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The net outflow included $503 million pulled from mutual funds and $102 million withdrawn from ETFs.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.

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.

To contact the reporters on this story: Lisa Lee in New York at llee299@bloomberg.net;Lara Wieczezynski in Princeton at wieczezynski@bloomberg.net

To contact the editors responsible for this story: James Crombie at jcrombie8@bloomberg.net, Adam Cataldo, Allan Lopez

©2019 Bloomberg L.P.