RIA Channel Webinar | Bank Loans: The Overlooked Asset Class Delivering High Income with Low Volatility

In this webinar replay, Polen Portfolio Manager, John Sherman and Senior Investment Specialist, Dave Levine, CFA discuss insights and a fresh perspective on bank loans and how they provide high income generation and strong diversification potentials for client portfolios or a client’s fixed income allocation.

Important Disclosures

This video has been prepared by Polen Capital without taking into account individual objectives, financial situations or needs. As such, this video is for informational purposes only and is not to be relied on as, legal, tax, business, investment, accounting, or any other advice. Recipients of this video should seek their own independent financial advice. Investing involves inherent risks, and any particular investment is not suitable for all investors; there is always a risk of losing part or all of your invested capital.

Indices Referenced:

The ICE BofA U.S. High Yield Index is a broad high yield index that tracks the performance of U.S. dollar-denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The S&P UBS Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. The Morningstar LSTA US Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. The Bloomberg U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. The Bloomberg U.S. Intermediate Treasury Index measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury with maturities of 1 to 9.9999 years. The J.P. Morgan EMBI Global tracks total returns for US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds. Lincoln Senior Debt Index tracks the fair market value of 1,600 middle market, direct lending credit investments every quarter across approximately 175+ fund clients in the U.S. and Europe. The Russell 2000 Index tracks U.S. small-cap stocks and is made up of the bottom 2,000 stocks in the Russell 3000 index. The Wilshire 5000 Index (FTW5000) is a broad-based market capitalization-weighted index that seeks to capture 100% of the United States investible market.. The MSCI World Index tracks large and mid-cap exposures across 23  Developed Market countries and captures approximately 85% of the free float-adjusted market capitalization in each country. The Bloomberg U.S. Mortgage-Backed Securities Index tracks fixed-rate agency mortgage-backed pass-through securities guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). The FTSE NAREIT Equity REIT Index tracks the performance of the U.S. REIT industry. The ICE BofA 10-Year U.S. Treasury Index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of approximately 10 years. 

The benchmark and index data presented herein is used for comparative purposes only. These indices do not bear any fees and expenses and do not reflect the specific investment restrictions and guidelines of a portfolio managed by Polen Capital. An investor cannot directly invest in such indices, and therefore the index returns are comparable to the returns calculated on a fully gross, and not net, basis. 

Definitions:
Average Blended Yield: Average blended yield is the weighted average of (i) for instruments priced at or above par, yield to worst for bonds and yield to three year take out for loans, and (ii) for instruments trading at a discount, yield to maturity. Yield to worst is the lowest possible yield from owning a bond considering all potential call dates prior to maturity and is the statistic provided for the index as it is comprised of high yield bonds only. Yield to three year take out is the yield from owning a senior bank loan assuming the loan is retired in three years or yield to maturity if the loan’s maturity date is in less than three years. 
Correlation: Correlation is a statistic that measures the degree to which two securities move in relation to each other.
Credit Rating: An evaluation of the creditworthiness of a borrower or issuer (e.g., a corporation, government, or financial instrument) based on its ability to meet financial obligations and repay debt. Credit ratings are assigned by independent agencies, such as Moody’s, S&P Global Ratings, and Fitch Ratings, using standardized criteria to assess factors like financial stability, debt levels, and payment history. Credit ratings range from high grades (e.g., AAA) for low-risk borrowers to lower grades (e.g., CCC) for high-risk borrowers.
Credit Spread: The difference in yield between a corporate bond (or other debt instrument) and a comparable risk-free government bond, reflecting the perceived credit risk of the issuer. An issuer is a legal entity that issues financial instruments to generate income to fund operations. Issuers are corporations, investment trusts, or domestic or foreign governments. 
Default: The failure of a borrower to meet legal obligations of debt repayment, such as missing interest or principal payments on a loan or bond.
Discount Margin (DM): A measure of the average expected return of a floating-rate security above the reference rate (such as LIBOR or SOFR), expressed in basis points, over its expected life.
Discount Margin (DM) to 3-Year Takeout: The discount margin calculated under the assumption that the loan will be repaid or refinanced in 3 years, not at final maturity.
Great Financial Crisis: The global financial crisis of 2007–2008, a severe period of economic instability triggered by the collapse of the U.S. housing market and excessive risk-taking in the financial system.
Effective Duration: A measure of a portfolios interest-rate sensitivity; the longer a fund's duration, the more sensitive the portfolio is to shifts in interest rates. Duration is determined by a formula that includes coupon rates and bond maturities. 
Floating Rate: Reflects debt instruments that carry floating interest rates. A floating interest rate changes periodically, as opposed to a fixed (or unchanging) interest rate, and follow an index or track another benchmark interest rate.
Option-Adjusted Spread (OAS): The yield spread of a fixed income security over a risk-free benchmark, adjusted to account for the value of any embedded options, such as the ability to call or prepay.
S&P UBS Leveraged Loan Index Yield to 3-Year Takeout: For the index, this is the weighted average yield to three-year takeout, based on the market value weights of the underlying constituents. Yield to three-year takeout is the yield from owning a senior bank loan assuming the loan is retired in three years or yield to maturity if the loan’s maturity date is less than three years.
Sharpe Ratio: The ratio describes how much excess return you receive for the extra volatility you endure for holding a riskier asset.
Standard Deviation: A measure of the average deviations of a return series from its mean; often used as a risk measure.
Yield to Worst: A measure of the lowest possible yield that can be received on a bond that fully operates within the terms of its contract without defaulting. The metric calculates the yield using the earliest retirement date.

Important Information about Polen Capital Floating Rate ETF (PCFI) and Polen Capital High Income ETF (PCHI):

A Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectus contains this and other important information about the investment company, and it may be obtained by calling 1-888-426-7515 (Polen Capital). Read it carefully before investing.

ETF Risks: Investing involves risk. Principal loss is possible. The Funds are exposed to certain risks such as its shares trading at a material discount to NAV as a result of its structure as an ETF. Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. A commission may apply when buying or selling an ETF.

The Polen Capital Floating Rate ETF (PCFI) and Polen Capital High Income ETF (PCHI) are distributed by Foreside Funds Distributors LLC.

No statement herein should be interpreted as an offer to sell or the solicitation of an offer to buy any security (including, but not limited to, any investment vehicle or separate account managed by Polen Capital). This presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. 

Unless otherwise stated in this presentation, the statements herein are made as of the date of this presentation, and the delivery of this presentation at any time thereafter will not create any implication that the statements are made as of any subsequent date. Certain information contained herein is derived from third parties beyond Polen Capital's control or verification and involves significant elements of subjective judgment and analysis. While efforts have been made to ensure the quality and reliability of the information herein, there may be limitations, inaccuracies, or new developments that could impact the accuracy of such information. Therefore, this presentation is not guaranteed to be accurate or timely and does not claim to be complete. Polen Capital reserves the right to supplement or amend this content at any time but has no obligation to provide the recipient with any supplemental, amended, replacement or additional information.

Any statements made by Polen Capital regarding future events or expectations are forward-looking statements and are based on current assumptions and expectations. Such statements involve inherent risks and uncertainties and are not a reliable indicator of future performance. Actual results may differ materially from those expressed or implied.

There is no assurance that any securities discussed herein are currently held in a Polen Capital portfolio nor that they are representative of the entire portfolio in which they are or were held. It should not be assumed that any transactions related to the securities discussed herein were (or will prove to be) profitable or that any future transactions will equal the investment performance of the securities discussed herein. 

Past performance is not indicative of future results.

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