While some investors remain fixated on high yield bonds, treasuries, and even munis, they may be missing out on opportunities that bank loans are currently offering.
Recent insights from Eaton Vance broke down the strong investment case supporting both bank loans and CLOs. Eaton Vance noted that the current positioning for starting yields could greatly benefit credit markets. Additionally, the insights touted bank loans and CLOs alike for offering low trading costs, high income, and a more secure credit profile.
“These factors can help bank loans and CLOs serve as effective hedges,” added Eaton Vance. “The absolute yield in bank loans is one of the highest in fixed income, with levels comparable to long-run equity returns, and CLOs offer even higher yielding—and higher rated—opportunities. Loans and CLOs are two of the most attractive opportunities currently available to investors.”
Why Floating-Rate Loan ETFs Could Work
Investors looking to capitalize on the perks of bank loans may wish to consider the Eaton Vance Floating-Rate ETF (EVLN ). EVLN is an actively managed fund that primarily allocates its investments towards floating-rate loans, as the title implies.
Assets within EVLN’s portfolio are chosen following rigorous bottom-up research in regards to credit and risk profile. Eaton Vance notes that this fund also holds some high yield bonds as well.
Along with the aforementioned bank loan benefits, the Federal Reserve’s ongoing fight with rate cuts can further justify the case for floating-rate loans. Due to their unique borrowing structure, these loans can do very well in an environment where interest rates gradually decline.
To make matters potentially even better for EVLN, the fund holds a smaller portion of its assets in CLOs. This allocation can help the fund capitalize on the potential tailwinds that bank loans and CLOs could benefit from in 2025.
Eaton Vance’s floating-rate strategy has clearly resonated with investors. The fund recently surpassed $1 billion in assets under management, with inflows continuing throughout November.
See More: EVLN’s Floating-Rate Loan Strategy Hits $1 Billion in AUM
Long-term potential aside, there’s plenty of good reason why investors and advisors have taken an interest in this fund. As of November 26, 2024, EVLN is offering a highly attractive 30-day SEC yield of 7.56%.
For more news, information, and analysis, visit The ETF Yield Channel.
