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This ETF offers exposure to floating rate debt, an asset class that may be appealing to investors looking to minimize interest rate risk (perhaps related to concerns about rising rates). Most bond ETFs offer exposure to securities that pay a fixed coupon over the life of the note, and as such are impacted when interest rates rise or fall. FLOT invests in debt with coupon payments calculated in reference to a benchmark rate, such as LIBOR. As such, the payments made by the underlying securities will fluctuate along with prevailing market interest rates. That results in an extremely low effective duration, and almost no interest rate risk. The diminished risk of course translates into a lower expected yields as well; FLOT will generally offer less in the way of return potential than other ETFs in the Corporate Bonds ETFdb Category that invest in fixed rate debt.
There are a number of potential uses for FLOT. This fund can be used as a tactical allocation in environments where interest rates are expected to rise, shielding investors from interest rate increases. It can also be used to round out fixed income exposure in a long-term portfolio, providing exposure to credit risk while minimizing interest rate risks.
This ETF focuses on investment grade, dollar-denominated debt (though the underlying portfolio includes issuers from several different countries). Investors seeking more in the way of credit risk (and return potential) might want to take a look at BKLN. That fund also invests in floating rate debt, but focuses on obligations of lower quality issuers. FLTR is another fund offering generally similar exposure to FLOT; investors considering this asset class should compare the expenses, various yield metrics, and effective durations of these funds to find the best match for their objectives.
The adjacent table gives investors an individual Realtime Rating for FLOT on several different metrics, including liquidity, expenses, performance, volatility, dividend, concentration of holdings in addition to an overall rating. The "A+ Metric Rated ETF" field, available to ETFdb Pro members, shows the ETF in the Corporate Bonds with the highest Metric Realtime Rating for each individual field. To view all of this data, sign up for a free 14-day trial for ETFdb Pro. To view information on how the ETFdb Realtime Ratings work, click here.
Fact sheets are issued by the ETF provider and framed by ETFdb.com. Information contained within the fact sheet is not guaranteed to be timely or accurate.
Copyright MSCI ESG Research LLC [2018]. All Rights Reserved. MSCI ESG Research LLC’s (“MSCI ESG”) Fund Metrics products (the “Information”) provide environmental, social and governance data with respect to underlying securities within more than 23,000 multi-asset class Mutual Funds and ETFs globally. MSCI ESG is a Registered Investment Adviser under the Investment Advisers Act of 1940. MSCI ESG materials have not been submitted, to nor received approval from, the US SEC or any other regulatory body. None of the information constitutes an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy, nor should it be taken as an indication or guarantee of any future performance, analysis, forecast or prediction. None of the Information can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user of the Information assumes the entire risk of any use it may make or permit to be made of the Information. All Information is provided solely for your internal use, and may not be reproduced or redisseminated in any form without express prior written permission from MSCI. Neither MSCI ESG nor any of its affiliates or any third party involved in or related to creating any Information makes any express or implied warranties, representations or guarantees, and in no event will MSCI ESG or any such affiliate or third party have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) relating to any Information. More information on MSCI ESG Fund Metrics, provided by MSCI ESG Research LLC, can be found at https://www.msci.com/esg-fund-metrics.
Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use, please see disclaimer.
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