Historical data suggest that rate-cutting cycles provide headwinds for loan fund growth, but that growth is strong once rates have bottomed out.

This analyst note talks through the implications of any order recommending private assets be offered in 401(k) plans.

Loan fund AUM has declined in prior rate-cutting cycles, though much depends on the cause of the cuts.

Cash inflows from loan mutual funds and ETFs are the latest example of increased investor appetite for the US leveraged loan market.

After net redemptions of $1.32 billion a week earlier, the four-week rolling average moved to negative $853.5 million, from negative $661 million through Aug. 16.

The decline in leveraged loan fund assets under management is the third straight, and the eleventh in the past 12 months. Assets have fallen a hefty $52.27 billion over the last year.

This is the second large net inflow in the last three weeks for the high yield asset class, and it trims YTD outflow to $9.9 billion. It was $17.6 billion at the end of March, according to Morningstar.

The $4.7 billion inflow to high yield bond mutual funds and ETFs comes amid renewed issuance in the asset class, and signs of investor appetite for risk.

Assets under management at mutual funds and ETFs investing in US leveraged loans have been taking big hits lately as retail investors retreat from risk, amid still-rising rates and market continued volatility.

The Leveraged loan redemption was the largest since the week ended Sept. 28 ($1.9B) and marks the 19th straight weekly outflow, with $11.64 billion exiting the asset class over that span.

U.S. retail investors turned bullish on the speculative-grade bond asset class for the week ended Jan. 11, marking the first notable cash inflow to the asset class since Thanksgiving.

The flood of outflows from mutual funds and ETFs investing in leveraged loans is in stark contrast to the $35 billion inflow in 2021.

Once again, exchange-traded funds were the lightning rod for resurgent investor demand, drawing $1.65 billion of inflows for the week for a fourth straight positive reading.

Leveraged loan coffers have shrunk by some $20 billion since April as investors, worried about inflation, have backed away from risk.

US high-yield mutual funds and ETFs saw an outflow of $3 billion for the week as investors accelerated their flight from risk.

This is the largest leveraged loan redemption since June 15 and extends the current outflow streak to six weeks, totaling roughly $6.9 billion.

Leveraged loan mutual funds saw an outflow of $896 million while $57.7 million was pulled from ETFs. This marks the nineteenth straight week of outflows from mutual funds.

Over the last three weeks alone $2.8 billion has exited the leveraged loan asset class as retail investors maintain their risk-off stance.