Assets at U.S. loan funds rose by $2.84 billion in October to $121.2 billion as investors continued to pour money into the market.
The primary reasons for the ongoing investor bullishness regarding loans are as follows:
- A Fed rate hike later this month, which would bolster a floating-rate asset class such as loans, appears all but a done deal.
- Investors appear keen to bank on increased spending/inflation accompanying a Trump presidency.
This marks the fourth straight monthly gain for the asset class, for a total of $9.7 billion, according to Lipper. Since February, assets at U.S. loan funds have risen by nearly $14 billion.
The two main technical drivers of this asset growth will be familiar.
The first: loan funds saw a net inflow of $1.65 billion in October, according to weekly reporters to Lipper. That’s the fourth straight monthly gain, and also the largest since the $1.9 billion inflow in February 2014.
The second: the steady stream of cash flowing into loan funds and ETFs buoyed prices in the secondary to continue rising in October, jumping by a hefty 205 bps during the month, according to the S&P/LSTA Leveraged Loan Index. (Note: some of that increase was due to credits exiting the Index).
As prices on loans increases, of course, their asset value rises. - Tim Cross
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