The S&P USD Select Leveraged Loan Index is a new entrant in the leveraged loan landscape, developed to fill a critical gap in existing liquid leveraged loan index offerings that typically focus on the largest loans by market capitalization. This innovative index encompasses all USD-denominated fully funded term loans with a minimum facility size of USD 500 million and credit ratings below investment grade, providing a broader view of the market.

As the U.S. leveraged loan market surged to an estimated USD 1.5 trillion in July 2025, the diversity of borrowers expanded significantly, incorporating a wide range of loan types, credit qualities, spreads, covenants and other characteristics. This variety is often not fully captured when analyzing only the top 100 largest loans in the market. The back-tested performance of the index was positive over the last five years, as showcased in Exhibit 1.

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This index not only provides a more holistic and representative view of the liquid leveraged loan market by including loans of USD 500 million and above, but also enhances sector diversification and risk/performance profile with a total of 930 constituents ending October 2025.

Examining the credit quality characteristics of loans beyond the top 100 by notional index value offers deeper insights into the broader market. These insights include tracking defaults of underlying loans, which serve as crucial early warning signs in the leveraged loan ecosystem—information that may be missed when focusing solely on the largest loans.

Additionally, potential risks such as credit deterioration become more evident with a larger dataset, allowing investors and market observers to make more informed decisions. The index also incorporates higher spreads into the overall mix, driven by the inclusion of smaller loans and lower average credit quality. Exhibit 2 illustrates the difference in credit quality between the top 100 loans in the S&P USD Select Leveraged Loan Index and the rest of the constituents as of October 2025.

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The effects of broader loan inclusion also extend to sector profile, as the addition of lower notional value loans provides access to a wider array of business types within the index, as shown in Exhibit 3.¹ For an index that focuses on including lower credit quality borrowers, diversifying across industries can have a positive effect, not only for encompassing additional sources of performance but also for moderating risk.

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In summary, the S&P USD Select Leveraged Loan Index offers a benchmark for measuring larger loans within the leveraged loan universe, without sacrificing the risk/performance balance and diversification qualities that result from the additional inclusion of smaller issuances. As the leveraged loan market continues to evolve and expand, indices that adopt a comprehensive view of the leveraged loan market will serve as essential tools for more informed investment decisions.

¹ The S&P USD Select Leveraged Loans Index follows the iBoxx Industry Classification Standard (iBICs). For further details, please see https://www.spglobal.com/spdji/en/landing/topic/ibics/

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