Historical data suggests that bank loans offer low correlations with other fixed income asset classes, but that as diversifiers they are not as strong as the Barclays Capital . Aggregate Bond Index relative to equity-linked asset classes (see Exhibit 2a). Furthermore, the return and standard deviation figures for bank loans move more closely with those for high-yield bonds. These results make sense: bank loans are below-investment-grade instruments, and Barclays Capital . Aggregate Bond Index constituents are investment- grade bonds. Bank loans’ low correlations with most fixed income indexes should not come as a huge surprise. The duration of the Credit.
