Octagon's Lam: Rising rates are creating an opportunity in the loan market

Gretchen Lam, senior portfolio manager, Octagon Credit Investors -- sub-adviser on the XAI Octagon Floating Rate & Alternative Income Term Trust -- says that while economic conditions are challenging and that a recession will be bad for the credit markets, collateralized loan obligations and other loan products have held up relatively well during the current period of rising rates. They haven't been able to avoid the downdraft, she says, but they have outperformed other forms of credit, maintaining a historical pattern of superiority in tough conditions. Coupled with low default levels -- which she expects to rise a minimal amount despite higher interest rates -- it creates an opportunity for credit investors now.