Loan Funds Targeted in Review of Liquidity Risk: Credit Markets
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The brokerage industry’s watchdog is intensifying scrutiny of funds that buy speculative-grade loans as concern mounts that smaller investors will struggle to get out of illiquid fixed-income assets when sentiment sours.
The Financial Industry Regulatory Authority is targeting sales practices for loan funds after individuals piled into the debt -- which offers floating-rate coupon payments -- as a way to protect themselves from rising borrowing costs, the Washington-based organization said in a Jan. 6 letter outlining its oversight priorities for the year.