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Outflows from Bank-Loan Funds during COVID-19
The COVID-19 pandemic has put significant pressure on debt markets, especially those populated by riskier borrowers. The leveraged loan market, in particular, came under remarkable stress during the month of March. Bank-loan mutual funds, among the main holders of leveraged loans, suffered massive outflows that were reminiscent of the outflows they experienced during the 2008 crisis. In this post, we show that the flow sensitivity of the loan-fund industry to the COVID-19 crisis (and to negative shocks more generally) seems to be even greater than that of high-yield bond funds, which also ...