Morningstar Loan Fund AUM Plunges $5.6B to $97.2B in February
Morningstar-tracked leveraged loan fund AUM fell by $5.6B to $97.2B in February, dipping below $100B since December 2023 after seven monthly declines. Retail investors withdrew $4.1B as the weighted average bid dropped 116bps to 94.59 and primary issuance slowed following a software loan price plunge.
1. February AUM Decline
Leveraged loan fund AUM tracked by Morningstar decreased by $5.6 billion to $97.2 billion in February, marking the seventh straight monthly drop and falling below $100 billion for the first time since December 2023.
2. Retail Outflows and Pricing Trends
Retail investors pulled $4.1 billion from these funds as the weighted average bid of the U.S. leveraged loan index slid 116 basis points to 94.59, driven by a steep decline in software sector loan prices.
3. Primary Market Slowdown
In the primary market, new loan issuance slowed markedly as risk-off sentiment intensified, reflecting broader investor caution and tighter financing conditions.
4. Rate Expectations Impact
Rate cut expectations for 2026 have been scaled back to zero, with some investors even forecasting hikes, which could increase floating-rate loan yields but may be offset by persistent inflation pressures.