Heading into the end of 2024, investors should be assessing which investment vehicles can offer them the strongest potential yield. Right now, bank loans and collateralized loan obligations (CLOs) can offer competitive yield for investors.
That’s what Christopher Remington, managing director of product & portfolio strategy in investment management at Morgan Stanley, noted in recent insights to Remington, bank loans and CLOs currently can provide high income, a secured credit profile, and are trading at relatively low costs. As such, he argues these securities can help buffer portfolios against long-term risk factors.
“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,” Remington noted. “We see loans and CLOs as two of the most attractive opportunities available to investors.”
Opportunities in an Eaton Vance Option
For investors looking to take advantage of the opportunities within bank loans and CLOs, the Eaton Vance Floating-Rate ETF (EVLN ) can offer a solution. The fund aims to offer investors strong yield, along with wide exposure to the floating-rate loan market.
With investor concerns continuing to simmer over inflation risk, adding floating-rate exposure to a portfolio can make a lot of sense right now. If inflation and interest rates bubble up, floating-rate loans can tweak their interest paid to protect the loan’s market value. As such, these funds can operate as excellent fixed income hedges against inflation.
While EVLN primarily holds floating-rate credit investments, the fund also provides CLO exposure. The smaller allocation to CLOs allows the fund to access the yield benefits of both bank loans and CLOs.
As a yield-generating fund, EVLN is currently providing strong income for its investors. As of Sept. 30, 2024, the fund has a 30-day SEC yield of 7.89%.
Fund flows for EVLN are supporting the case for adding more floating-rate loan exposure to one’s portfolio. As of Sept. 9, 2024, EVLN has seen over $200 million in net flows over the last month.
For more news, information, and analysis, visit The ETF Yield Channel.
