Leveraged Loan Funds: Ongoing Outflows in June
June High Yield Bond Issuance Tanks on Weak Market Conditions
Deals slowed
The volume of collateralized loan obligation, or CLO, deals fell last week. Three CLO deals totaling $1.4 billion came through in the week ended June 12. That’s less than the deals worth $3.5 billion in the previous week. Year-to-date, 96 CLO deals worth $51.5 billion have been struck, according to S&P Capital IQ’s Leveraged Commentary and Data.
Leveraged loan funds see outflows
According to data from Thomson Reuters subsidiary Lipper, leveraged loan funds saw outflows in the week ended June 12. This was the second week of outflows. The quantum of outflows was $223 million compared to net outflows of $93.9 million in the previous week. Last week brings the total net outflows from leveraged loan funds to $4.3 billion year-to-date.
Senior loans are tracked by the Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN). The loans of Avago Technologies (AVGO), PetSmart (PETM), and Community Health Systems (CYH) are among BKLN’s holdings.
In comparison, high yield bond (JNK) (HYG) funds recorded outflows of $2.6 billion, and equity (SPY) funds recorded inflows of $2.8 billion last week. Equity funds saw inflows of $6.2 billion in the previous week.
The primary market issuance in the leveraged loans space remained nearly the same as it was in the previous week. Discount store operator Dollar Tree (DLTR) was the highest issuer of leveraged loans in the week ended June 12. Medical diagnostics and health services firm Alere (ALR), medical supplies company ConvaTec, and SBA Communications (SBAC) were also large issuers of leveraged loans. You can read more about the primary market activity in leveraged loans in Part 5 of this series.
Returns on leveraged loans
Returns on leveraged loans fell in the week ended June 12. The S&P/LSTA U.S. Leveraged Loan 100 Index fell by 0.2%, but the index is up by 2.2% year-to-date. The PowerShares Senior Loan Portfolio (BKLN), which provides exposure to senior loans, was also down 0.2% week-over-week. Year-to-date, the ETF has returned 0.9%.
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