Seeking Alpha

Trouble in loan fund land?

  • Leveraged-loan ETFs last month had three consecutive weeks of withdrawals - the first such streak since the initial one of these was launched three years ago, according to Lipper. This streak combined with a recent general trend of outflows is a reversal from last year's record inflows as investors then - worried about higher rates - sought the funds out for their floating rate exposure.
  • Money comes and goes from all ETFs ... What's the big deal? Leveraged-loan (also called bank loan or senior loan) funds can't just buy or sell stocks as money flows, but instead their portfolios are made up of loans. “What happens if outflows continue? Who are you going to sell the loans to? It could disrupt that market,” says Dan Fuss.
  • "Realize that getting quick, easy access via ETFs to a tough-to-access market doesn’t happen for free," writes Brendan Conway.
  • Previous: Warnings on bank loan funds are not new
  • ETFs: BKLN, SRLN, SNLN, FTSL
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Comments (1)
  • Mktneutralhedger
    , contributor
    Comments (1110) | Send Message
     
    What trouble? People have simply switched en masse to fixed-rate corporates. The appetite of pension funds for the long-end of the curve is insatiable and this process pushed lots of traders to cover their shorts. When we will see a steepening of the curve I bet the favour will be for the belly of the curve vs long-end and for variable rates.
    20 May, 01:16 PM Reply Like
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