Observers have queried whether syndicated loans, which often take longer than three days to settle, belong in open end mutual funds that permit daily redemptions by investors. The concern, which was the subject of debate in 2016 when the SEC issued its open end fund liquidity risk management rule (“the Rule”), is that loan funds may not be able to meet redemptions due to settlement delays.
Recently, questions have been raised about the liquidity of loan investments and whether loan mutual funds are an appropriate investment vehicle for loans. In fact, that question was answered late last year. In fourth quarter 2018, loan mutual funds and ETFs underwent a “natural experiment” as loan prices declined five points and funds experienced nearly $20 billion of redemptions in short order.
Become a Member
Membership in the LSTA offers numerous benefits and opportunities. Chief among them is the opportunity to participate in the decision making process that ultimately establishes loan market standards, develops market practices, and influences the market’s direction.