After shifting in the direction of relative-value players during the liquidity-starved third quarter, the investor market for leveraged loans tilted toward banks and traditional accounts over the final three months of 2011.
Still, the share held by hedge funds, high-yield accounts, and other relative-value players remains above that of the first half, when massive inflows to retail accounts narrowed clearing yields, thereby curtailing the volume of high-octane loans that are in the wheelhouse of relative-value accounts.
The other major theme of the fourth quarter was strong bank demand, which was focused largely on BB cash-flow loans, asset-based loans, and relationship clients. For this reason, pro rata loan volume jumped to 55% of overall leveraged loan issuance, or $32 billion, in the fourth quarter. That’s up from 49% in the third quarter, and it’s the highest share since the second quarter of 2009, when there was little volume outside of DIPs.