Leveraged Loan Fund AUM Grows $1.3 Billion in May Led by ETFs
MORN•Leveraged loan fund assets under management increased by $1.3 billion in May, reversing eight months of declines as ETFs contributed $1.0 billion and mutual funds $0.3 billion. The Federal Reserve’s hawkish June statement raised July rate-hike odds to 30%, potentially boosting flows into floating-rate loan funds.
1. May Asset Growth
Leveraged loan funds saw assets under management rise by $1.3 billion in May, marking the first monthly gain after eight straight declines. ETFs accounted for $1.0 billion of the inflows, mutual funds added $0.3 billion, and closed-end funds registered a slight drop in assets.
2. Secondary Market Prices
The weighted average bid price for leveraged loans inched up to 95.33 in May from 95.31 in April but retreated to 95.04 by June 24. This modest volatility underscores mixed investor sentiment in the secondary market.
3. Software Sector Slump
Loans in the Software sector fell 1.5 points in June and have dropped nine points year-to-date, reflecting investor concerns over companies’ exposure to AI disruption. Price dispersion within the sector remains high as investors differentiate between issuers.
4. Fed Rate Outlook Influence
The Federal Reserve’s unexpectedly hawkish June policy statement boosted the probability of a July rate hike to 30%. Higher rate expectations could draw retail and institutional investors back into loan funds to benefit from floating-rate coupon resets.
