Trouble in loan fund land?

|By:, SA News Editor

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.

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ETFs: BKLN, SRLN, SNLN, FTSL