Bank loan funds see rare outflows

|By:, SA News Editor

With Janet Yellen reassuring markets the Fed isn't in a rush to hike interest rates, investors broke a near two-year string of funneling money into bank loan funds, pulling out about $249M in the week ended April 16, according to Lipper.

"The door to sustained outflows is open now, and wider than it has been in a long time," says Lipper's Jeff Tjornehoj. "It's all about sustained low interest rates and the need for protection against rising rates just doesn't seem so strong anymore."

Bank loans (also known as senior, or leveraged loans) became a popular spot for money - the funds often pulling in $1B or more weekly last year - thanks to fears over higher interest rates. The loans are floating rate and theoretically should fluctuate along with the short end of the yield curve (though the floating-rate protection may not be what it's trumped up to be).