An Attractive Income Option for a Strategic Allocation

Transcription

1 An Attractive Income Option for a Strategic Allocation Voya Senior Loans Suite A strategic allocation provides potential for high and relatively steady income through most credit and rate cycles Improves the diversification potential of the fixed income portion of client portfolios One of the world s largest, most experienced senior loan teams A pure-play loan fund that typically has no allocations to other asset classes - helps to keep duration risk low, asset allocation efficient, and risk exposures clear and transparent Not FDIC Insured May Lose Value No Bank Guarantee I N V E S T M E N T M A N AG E M E N T

2 Meet the Managers Two Ways to Invest in Senior Floating Rate Loan Portfolios The Voya Senior Loan Group offers two distinct senior loan portfolios to match differing investor needs and preferences. Dan Norman Portfolio Manager 3 years experience Jeff Bakalar Portfolio Manager 30 years experience Voya Floating Rate Fund Typically invests 00% in senior secured, floating rate loans with little to no cash allocation No leverage Suitably diversified across industry sectors and individual issuers Daily subscriptions, daily redemptions and monthly dividend Senior loans seek to perform well in most interest rate environments, so they may be a great complement to fixed income investments, particularly in a rising rate environment. Dan Norman Voya Senior Loan Suite Fund Share Class Ticker Symbol Floating Rate Fund Class A IFRAX Class I IFRIX Senior Income Fund Class A XSIAX Class I XSIIX Summary: Senior loans seek to pay a relatively high rate of income in all market environments and complement fixed income portfolios because they tend to hold their value when rates rise. Voya has one of the industry s largest dedicated teams, which focuses on diversification, liquidity, and appropriate monitoring and risk management practices at all points in the investment cycle. Voya employs an extensive fundamental credit review process that utilizes all company information available, including detailed operating information that can support better decision making, particularly during periods of credit stress. Morningstar Ratings and Rankings as of 03/3/6 Morningstar Category 3 Year 5 Year 0 Year Overall Class A LW* Inception Date 08/7/0 Class I Inception Date 08/7/0 Bank Loan Bank Loan 42/22 7/22 25/5 6/5 N/A N/A out of 22 out of 22 Past performance does not guarantee future results. *Ratings and other statistics for load-waived Class A shares of the mutual fund reflect the investor experience for those investors who do not pay the fund s front-end sales load. Load-waived shares are typically only available through advisory accounts and may not be available to all investors. Rankings for other share classes may be lower due to inclusion of fees in performance rankings. For additional share class information, please visit For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 0% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 0% receive star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its 3-, 5- and 0-year (if applicable) Morningstar Rating metrics. Voya Senior Income Fund (Interval Fund) Typically invests 00% in senior secured, floating rate loans Employs the use of leverage providing increased bank loan exposure and greater return objectives Suitably diversified across industry sectors and individual issuers Daily subscriptions, monthly redemptions and dividends Added fund features can provide for a better long-term investment experience Voya Senior Loan Portfolios do NOT own: Any mortgage exposure Any exposure to derivative instruments Any structured assets or mezzanine exposure For the most recent performance of the following funds, visit

3 A Potentially Effective Core Allocation, Whether Rates Rise, Fall or Stay the Same Senior loans may be an attractive strategic allocation, historically providing income and stability through most credit and rate cycles. Senior Loans Have Had Positive Performance in 7 of the Last 9 Years S&P/LSTA Leveraged Loan Index Total Returns by Calendar Year 55% % % 5.25% 3.65% 4.99% 4.8%.9% 9.97% 5.7% 5.08% 6.77% 2.02% 0.3%.52% 9.66% 5.29%.60% -0.69% % Total Return Market Value Return Source: Standard & Poor s LCD, S&P/LSTA Leveraged Loan Index Past performance does not guarantee future results. The S&P/LSTA Leveraged Loan Index is an unmanaged total return index that captures accrued interest, repayments and market value changes. An index does not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot directly invest in an index. Senior Loans are the Low Volatility Choice Among Income Oriented Investment Options Adding senior loans as a permanent allocation to a well diversified portfolio may help lower overall volatility. 2-Month Lagging Standard Deviation of Returns, 0/0/3 2/3/5 9% S&P/LSTA Leveraged Loan Index 8 Bank of America Merrill Lynch HighYield Master II Index 7 Bank of America Merrill Lynch 6 High Grade Corporate Master Index Year US Treasuries S&P 500 Index 3 0 0/06 2/06 2/07 2/08 2/09 2/0 2/ 2/2 2/3 2/4 2/5 Source: Standard & Poor s LCD, not annualized; Bloomberg Past performance does not guarantee future results. An index does not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot directly invest in an index. 2

