Bloomberg News Merrill Lynch Investment Managers said Gilles Marchand and Rick Kilbride, co-heads of its $7.5 billion of loan funds, have resigned as the asset management arm of the biggest U.S. securities firm seeks to improve performance.

Vincent Lathbury 3d, who had overseen Merrill’s high-yield bond and emerging-market debt funds, will take over its bank loan funds, giving him a pool of $13.5 billion to oversee, said Bob Browne, co-head of fixed income for Merrill Lynch Investment Advisors Americas.

Merrill’s senior-floating-rate portfolio, which manages about $2.6 billion of loans, has returned 3.6% so far this year, more than one percentage point below the industry’s average. The fund ranks 27th out of 33 loan funds tracked by Lipper Inc., a research firm.

Investors have been withdrawing money from Merrill’s loan funds since Oct. 27, when they posted their lowest net asset values ever.

The number of institutional investors that buy loans, as Merrill does, has grown to nearly 100 from just a handful 10 years ago. The volume of loans in this market last year more than doubled from 1997, to $60 billion, according to Portfolio Management Data.

Van Kampen Investments Inc. is the biggest loan fund manager, with about $13 billion. Fidelity Investments opened its first loan fund this year.

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