Discussion Paper

Investor Diversity and Liquidity in the Secondary Loan Market

Abstract: Over the last two decades, the U.S. secondary loan market has evolved from a relatively sleepy market dominated by banks and insurance companies that trade only occasionally to a more active market comprising a diversified set of institutional investors, including collateralized loan obligations (CLOs), loan mutual funds, hedge funds, pension funds, brokers, and private equity firms. This shift resulted from the growing presence of these investors in the syndicates of corporate loans, as shown in the chart below. In 1991 the average term loan had just two different types of investors; by 2013 that number had grown to five.

Keywords: loan liquidity; investor diversity; loan syndicate;

JEL Classification: G1;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2017-08-09

Number: 20170809