Highland Capital Management
October 14, 2016
A pioneer in alternative asset management.

It's Money Market Reform Day and Bank Loan Investors Are Celebrating

October 14, 2016 has been a date marked on the calendars of many asset managers for quite some times now--a deadline looming for more than two years since the SEC issued new rules for money market funds designed to prevent funds from "breaking the buck."

The new rules added liquidity fees and redemption gates, and most notably, demanded that certain funds adopt a floating NAV versus a constant $1 per share value. All affected funds were required to implement these changes by October 14, 2016. 

That day is now here, but the most significant impact of these new regulations has already been felt. As the deadline approached, investors anticipating the changes took action accordingly. The result was an exodus in prime funds to the tune of $1.1 trillion in the past year.

But the consequences of the reform go beyond the trends in fund flows in the last 12 months. The prime fund outflows caused major moves in Libor, which has tripled in that same timeframe. As an experienced credit manager with a long history in bank loans, this rise in Libor gets us excited. We believe this trend can benefit floating-rate securities (like loans) given the lower duration compared to fixed-rate securities.

Chris Mawn, portfolio manager of Highland's senior loan ETF and co-portfolio manager of our floating-rate opportunities mutual fund, recently wrote a piece on rising Libor for Alt Credit Intelligence. Click below to access our exclusive content and download the article.

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This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document. It should not be assumed that any securities discussed in this commentary will increase in value. Highland Capital Management, L.P. (“Highland”) will not accept liability for any loss or damage, including, without limitation, any loss of profit that may arise directly or indirectly from use of or reliance on such information. 
Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed herein are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Highland disclaims any obligation to update or revise any statements or views expressed herein. In considering any performance information included in this commentary, it should be noted that past performance is not a guarantee of future results and there can be no assurance that future results will be realized. Nothing contained herein should be deemed to be a prediction, projection or guarantee of future performance. No representation or warranty is made concerning the completeness or accuracy of the information contained herein. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which information, although believed to be accurate, has not been independently verified. Highland and/or certain of its affiliates and/or clients hold and may, in the future, hold a financial interest in securities that are the same as or substantially similar to the securities discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Highland and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities. This commentary has not been reviewed or approved by any regulatory authority and has been prepared without regard to the individual financial circumstances or objectives of persons who may receive it. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Highland encourages any person considering any action relating to the securities discussed herein to seek the advice of a financial advisor. Includes Highland Capital Management, L.P. and its affiliated advisers.


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