ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Volatility Resource Channel
  2. Consider Senior Loan ETFs As Rates Rise
Volatility Resource Channel
Share

Consider Senior Loan ETFs As Rates Rise

James ComtoisMay 09, 2022
2022-05-09

The Federal Reserve raised interest rates by 50 basis points last week to fight record inflation, with Fed Chair Jerome H. Powell announcing that “Inflation is much too high,” and that the Federal Open Market Committee is “moving expeditiously to bring it back down.”

Powell added that additional interest rate hikes as high as 0.5 percentage points are “on the table” in the coming months. The recent rate increase is the highest since 2000 and the second of seven hikes forecast for 2022.

However, investors had been pivoting out of fixed income in favor of less rate-sensitive products even before the Fed made this move. While investors have been moving away from fixed income, many are still seeking income.

So, with the Fed set to raise rates even more this year, the demand for floating-rate ETFs remains high. As opposed to ETFs that target fixed-rate bonds, funds focused on floating-rate bonds are less sensitive to rate hikes, since they pay a variable coupon rate based on the prevailing short-term market rates on top of a fixed spread.

Due to the quarterly coupon resets, the duration profile is historically and structurally low when compared to the broader Aggregate bond index.

For investors seeking to manage interest rate risk through an actively managed portfolio of floating-rate loans, the Franklin Liberty Senior Loan ETF (FLBL B) could be a good fit. According to the fund’s description on ETF Database, FLBL invests in leveraged loans, bank loans, and floating-rate loans, which are often extended to “junk” borrowers with below investment-grade credit ratings. The fund may invest in loans of companies whose financial condition is uncertain, including companies involved in bankruptcy proceedings and restructuring.

“Senior loan ETFs provide a similar level of above average income as high yield corporate bond funds without the same sensitivity to rising interest rates,” said ETF Trends’ head of research, Todd Rosenbluth. “Demand for loan ETFs has been gaining traction with advisors as the Fed has been raising interest rates.”

FLBL has an expense ratio of 0.45%.

For more news, information, and strategy, visit the Volatility Resource Channel.

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X