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Why Leveraged Loan Funds Saw Outflows after 3 Weeks of Inflows

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Updated

CLO deals

According to S&P Global Market Intelligence Leveraged Commentary & Data (or LCD), collateralized loan obligation (or CLO) deals worth $451 million were priced last week. Meanwhile, CLO deals worth $1.2 billion were priced in the previous week. Thus, year-to-date (or YTD), CLO issuance stands at $7.1 billion.

US CLO issuance rose to $4.2 billion in March 2016 from $2.1 billion in February and $827 million in January, according to S&P Global Market Intelligence LCD.

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Leveraged loan funds saw outflows last week

According to data from Lipper, leveraged loan funds saw outflows after three consecutive weeks of inflows. Outflows came in at $189 million last week. In the previous week, leveraged loan funds saw inflows of $126 million. With last week’s outflows, total net outflows from leveraged loan funds stood at $4.7 billion as of March 30, 2016.

In comparison, high yield bond funds recorded outflows of $545 million, while equity funds recorded outflows of $2.6 billion, respectively, last week. Equity funds witnessed inflows of $2.0 billion in the previous week.

Senior loans are tracked by 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). Investors can get exposure to senior loans through ETFs such as the Invesco PowerShares Senior Loan ETF (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Leveraged loan issuance fell last week. Western Digital (WDC), Capsugel, and Sensus USA were some of the issuers of leveraged loans during the week. In the previous week, Global Payments (GPN), Huntsman (HUN), and TransUnion (TRU) issued leveraged loans.

Returns on leveraged loans

Returns on leveraged loans fell during the week ended April 1. The S&P/LSTA U.S. Leveraged Loan 100 Index fell 0.1% compared to a week prior. The index has risen by 2.5% year-to-date (or YTD).

Meanwhile, the Hartford Floating Rate Fund Class A (HFLAX), which provides exposure to senior loans, rose 0.2% week-over-week. YTD, HFLAX has risen 1.2%.

The Invesco PowerShares Senior Loan ETF (BKLN), which also provides exposure to senior loans, rose by 0.8% week-over-week. It has risen by 2.4% YTD.

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

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