Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Loan Mutual Funds Deposits Decline to $454.7 Million, EPFR Says

Don't Miss Out —
Follow us on:

Feb. 7 (Bloomberg) -- Investors added $454.7 million into funds that purchase leveraged loans in the U.S., according to EPFR Global.

The inflows are down from last week’s deposits of $568.1 million and the least since the $306.8 million taken in during the week ended Jan. 22, according to the Cambridge, Massachusetts-based firm.

“Supply and demand are coming into some kind of balance,” Cameron Brandt, the director of research at EPFR, said in a telephone interview. “A lot of funds bet on rising interest rates. Given the torch has just been passed to Yellen from Bernanke, investors might be easing back to see what direction she takes.”

Deposits into funds that purchase debt that rises with benchmarks may be slowing as investors assess when interest rates may rise after Janet Yellen replaced Ben S. Bernanke as chairman of the Federal Reserve. Inflows this year total $3.4 billion after a record $70.6 billion were invested in 2013.

Yellen was sworn in on Feb. 3 as the chairman of the Fed, replacing Bernanke, whose term expired on Jan. 31.

“Regulatory uncertainty could certainly be an element” to declining fund flows, Brandt said.

The Volcker Rule, published in a final draft on Dec. 10, may slow issuance of collateralized loan obligations. Morgan Stanley on Feb. 5 reduced its forecast of CLO sales to $55 billion to $65 billion, from $65 billion to $75 billion.

A restriction was put in place by the Federal Deposit Insurance Corp. on April 1 requiring banks with more than $10 billion in assets that buy CLOs to designate them as “higher-risk” holdings. In addition to the FDIC restriction and the Volcker Rule, U.S. banking regulators are considering requiring CLO managers to hold 5 percent of the debt they package or sell without the ability to hedge or offload it.

Leveraged loans are those rated below BBB- by Standard & Poor’s and less than Baa3 at Moody’s Investors Service. CLOs package speculative-grade loans into securities of varying risk and return, typically from AAA ratings down to BB.

To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net

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

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.