Asset growth at U.S. loan funds continued apathetic in October, with investor coffers increasing by just $450 million, according to Lipper and LCD.
While that’s more than in three of the past four months—there was an outlying $1.6 billion gain in July—it’s firmly in the low-growth pattern that has taken root in the market since the start of 2017’s third quarter, and is well off the monthly average of $3.4 billion during the first half of the year.
The October activity brings assets at U.S. loan funds to $157 billion, the most since the $158 billion in September 2014. But again, the asset figure is relatively unchanged from $154 billion back in May.
Asset growth has slowed considerably from earlier in 2017 and in 2016, when retail investors were more bullish regarding additional interest rate hikes by the Fed. Floating-rate asset classes such as leveraged loans tend to fare well in a rising rate environment, so the specter of multiple rate increases, after a prolonged stretch without one, attracted billions to the market.
While the market consensus widely expects a 25 bps hike this month – bringing the rate to 1.5% – the sentiment is mixed regarding rate hikes thereafter. – Tim Cross
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