Dan McMullen and Adam Dwinells, Senior Managing Directors of Blackstone Credit & Insurance (“Blackstone”), joined Keith Black, Managing Director of RIA Channel, to discuss developments in the credit markets.
The high yield bond and broadly syndicated loan markets are each valued around $1.4 trillion with similar levels of credit risk and long-term default rates. While high yield bonds are typically fixed-rate assets in the unsecured portion of the capital structure, broadly syndicated loans are floating-rate loans collateralized by the issuer’s assets. Due to their floating-rate nature, loans tend to have a lower correlation to broader fixed-income markets.
Blackstone offers two ETFs in conjunction with SSGA. The SPDR(R) Blackstone Senior Loan ETF (SRLN) invests in first lien, senior secured bank loans. The SPDR(R) Blackstone High-Income ETF (HYBL) invests in high yield bonds, senior loans, and debt tranches of US CLOs. The asset allocation of HYBL dynamically changes based on the market outlook, seeking to outperform a benchmark equally weighted in loans and bonds. The market outlook and tactical positioning is discussed at monthly internal meetings known as Blackstone’s Credit Markets Forum. In October 2024, Blackstone notes the additional yield that can be earned in loans shows relative value over bonds.
Credit fundamentals in the US market remain strong, with high yield bonds returning 8% and loans returning 6.5% year-to-date as of September 2024.1 Recent default rates of 3.7% for loans and 1.6% for high yield bonds are manageable, against a backdrop of relatively healthy corporate balance sheets.2
New debt issuance and M&A activity are likely to remain at lower levels at least until the election uncertainty has subsided. Loan prices continue to be supported by demand from CLOs, which comprise approximately 70% of the buyer base.
While the market seems strong, Blackstone is maintaining a relatively defensive portfolio positioning, focused on companies with conservative leverage and strong cash flow prospects. HYBL and SRLN are the only vehicles available for investors to access Blackstone’s credit offerings via ETFs.
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Footnotes
1 Source: Morningstar LSTA US Leveraged Loan Index, ICE BofA US High Yield Constrained Index (HUC0). Loan returns as of September 30, 2024. High yield bond returns as of September 30, 2024
2 JPM Default Monitor, October 2, 2024. JPM Default rate represented by LTM par-weighted default rate. (1) Includes Distressed Exchanges, which is defined as “when an issuer exchanges its debt for an amount lesser than its par amount”.
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10/31/2025