Bank Loan ETFs Hot on High Yields, Rising Rate Fears

PowerShares Senior Loan Portfolio (NYSE: BKLN) is one of the best-selling ETFs in the first quarter with inflows of more than $1.4 billion. Investors have flocked to the fund in search of decent yields and protection from rising interest rates.

BKLN is appropriate for investors who are willing to take on additional credit risk and who may be looking for floating-rate bonds to protect against rising interest rates, says Morningstar analyst Timothy Strauts.

“Bank loans are denoted ‘high yield’ in large part because the firms issuing them are highly leveraged,” he writes in a profile of the ETF. “Most investors typically become interested in bank loans when interest rates are expected to rise.”

BKLN has a distribution yield of 4.59%, according to manager Invesco PowerShares.

“Financial tastemakers have crowned leveraged loans the ‘it’ income asset class throughout 2013,” reports Michael Aneiro at Barron’s. “Loan funds have been soaking up attention and inflows all year as investors seek them out for their combination of current income and floating rates, which will come in handy whenever rates start rising for real.”

Source:  John Spence, ETF Trends

BKLN is a component of the D2 Capital Management Multi-Asset Income Portfolio.

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