Scott Caraher, Head of Senior Loans, Nuveen joined Julie Cooling, Founder & CEO, RIA Channel to discuss the state of the market and why advisors should consider senior loans now.
As inflation surges on and rate hikes are imminent, advisors look to protect their portfolios from duration risk. “Loans are the one fixed income asset class that have zero duration,” explains Caraher. In times of rate sell-offs, senior loans have outperformed duration-sensitive asset classes, like investment grade bonds. While senior loans provide the potential for attractive yields and diversification benefits, Cahaher cautions that not all senior loans are created equally. Over the last five years, the quality of the loan asset class, as a whole, has deteriorated. Caraher encourages advisors to look under the hood and understand the overall risk profile of a loan strategy before allocating purely based on duration benefits.
Nuveen’s senior loan investment strategy is guided by an integrated, top down approach to research and due diligence. The Nuveen senior loan research team also covers a range of asset classes including high yield, structured credit and hedge funds, and seeks opportunities on both the long and short side. This differentiated, holistic approach allows analysts to focus up and down the capital structure, and really be predictive around which sectors and companies are more likely to experience downside volatility.
Scott Caraher is head of senior loans and responsible for retail and institutional bank loan-focused portfolio management and co-PM on the firm’s Long-Short Credit Strategy. When Caraher joined Nuveen affiliate Symphony Asset Management in 2002, he was a gaming and industrials analyst providing long and short credit ideas to the investment team up and down the capital structure. Caraher began trading loans for the platform in 2003 and in 2005 was named an associate portfolio manager on the firm’s loan strategies. He became the lead portfolio manager on the firm’s loan strategies in 2008. Prior to joining the firm, Caraher was an investment banking analyst in the industrial group at Deutsche Banc Alex Brown in New York. Caraher graduated with a B.S. in Finance from Georgetown University.
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