Week InReview: May 25, 2018

Loan market liquidity concerns -

Financial Times Alphaville's Alexandra Scaggs is concerned that "there are currently five ETFs that invest in leveraged loans," and that these exchange-traded funds with intraday liquidity have a mismatch with the illiquid underlying loans:

"The problem with using liquid open-ended vehicles (like ETFs and mutual funds) to invest in illiquid assets is not as dry as settlement time. Instead, it is the chance that a negative feedback loop will occur if this currently booming market turns sour. If poor performance in these funds leads to withdrawals, that could lead to even worse performance, and more withdrawals, and so on.

In short, they create the risk of a fire sale...."

Please don't tell individual investors to buy leveraged loans

Read entire Week InReview: May 25, 2018