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Investors withdraw $1.8B from leveraged loan funds; largest outflow in 3 years

Cash outflows from bank loan funds deepened to the largest in 3.3 years, at $1.8 billion for the week ended Dec. 17, according to Lipper. Indeed, there has been no withdrawal that large since $2.1 billion in the week ended Aug. 17, 2011.

The latest reading represents the 23nd consecutive weekly withdrawal and the 34th outflow in the past 36 weeks, for a net redemption of $21.9 billion over that span.

The influence of exchange-traded funds expanded to represent 18% of the outflow for the week, or double the 9% presence in last week's $1 billion outflow and up from just 1% in the prior week's $511 million outflow.

The trailing four-week average is now negative $936 million, compared to negative $586 million last week. The current observation is the deepest in seven weeks.

The year-to-date fund-flow reading pushes deeper into negative territory, at roughly $14.9 billion, with ETFs representing about 4% of the withdrawal. In the comparable year-ago period, inflows totaled $51.6 billion, with 10% tied to ETFs, or roughly $5.4 billion.

The change due to market conditions was negative $1.2 billion, or a decline of approximately 1.3% against total assets of $83.5 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 8%.

Here, too, the negative reading is the largest in 3.3 years. It's the largest reduction of assets due to market momentum since the $1.6 billion contraction in the week ended Aug. 10, 2011. – Matt Fuller

(Note to readers: The accounting of total assets against last week's report will show a large decline due to either funds removed from the sample or the reclassification of funds to a different category. Please contact Lipper for reconciliation.)

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