how do funds invest in leveraged loans 
investment funds such as mutual funds and exchange traded funds or etfs may hold leveraged loans in their portfolios depending on their investment strategy some funds may make a small investment in leveraged loans as part of a diverse portfolio while other funds may invest heavily in these loans fund portfolio managers may be interested in purchasing these loans because their higher interest rates could mean a higher return for investors in the fund 1the bottom linea leveraged loan is extended to companies or individuals that have considerable amounts of debt or poor credit history lenders consider leveraged loans to carry a higher risk of default and as a result make them more costly to the borrowers with higher interest rates than typical loans reflecting the increased risk involved in issuing the loans there are no set rules for defining a leveraged loan some market participants base it on a spread calculating a floating rate based on a benchmark called sofr in addition to a basis or arm margin 