Leveraged Loan Fund Assets Rise Amid Fed's Hawkish Stance
Inflows into leveraged loan funds have increased as the Federal Reserve adopts a more hawkish stance, raising interest rates. According to Morningstar data, assets under management (AUM) in these funds grew by $1.2 billion in August and continued rising through September. The Fed's recent rate hike of 0.25 points on Sept. 16 brought the overnight funding rate to between 3.75% and 4.00%, increasing returns for floating-rate loans. The decision followed a period of elevated Treasury yields, driven by geopolitical tensions in Iran and persistent inflation above the Fed's target. Market expectations suggest further hikes are likely, with CME data indicating over a 50% chance of another increase at the October meeting. In contrast to leveraged loan funds, fixed-rate high-yield funds have seen significant outflows.
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Topics: Fed rate hikes inflows/outflows leveraged loan funds Treasury yields