Leveraged Loan Funds Saw Sharp Contraction in Outflows Last Week

According to S&P Capital IQ/LCD, one collateralized loan obligation (or CLO) deal worth $354 million got priced last week. In the previous week, two CLO deals worth $800 million were priced. The year-to-date (or YTD) CLO issuance stands at $26.8 billion.

According to data from Lipper, leveraged loan funds saw outflows for the fourth consecutive week. But the quantum of outflow was tepid and came in at $17.5 million during the week ended July 6, 2016. In the previous week, leveraged loan funds saw outflows of $525 million.

Even with the outflows last week, total net outflows from leveraged loan funds stood at $5.5 billion up to July 6, 2016.

In comparison, high-yield bond funds recorded inflows of $1.8 billion, while equity funds recorded outflows of $6.1 billion last week. Equity funds saw outflows of $2.8 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 to senior loans through ETFs such as the Invesco PowerShares Senior Loan ETF (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Leveraged loans issuance rose last week. Uber Technologies, Booz Allen Hamilton (BAH), U.S. Security Associates, and Douglas Dynamics (PLOW) were some of the issuers of those leveraged loans.

Returns on leveraged loans rose in the week ended July 8. The S&P/LSTA U.S. Leveraged Loan 100 Index rose 0.4% last week. The index has risen 5.5% YTD. The Oppenheimer Senior Floating Rate Fund – Class A (OOSAX), which provides exposure to senior loans, rose 0.3% week-over-week. YTD, OOSAX has risen 4.8%.

The Highland/iBoxx Senior Loan ETF (SNLN), which also provides exposure to senior loans, rose 0.4% last week. It has risen 4.7% YTD.