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Bank-Loan Funds See Worst Outflow Since 2011 As Rates Stagnate
FYI: Not to say loans are a bad investment – they still offer comparatively high yields (5% on average lately), and they’re secured by assets, which offsets some of the credit risk associated with the junk-rated companies who take on these loans. But be mindful of that credit risk – today’s Wall Street Journal has a featured story detailing how loan covenants are becoming more lax lately, a behavior often seen at the peak of credit cycles when investor discipline starts to erode. Regards, Ted http://blogs.barrons.com/incomeinvesting/2014/06/13/bank-loan-funds-see-worst-outflow-since-2011-as-rates-stagnate/tab/print/
Yeah, I keep seeing this "5%" figure for bank loans, but I have yet to find an (unleveraged) bank loan/floating-rate MF that is kicking this yield out. And I still think the minute these loans hit the LIBOR float bar they'll all be called away from you (if not before) and you'll never get the protection you thought you had by including them in your portfolio.
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