4 Interest Rate Protection The yields of floating rate investments, such as senior loans, adjust to changes in interest rates, so when rates rise, the amount of income also rises. The reason for this lies in the unique structure of senior loans: They are ultra-short duration assets, with average interest rate reset periods of 60 days or fewer. They typically pay at the market rate, so interest rate changes by themselves don t affect their prices. They are made to non-investment grade businesses, so the rate tends to be higher than other short-term debt instruments. In the current low-interest rate environment, a majority of loans are issued with a LIBOR (London Interbank Offered Rate) floor. Loans pay a coupon consisting of two parts a contractual spread plus a market interest rate (typically LIBOR). Loans that are issued with a LIBOR floor demand a minimum level of payment on the market interest rate portion of the coupon. For such loans, even if interest rates begin to rise, the income of the loan will not increase until LIBOR rates rise above the applicable floor. Highly Diversifying Adding senior loans can improve the diversification potential of the fixed income portion of client portfolios. They have low correlation to duration sensitive US Treasuries, mortgage bonds, investment grade corporates and many equities. Senior Loans Get Paid First Senior loans are made to non-investment grade borrowers, increasing the risk that a borrower might not make payments on time or default on the loan. To offset this risk, senior loans have several important structural advantages: Senior loans hold the highest rank in a borrower s capital structure, giving them payment priority over all other outstanding debt. Senior loans typically are secured by a first priority lien on the assets of the borrower. In the event of a bankruptcy or liquidation, senior loan obligations typically would be paid first. Senior loans impose performance targets and borrower covenants that, if missed, can trigger the right of the lender to take action. Priority of Repayment in the Event of Default Senior Secured Loans Senior Unsecured Debt Subordinate Debt Preferred Stock Correlation of Senior Loans with Other Asset Classes Cumulative Performance 0/0/92 /30/5 U.S. 30-Day T-Bills 0.0 Barclays U.S. Aggregate Bond Merrill Lynch Mortgage -0. Barclays U.S. Corporate Aaa -0. U.S. Government 0+ Years U.S. Government 5 7 Years Source: Credit Suisse Past performance does not guarantee future results. Note: Senior Loans are represented by the Credit Suisse Leveraged Loan Index Source: Voya Financial Common Stock 3

5 Depth of Expertise The Voya Senior Loan Group is one of the world s largest teams dedicated exclusively to senior loans and the manager of the oldest loan mutual fund (established in May 988). Our Team by the Numbers The Voya Senior Loan Group managed over $20 billion in senior loans as of December 3, 205. Voya has a dedicated senior loan team of 28 investment professionals supported by a staff of 27, with an average industry experience of 4 years. Investment professionals conduct ongoing analysis, monitoring and underwriting through daily credit and trading meetings, as well as detailed periodic portfolio reviews. The team s proprietary loan management system incorporates analytics, trading, compliance and operational support into every trade decision. An Investment Process Driven by Meticulous Credit Research Liquidity Focus A focus on senior, secured first-lien loans, emphasizing the more liquid loans in the senior loan asset class. Diversification Seeks to limit portfolio exposures to an average of 5% per industry and 0.5% per borrower. Ongoing Risk Monitoring Daily monitoring of intrinsic values and internal credit ratings for every investment aims to reduce the possibility of defaults. Consistent Decision Making The Senior Loan Investment Committee oversees investment decisions made by the team and approves every loan for investment. The Voya Senior Loan Group One of the Largest and Most Experienced Loan Managers Research Advantage One of the few remaining private-side lenders Extensive fundamental credit review utilizes all company information available, including detailed operating information This information can support better decision making, particularly during periods of credit stress 2 3 Pure-Play Loan Strategy Our funds are typically 00% senior loans no allocations to other types of credit Voya s approach leads to more efficient asset allocation and greater clarity in risk exposures Disciplined Approach Focused on Credit Risk Management Our strategy has achieved a favorable default record over its history only 40% of the index default rate Voya Senior Loan Team 4

