We find robust evidence indicating a pro-cyclical relationship between monetary policy shocks and loan fund flows. This relationship, however, is asymmetric: weaker for policy rate increases and stronger for policy rate decreases. Further, the effect of monetary policy shocks is stronger when short-term rates are higher. Finally, we document that large outflows from loan funds are associated with a decline in prices in the leveraged loan market. Our results identify a novel channel of monetary policy transmission that not only affects a critical segment of the credit sector, but also has the potential to impact financial stability.