Even recent inflows into BlackRock’s HYG fund are also likely a bearish play, reflecting create-to-lend activity rather than actual buyer demand, according to Mohit Bajaj, director of ETFs at WallachBeth Capital.
As credit faces some of the worst returns since the financial crisis, it’s easy to understand the bearish sentiment. But it’s an asset class that can be tough to short outright -- in some cases, ETFs are the best and most-liquid option.
One fund proving popular to bet against is the Invesco Senior Loan ETF (BKLN), which tracks a portfolio of leveraged loans -- one of the year’s hottest asset classes.
“Only a small handful of the underlying loans have any availability in securities lending, so borrowing shares from long holders of the ETF is essentially the only means of sourcing the borrow,” Sam Pierson, director at IHS Markit, wrote in the report.
This article was provided by Bloomberg News.