6 Voya Investment Management Equity Fixed Income Multi-Asset Strategies & Solutions Voya Investment Management is the asset management arm of Voya Financial, a leader in retirement services and investing. Our investment platform has been carefully built to help meet the long-term needs and goals of our clients, supported by more than 200 investment professionals. Our deep understanding of managing risk exposure and capturing unrecognized investment potential through intense fundamental research and skilled portfolio construction has delivered a consistency of results across continuously evolving market cycles. Today, we are proud to manage more than $209 billion in assets for investors. 84% of our assets outperformed their benchmark on a 5-year basis. 2a 72% of our assets outperformed their benchmark on a 0-year basis. 2a 88% of the time our portfolios outperformed their benchmark on a rolling 3-year basis. 2b Past performance does not guarantee future results. As of 2/3/5, Voya IM assets of $209 billion include proprietary insurance general account assets of $86 billion calculated on a market value basis. Voya IM assets, as reported in Voya Financial, Inc. SEC fi lings, include general account assets valued on a statutory book value basis and total approximately $20 billion. 2 Metrics are either a) calculated on an annualized, gross-of-fees basis, or b) based on observations of rolling 3-year annualized returns over the last 30 months, calculated on an annualized, gross-of-fees basis, and include mutual funds as well as pooled and separately-managed institutional portfolios that fall within our traditional (long-only) commercial book of business that remains open as of 2/3/5. If terminated and other accounts had been included, results may have differed from that shown. Source of performance returns is Voya Investment Management, and further detailed information regarding these calculations is available upon request. A reliable partner committed to reliable investing For more information on Senior Loans, contact your Financial Professional or visit Investment Risks Risk is inherent in all investing. The following are the principal risks associated with investing in senior loans. Credit Risk: Senior loans are below investment grade instruments that carry a higher than normal risk that borrowers may not make timely payments of principal and interest. Failure by borrowers to make such payments may cause the yield and/or the value of an investment in senior loans to decline. Interest Rate Risk: The yield on senior loans is directly affected by changes in market interest rates. If such rates fall, the yield may fall. Also, if overall interest rates on loans decline, the yield may fall and the value of the loans may decrease. When market interest rates rise, there may be a delay in the rise in the yield on loans due to a lag between changes in such rates and the resetting of the floating rates on the loans. There may also be a delay due to the effect of LIBOR floors, which establish a lower limit on the LIBOR portion of a loan s yield. Rises in market interest rates must exceed applicable LIBOR floors before such rises will affect the yield on a loan with a LIBOR floor. Limited secondary market for loans: Loans do not trade on an established exchange. There is a limited secondary market for loans. Demand for loans: An increase in demand for loans may adversely affect the rate of interest payable on new loans, and it may also increase the price of loans in the secondary market. A decrease in the demand for loans may adversely affect the price of loans, which could cause the value of loans to decline. Foreign Borrowers: Voya Senior Income Fund may invest up to 20% of their respective assets in loans to borrowers in countries outside of the U.S. and Canada. Investment in foreign borrowers involves special risks, including potentially less rigorous accounting requirements, differing legal systems and potential political, social and economic adversity. Use of Leverage: Voya Senior Income Fund may utilize leverage to seek to enhance returns. The use of leverage in a portfolio may have a magnifying effect on the returns for a portfolio, both positively and negatively. Foreign Currency: Voya Senior Income Fund may invest in loans denominated in currencies other than the U.S. dollar. While the strategy seeks to hedge foreign currency risk to the greatest extent practicable, such hedging may not be effective. This is not, and is not intended to be, a description of all risks of investing in senior loans. The applicable offering documents should be read carefully before investing. Other risks of the funds include but are not limited to Diversification Risk and Concentration Risk. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. Using diversification or asset allocation as part of an investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets. An investor should consider the investment objectives, risks, charges and expenses of the Fund(s) carefully before investing. For a free copy of the Fund s prospectus, or summary prospectus, which contains this and other information, visit us at or call (800) Please read all materials carefully before investing. 206 Voya Investments Distributor, LLC 230 Park Ave, New York, NY 069 All rights reserved. (800) Individual Investors (800) Investment Professionals Not FDIC Insured May Lose Value No Bank Guarantee BSIG-FRSL 0506 IM