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Hedge Funds Gaining on CLOs Drives Up Volatility: Credit Markets

Bloomberg – Hedge funds and junk bond investors are emerging as the biggest buyers of leveraged loans, driving up borrowing costs and volatility as the share of the market held by collateralized loan obligations falls to a 14-year low.

CLOs bought 40.64 percent of loans sold to non-bank lenders last year, down from a peak of 74 percent in 2001 and the least since the 30 percent in 1997, according to Standard & Poor’s Leveraged Commentary and Data. Non-CLO investors purchased the majority of the debt during the last two years.

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