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Leveraged Loan Funds Continue to Witness Outflows

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Updated

CLO deals remain unchanged

CLO (collateralized loan obligation) deals remained unchanged in volume in the week ending December 11. Four CLO deals worth approximately $2.1 billion came through during the week—higher than ~$1.9 billion during the previous week. YTD (year-to-date), CLO deals worth $94.1 billion have been struck through 180 deals, according to S&P Capital IQ.

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Leveraged loan funds saw outflows

According to data from Lipper, leveraged loan funds saw an outflow for the week that ended December 9, making it the 20th such week. The quantum of these outflows hit $581 million that week—up from $387.4 million during the previous week. With the outflows last week, the total net outflows from leveraged loan funds have increased to $13.4 billion YTD.

Senior loans are tracked by the mutual funds such as the Oppenheimer Senior Floating Rate Fund Class A (OOSAX) and the Fidelity Advisor Floating Rate High Income Fund Class A (FFRAX). Loans of Avaya (AV), Par Pharmaceuticals Companies (PRX), and Neiman Marcus are among holdings in OOSAX. Loans of Hilton Worldwide Holdings (HLT), Albertson Company (ABS), and Dell are among holdings in FFRAX.

High-yield bond fund outflows

In comparison, high-yield bond funds recorded outflows of approximately $3.5 billion while equity funds recorded outflows of $8.6 billion last week. Equity funds had witnessed outflows of $920 million during the previous week.

The primary market issuance in the leveraged loan space gained traction last week as well. AMC Entertainment, a wholly owned subsidiary of AMC Entertainment Holdings, (AMC), ClubCorp Club Operations, a subsidiary of ClubCorp Holdings (MYCC), and DTZ Holdings were some of the issuers of these leveraged loans. (You can read more about the primary market activity in leveraged loans in Part 5 of this series.)

Returns on leveraged loans

Returns on leveraged loans fell in the week that ended December 11. The S&P-LSTA US Leveraged Loan 100 Index fell by 1.1% from one week previously. The index was down by 2.7% YTD.

Meanwhile, the Fidelity Advisor Floating Rate High Income Fund Class A (FFRAX), which provides exposure to senior loans, fell by 0.9% week-over-week. YTD, FFRAX has returned -4.5%.

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

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