AgPa #45: Factor Investing in Private Debt

Investing with Style in Liquid Private Debt (2022)
Thomas Mählmann, Galina Sukonnik
Financial Analysts Journal 78(3), URL

This week’s AGNOSTIC Paper is yet another out-of-sample test of the Momentum and Value factor. The authors apply the factors within the relatively new asset class of private debt. More specifically, for “[…] loans to non-investment grade issuers, commonly known as leveraged loans.” This is obviously not my main area of expertise, but I learned from the paper that there is quite some trading of such loans in private secondary markets. Implementing a factor strategy for leveraged loans is obviously more complicated than for equities, but this is exactly what makes this study so interesting.

  • Private debt improves multi-asset portfolios
  • Value and Momentum are profitable within private debt

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