Invesco Ltd. (IVZ)’s exchange-traded fund, that invests in the largest speculative-grade corporate loans, recorded its biggest outflow in a single day.
Invesco’s PowerShares Senior Loan (BKLN) fund, started in 2011 as the first ETF dedicated to purchasing floating-rate debt with the highest claim on a borrower’s assets, reported redemptions of 5 million shares August 1, valued at about $132 million, according to data compiled by Bloomberg. The fund, whose total assets had climbed to an unprecedented $7.4 billion in March, has since seen holdings drop to $7 billion as investors stage the biggest retreat in three years.
The withdrawals are mounting as the benchmark index tracked by the ETF reported its first monthly loss this year. Prices on the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, slumped to a three-month low of 98.2 cents on the dollar last week as returns in July slid 0.27 percent to 2.2 percent for the year.
Some of the biggest loans in the PowerShares portfolio include debt from ketchup maker H.J. Heinz Co. to Australian iron-ore producer Fortescue Metals Group Ltd. and media company Tribune Co.
Leveraged loans are a form of high-risk debt that carry ratings of less than Baa3 by Moody’s Investors Service and below BBB- by S&P. ETF shares trade like stocks on exchanges, allowing investors to access the underlying assets in which the fund invests without directly holding the debt.