Loan Funds Add Unprecedented $2.1 Billion in Deposits, BofA Says

Investors added $2.1 billion this week into funds that purchase leveraged loans in the U.S., surpassing the all-time high set last week, according to Bank of America Corp. (BAC)

The inflows brought deposits this year to more than $40 billion, making the debt the fastest growing segment among various asset classes, according to a report published yesterday by the Charlotte, North Carolina-based bank. U.S. speculative-grade bond funds reported a $3.2 billion increase, the second-highest on record.

Funds that invest in senior-ranking bank debt have gained 1 percent this month, the most since January, Standard & Poor’s/LSTA index data show. Prices on the largest, first-lien floating-rate borrowings dropped to 98.34 cents on the dollar yesterday.

Leveraged loans are a form of high-risk debt that carry ratings of less than Baa3 by Moody’s Investors Service and below BBB- at S&P. Investors have made deposits into loan mutual funds every single week over the last year, Bank of America data show.

Junk-rated bonds have returned 2.2 percent this month, according to the Bloomberg USD High Yield Corporate Bond Index. (BUHY)

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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