Title page
Contents
Abstract 2
1. Introduction 3
2. Assets Under Management and Investor Base 5
2.1. BL and HYB assets under management have grown significantly since the financial crisis 5
2.2. Institutional investors are increasingly seeking out BL and HYB MFs 6
3. Portfolio Allocations 7
3.1. BL funds held about 74% of their assets in leveraged loans, while HYB funds held near 5% of total assets in such loans 8
3.2. Foreign assets of BL and HYB MFs account for nearly one-fifth of their respective fixed-income allocations 9
3.3. BL and HYB MFs held about 74% and 71% of their fixed-income allocation in B and below-B rated debt 10
3.4. BL MFs held about 7% of LL outstanding while HYB MFs held roughly 16% of HY bond outstanding at the end of 2018 11
4. Flow and Performance 12
4.1. Flows as a share of assets have been larger and more volatile for BL than for HYB MFs 12
4.2. HY MFs significantly outperformed bank loan MFs 14
5. Concluding Remarks 17
Appendix A. Robustness of the Bank Loan and High Yield Mutual Fund Universe 18
Appendix B. Data Limitations 20
Appendix C. Other Morningstar Variables and Analysis 22
Appendix D. Summary Statistics 24
Figure 1. Total Net Assets 5
Figure 2. Market Share of BL Top Ten Funds 6
Figure 3. Market Share of HYB Top Ten Funds 6
Figure 4. Institutional vs. Retail Assets Bank Loan MFs 7
Figure 5. Institutional vs. Retail Assets High Yield Bond MFs 7
Figure 6. Bank Loan Mutual Funds Assets by Allocation 8
Figure 7. High Yield Bond Mutual Funds Assets by Allocation 8
Figure 8. Bank Loan Mutual Funds Assets by Primary Sector 9
Figure 9. High Yield Bond Mutual Funds Assets by Primary Sector 9
Figure 10. Bank Loan Mutual Funds Bond Allocation (Net) 9
Figure 11. High Yield Bond Mutual Funds Bond Allocation (Net) 9
Figure 12. Bank Loan Mutual Funds Assets by Rating 10
Figure 13. High Yield Bond Mutual Assets by Rating 10
Figure 14. Percentage of Bank Loans held by BL Mutual Funds 11
Figure 15. Percentage of HY Bonds held by HY MFs 11
Figure 16. Total Net Flows 13
Figure 17. Net Flows as a % of Assets 13
Figure 18. Bank Loan Flows as a Percentage of Assets 14
Figure 19. High Yield Bond Flows as a Percentage of Assets 14
Figure 20. Annual Benchmark Returns 15
Figure 21. Annual Weighted Returns 15
Figure 22. Bank Loan Mutual Fund-Distribution of Returns 15
Figure 23. High Yield Bond Mutual Fund-Distribution of Returns 15
Figure 24. Market Benchmark Returns over time 16
Figure 25. Morningstar Weighted Returns over time 16
Table 1. Summary of Flows as a Percentage of Assets (Monthly) 24
Table 2. Summary of Returns (Monthly) 24
Table 3. Fund Level Performance (Monthly) 25
Figure A.1. Morningstar and ICI and Bank Loan MFs Assets Comparison 18
Figure A.2. Morningstar, ICI and Lipper High Yield Bond MFs Assets Comparison 18
Figure A.3. (Omit) 19
Figure A.4. U.S. Category Group Assets 20
Figure A.5. Taxable Bond Category Assets 20
Figure A.6. Investment Grade Bond Assets Categories 20
Figure B.1. Bank Loan MFs Assets by Rating Lagged Sample 21
Figure B.2. High Yield Bond MFs Assets by Rating Lagged Sample 21
Figure B.3. Percentage of Bank Loans held by Leveraged Loans Lagged Sample 22
Figure B.4. Percentage of HY Bonds held by HY MFs Lagged Sample 22
Figure B.5. Total Corporate Bonds Outstanding 22
Figure C.1. Annual Average Returns 23
Figure C.2. Morningstar Average Returns over time 23
Figure C.3. Bank Loan Mutual Funds Assets by Super Sector 23
Figure C.4. High Yield Bond MFs Assets by Super Sector 23