Feb 3, 2025

Investors Flock to Leveraged Loan ETFs Amidst High Interest Rate Environment

Investors are channeling unprecedented funds into leveraged loan ETFs, signaling a strong conviction that the Federal Reserve will maintain its current interest rate levels for an extended period (source). The Janus Henderson AAA CLO ETF (ticker JAAA) led the charge with an impressive influx of over $1.2 billion last week, marking its most significant weekly gain since its inception in 2020. In tandem, the SPDR Blackstone Senior Loan ETF (SRLN) received more than $600 million in inflows, bolstering its positive inflow streak to 12 out of the last 13 weeks.

This influx comes as a strategic response to the Fed's recent stance on interest rates. Fed Chair Jerome Powell emphasized a 'wait-and-see' approach regarding rate cuts due to stable economic growth and a robust labor market, with the central bank pausing rate reductions following initial cuts in September. This scenario has propelled leveraged loans to the forefront as one of the best-performing credit asset classes, yielding investors approximately 9% in returns last year. According to IndexBox data, the market for leveraged loans shows strong resilience, with expectations of continued performance as rates remain elevated.

The JAAA ETF dominates the CLO market with roughly a 90% share among top-rated CLO ETFs. Bank of America data reveals that ETFs holding CLOs witnessed $3.2 billion in January inflows, setting a monthly record. Meanwhile, SRLN offers retail investors a diversified selection of loans, appealing to those seeking both safety and income generation via floating rate exposure.

Despite these promising trends, portfolio manager John McClain of Brandywine Global Investment Management warns of potential risks. He argues that while the current high-rate environment is favorable, it may lead to unattractive pricing for new supply driven by heightened demand. 'Valuations matter and credit risk will be mispriced quickly,' McClain cautions, highlighting the importance of prudent investment strategies within this growing sector.

Source: IndexBox Market Intelligence Platform

  1. 1. INTRODUCTION

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  2. 2. EXECUTIVE SUMMARY

    A Quick Overview of Market Performance

    1. KEY FINDINGS
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  3. 3. MARKET OVERVIEW

    Understanding the Current State of The Market and Its Prospects

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    1. TOP PRODUCTS TO DIVERSIFY YOUR BUSINESS
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  9. 9. GLOBAL EXPORTS

    The Largest Exporters on The Market and How They Succeed

    1. EXPORTS FROM 2012–2024
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  10. 10. PROFILES OF MAJOR PRODUCERS

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    • United States
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  12. LIST OF TABLES

    1. Key Findings In 2024
    2. Market Volume, In Physical Terms, 2012–2024
    3. Market Value, 2012–2024
    4. Per Capita Consumption, By Country, 2018–2024
    5. Production, In Physical Terms, By Country, 2012–2024
    6. Imports, In Physical Terms, By Country, 2012–2024
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    8. Import Prices, By Country Of Destination, 2012–2024
    9. Exports, In Physical Terms, By Country, 2012–2024
    10. Exports, In Value Terms, By Country, 2012–2024
    11. Export Prices, By Country Of Origin, 2012–2024
  13. LIST OF FIGURES

    1. Market Volume, In Physical Terms, 2012–2024
    2. Market Value, 2012–2024
    3. Consumption, By Country, 2024
    4. Market Volume Forecast to 2030
    5. Market Value Forecast to 2030
    6. Products: Market Size And Growth, By Type
    7. Products: Average Per Capita Consumption, By Type
    8. Products: Exports And Growth, By Type
    9. Products: Export Prices And Growth, By Type
    10. Production Volume And Growth
    11. Exports And Growth
    12. Export Prices And Growth
    13. Market Size And Growth
    14. Per Capita Consumption
    15. Imports And Growth
    16. Import Prices
    17. Production, In Physical Terms, 2012–2024
    18. Production, In Value Terms, 2012–2024
    19. Production, By Country, 2024
    20. Production, In Physical Terms, By Country, 2012–2024
    21. Imports, In Physical Terms, 2012–2024
    22. Imports, In Value Terms, 2012–2024
    23. Imports, In Physical Terms, By Country, 2024
    24. Imports, In Physical Terms, By Country, 2012–2024
    25. Imports, In Value Terms, By Country, 2012–2024
    26. Import Prices, By Country, 2012–2024
    27. Exports, In Physical Terms, 2012–2024
    28. Exports, In Value Terms, 2012–2024
    29. Exports, In Physical Terms, By Country, 2024
    30. Exports, In Physical Terms, By Country, 2012–2024
    31. Exports, In Value Terms, By Country, 2012–2024
    32. Export Prices, 2012–2024

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