Investors seeking to bolster their portfolios with more income might want to consider opting for floating-rate loan exposure. Floating-rate ETFs invest in securities that possess fluctuating interest rates. These strategies can be especially beneficial for investors who wish to mitigate duration risk. Additionally, exposure to floating-rate securities can offer further diversification for investor portfolios.
Take the Eaton Vance Floating-Rate ETF (EVLN ), for example. The fund provides broad exposure to floating-rate loan categories while seeking robust current income for its investors.
The wide majority of EVLN’s portfolio is focused on a mix of floating-rate credit instruments. These floating-rate securities can include senior loans, bonds, and collateralized loan obligations, among others.
Keeping Risk at Bay With Floating-Rate ETF Strategies
In terms of credit quality, EVLN primarily holds assets below the investment-grade threshold. While this may seem to indicate the fund could add volatility risk, there are a number of factors to consider here.
Eaton Vance has notable expertise in navigating the loan market, with experience dating back to 1989. The fund utilizes a bottom-up research approach to find floating-rate loans with great potential and less risk.
Along with the benefits of diversifying an investor’s portfolio, EVLN’s mixed loan portfolio can also be a boon for risk management. By not solely concentrating on a single loan sector, the fund can mitigate some of the inherent risk involved with individual loan sectors.
The fund primarily holds a portfolio of intermediate-duration loan securities. By choosing intermediate-duration assets, EVLN can blunt some of the long-term interest rate risk, along with avoiding short-term reinvestment risk.
All of this comes tied with the inherent benefits of an active portfolio team. With active managers holding down the fort, EVLN can better adapt to ever-changing market conditions.
One glance at the fund’s yield can indicate that Eaton Vance’s strategy has merit. As of August 28, 2024, the fund is offering a 30-day SEC yield of 8.28%. This is matched with robust fund flows, with EVLN seeing over $800 million in net flows since the fund launch in February 2024.
For more news, information, and analysis, visit The ETF Yield Channel.
