Seeking Alpha

Bank loan funds see rare outflows

  • 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).
  • ETFs: BKLN, SRLN, SNLN, FTSL
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