U.S. Leveraged Loan Funds See Outflows Persist for 17th Week

(Bloomberg) -- Investors pulled $606 million from U.S. leveraged loan funds extending a losing streak to 17 consecutive weeks, according to Lipper data, as investors remain bearish on floating-rate assets.

The exits have been increasing after moderating earlier in the month. The latest loan flow for the week ended March 13 compares to a $291 million outflow for the previous week. So far this year loan funds are down $7.8 billion.

The net outflow included $503 million pulled from mutual funds and $102 million withdrawn from ETFs. This continues a stretch that began at the end of November that includes four of the largest outflow weeks on record.

U.S. Leveraged Loan Funds See Outflows Persist for 17th Week

Leveraged loans lost much of their appeal as a hedge against rising interest rates when markets began to expect the Federal Reserve to cease rate tightening.

Due to the persistent outflows and slower new CLO formation, the S&P/LSTA Leveraged Loan Price index declined to 96.85 on Wednesday from 97.01 a week ago. Despite softer demand, the dearth of new supply has been a support for the loan market this month. The term loan in the financing deal for Johnson Control International’s battery unit, for example, upsized by $1 billion via a shift from bonds while pricing tightened.

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