Hi guys I was reading WSO technical guide and was wondering why corporate loans are open to institutional investors and corporate bonds are open to the public when it seems like, from the description, corporate loans are much safer due to collateral and seniority. Why is a safer investment tool not available for the public?
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Bonds aren't inherently more or less risky. Loans can be very risky e.g. levered loans. Bonds that are available to the general public tend to be senior and from highly rated issuers. When it comes to seniority and risk that is determined at the individual bond or loan level. Covenant packages determine security and they vary widely.
Also, you have to think of the histories of both products. Loans were traditionally bank-only products, whereas bonds have been, relatively speaking, widely held for well one a century. The non-bank institutional loan market only came into being in the past 40 or so years.
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