Two of Morningstar’s Favorite Bank Loan Funds

Investors seeking a mix of income and a shield against higher interest rates have discovered bank loan funds. The category has matured to a degree that they can choose from both actively managed funds and passive, index-linked exchange traded funds.

“There are a number of mutual funds, closed-end funds, and exchange-traded funds (ETFs) that invest in bank loans,” says Morningstar analyst Timothy Strauts.

PowerShares Senior Loan Portfolio (BKLN) is a Morningstar favorite and is the oldest exchange traded fund in the group, launching in March 2011. The fund holds $4.8 billion of assets and is currently paying an SEC yield of 4.17%. BKLN is one of the best-selling ETFs this year.

“ETFs have the advantage of offering below-average fees and intraday liquidity and tend to trade near net asset value. ETF investors have the choice between passive or active strategies in the ETF wrapper,” Strauts wrote in an article posted on Morningstar’s website 26 July.

Additionally, Morningstar also liked Eaton Vance Floating Rate (EABLX).  Eaton Vance Floating Rate is the only mutual fund in the bank-loan category with a Morningstar Analyst Rating of Gold. It is one of the largest bank-loan funds with more than $12 billion in assets. This mutual fund follows a similarly conservative investment strategy without the risk of leverage. It has a current SEC yield of 3.8%.

Source:  John Spence, ETF Trends and Tim Strauts, Morningstar

PowerShares Senior Loan Portfolio (BKLN) is a component of the D2 Capital Management Multi-Asset Income Portfolio and Eaton Vance Floating Rate (EABLX) is a component of many of our other fund portfolios.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

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