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Risks in Leveraged Loan Market

How the unregulated, archaic system for trading syndicated corporate loans poses liquidity and other risks to pensions and other investors.

By Lisa Abramowicz | Updated on September 18, 2014

Imagine a trillion-dollar market that runs on faxes and phone calls while routinely tying up investors’ money for months before they get any return.

That’s not fiction: It’s the unregulated market for leveraged corporate loans. In a financial system that is increasingly automated, the origination and trading of loans is in the relative dark ages while money pours in from mainstream investors such as Kansas and New York pension plans and mutual funds catering to individuals seeking high yields in an era of near-zero interest rates.

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