing syndicated loans is embodied in their Bentham Syndicated Loan Fund. This fund is designed with a diversified portfolio structure spread across various industries and issuers, which is central to managing credit risk. This strategy offers Australian investors a rare chance to access an institutional market that trades between three to four billion dollars a day, providing both diversification and liquidity.

Unlike the private debt market, syndicated loans are daily priced and actively traded, offering investors a level of liquidity that is rarely available in comparable credit strategies. This liquidity feature is a significant advantage for investors who may need to adjust their portfolios swiftly in response to market changes.

The management of Bentham's syndicated loans is handled by their SIG team, a well-established group since 1997. The team comprises 70 investment professionals based in New York and London, covering approximately 800 corporate issuers across the US and European markets. This extensive network and expertise are critical in navigating the complexities of the syndicated loan market.

For investors focused on income, including retirees, the Bentham Syndicated Loan Fund offers a track record that speaks for itself. Over more than 22 years, the fund has delivered a consistent income stream, with returns approximating 7.5 per cent per annum before fees. Currently, it yields around 9.1 per cent, with monthly distributions paid consistently for over 15 years.

"This investment suits investors seeking a return above bank bills without fixed rate exposure," Quin notes. "They are taking the current bank bill rate and adding a credit risk premium, and that gives them a higher income." This statement underscores the fund's appeal to those looking to enhance their income without exposing themselves to the risks associated with fixed-rate investments.

The appeal of syndicated loans lies not only in their potential for high returns but also in their structure, which provides a buffer against interest rate fluctuations. This is particularly relevant in the current economic climate, where interest rates are a significant concern for investors.

In summary, syndicated loans offer Australian investors a unique opportunity to diversify their portfolios while enjoying a dependable income stream. With the expertise of Bentham Asset Management and their seasoned SIG team, investors can navigate this complex market with confidence. As Quin aptly puts it, the combination of a floating rate structure, expert credit selection, and a diversified portfolio makes syndicated loans an attractive option for those seeking both income and stability in their investments.