Secured loans, essentially debt originated by banks to finance ventures such as private equity sponsored leveraged buyouts (LBOs), have become increasingly attractive to investors as security for the lender has improved at the same time as the return on offer has risen. Secured loans also present a higher expected recovery rate than high-yield bonds in the event of default and are secured by the operating assets of the borrowing company, according to the Alcentra study. Consequently the study concluded that volatility in the secondary market is lower for secured loans than for high yield bonds even though both forms of debt are issued by similar sorts of businesses. "Loans are a floating rate asset class and will therefore be less sensitive to rises in interest rates than high yield bonds," said Simon Perry, co-author of the study and Head of EMEA Business Development at Alcentra.