Weekly Market Summary

Extra Credit^*

•Leveraged loan payment default rates declined in August, with the Morningstar LSTA US Leveraged Loan Index default rate falling to 0.87% by amount and 1.17% by issuer count as two companies rolled off the trailing 12-month calculation. During the month, the market recorded two liability management exercises (LMEs) and one payment default. Meanwhile, the dual-track default rate by issuer count remained broadly stable at 2.88%, compared with 2.87% in July.

•Harrison Street is introducing a secondary-market auction designed to provide investors with an additional, more permanent source of liquidity beyond regular quarterly repurchases. The mechanism would be triggered after two consecutive quarters of proration and allow investors to sell shares at predetermined discounts to NAV, such as 5%, with buyers bidding at the same preset levels. After a three-week auction, transactions clear at the single price that maximizes matched buyers and sellers, providing liquidity while maintaining consistent execution across participants

•Additional liquidity options could help interval funds manage sustained redemption pressure without putting undue strain on their portfolios. Because interval funds generally cannot suspend scheduled repurchases, prolonged outflows can erode liquidity buffers and force managers into less attractive actions to raise cash. Providing a secondary avenue for investors to exit could help protect both redeeming and remaining shareholders.

Source: Pitchbook LCD & MorningStar

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