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Why Leveraged Loan Funds Witnessed an Outflow Last Week

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Updated

CLO deals

According to S&P Capital IQ/LCD, four CLO (collateralized loan obligation) deals worth $354 million were priced last week. Meanwhile, two CLO deals worth $835 million were priced in the previous week. CLO issuance stands at $10.1 billion YTD (year-to-date).

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Leveraged loan funds saw outflows last week

According to data from Lipper, leveraged loan funds saw an outflow for the fourth consecutive week last week. The quantum of outflows came in at $93 million last week. In the previous week, leveraged loan funds saw outflows of $73 million. With the outflows last week, the total net outflows from leveraged loan funds stood at $5.2 billion as of April 20, 2016.

In comparison, high-yield bond funds recorded inflows of $410 million while equity funds recorded outflows of $4.5 billion, respectively, last week. Equity funds witnessed outflows of $4.8 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 also take exposure in senior loans through ETFs such as the Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Leveraged loan issuance was slow last week. Prime Security Services—a subsidiary of Apollo Global Management (APO), MKS Instruments (MKSI), Precyse Solutions, and Netsmart Technologies were some of the leveraged loan issuers last week.

In the previous week, Samsonite International SA, Quorum Health, Atlantic Power (AT), and Pinnacle Entertainment (PNK) issued leveraged loans.

Returns on leveraged loans

Returns on leveraged loans rose in the week ending April 22. The S&P/LSTA U.S. Leveraged Loan 100 Index rose 0.7% from a week ago. The index is up by 4.5% YTD. Meanwhile, the Hartford Floating Rate Fund – Class A (HFLAX) provides exposure to senior loans. It rose 0.8% week-over-week. HFLAX has risen 3.1% YTD. The Highland/iBoxx Senior Loan ETF (SNLN) also provides exposure to senior loans. It rose by 1.0% week-over-week. It has risen 4.2% YTD.

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

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