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Leveraged Loan Funds Continued to Witness Outflows

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CLO deals rose

CLO (collateralized loan obligation) deals rose in value last week. Four CLO deals worth $2 billion came through in the week ending October 30—higher than $1.9 billion in the previous week. YTD (year-to-date), CLO deals worth $85.2 billion were struck through 162 deals, according to S&P Capital IQ/LCD.

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Leveraged loan funds saw outflows

According to data from Lipper, leveraged loan funds saw an outflow for the week ending October 28. It was the 14th week with an outflow. The quantum of outflows was $169.1 million last week—the same as the previous week.

With the outflows last week, the total net outflows from leveraged loan funds rose to $10.6 billion YTD. Mutual funds like the Oppenheimer Senior Floating Rate Fund – Class A (OOSAX) and the Fidelity Advisor Floating Rate High Income Fund – Class A (FFRAX) track senior loans.

Loans of Avaya (AV), Par Pharmaceuticals (PRX), and Neiman Marcus are among OOSAX’s holdings. Meanwhile, the loans of Hilton Worldwide Holdings (HLT), Albertsons (ABS), and Dell are among FFRAX’s holdings.

In comparison, high-yield bond funds recorded inflows of $2.0 billion while equity funds recorded inflows of $8.4 billion, respectively, last week. Equity funds witnessed inflows of $4.3 billion in the previous week.

The primary market issuance in the leveraged loans space lost traction last week. Computer Sciences Corporation (CSC) was the biggest issuer of leveraged loans last week. XPO Logistics (XPO) and First Eagle Investment Management were the other large leveraged loans issuers. You can read more about the primary market activity in leveraged loans in Part 5 of this series.

Returns on leveraged loans

The returns on leveraged loans rose in the week ending October 30. The S&P/LSTA U.S. Leveraged Loan 100 Index fell 0.17% from a week ago. The index fell by 0.5% YTD. Meanwhile, the Fidelity Advisor Floating Rate High Income Fund – Class A (FFRAX), which provides exposure to senior loans, fell 0.17% week-over-week. FFRAX has returned -2.2% YTD.

For more mutual funds analysis, please visit Market Realist’s Mutual Funds page.

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