The Power of Floating Rate Credit

12 December 2022

Calendar year 2022 has been a volatile one for global capital markets as a combination of elevated inflation, higher interest rates and geopolitical volatility have roiled markets across the globe, leading to sharp declines for global equities. Within fixed income, traditional investment solutions, long viewed as a ballast for equity price volatility, have not lived up to that expectation, exhibiting double digit declines and undermining the “60/40” portfolio construct. As a result, investors have had to look elsewhere for income-oriented solutions that offer a defensive source of yield. We believe this void can be filled by allocating to portfolios comprised of both public and private floating rate credit. In this piece, we aim to explain how floating rate credit investments can serve as the new ballast, mitigating downside risk, optimizing diversification, and enhancing yield within investor portfolios.