Four floating-rate ETFs to consider

Floating-rate exchange-traded funds invest mainly in senior secured loans whose interest payments reset with reference rates. That feature reduces funds’ sensitivity to changes in market yields and lowers duration risk compared with conventional fixed-coupon bonds. Senior secured loans also sit higher in the corporate capital structure, giving lenders priority for repayment in restructurings or defaults relative to unsecured high-yield bonds.

Invesco’s Senior Loan ETF (BKLN) is a passive fund that tracks a broad leveraged-loan index focused on large, liquid institutional loans. BKLN was launched on March 3, 2011, carries an expense ratio of about 0.65%, manages roughly $7.2 billion and holds about 164 positions. Its 30-day SEC yield is near 6.7%.

State Street’s Blackstone Senior Loan ETF (SRLN) is an actively managed fund co-advised by Blackstone. SRLN launched on April 3, 2013, charges about 0.70%, manages roughly $5.3 billion and holds about 715 loans. Its 30-day SEC yield is near 6.7%.

BlackRock’s iShares Floating Rate Loan Active ETF (BRLN) and T. Rowe Price’s Floating Rate ETF (TFLR) are active products launched in October and November 2022, respectively. BRLN has a net expense around 0.55%, roughly $53.5 million in assets and about 437 holdings; its portfolio includes senior secured loans and some subordinated floating-rate loans, and its 30-day SEC yield is around 5.9%. TFLR charges about 0.61%, manages roughly $655 million with about 329 holdings, focuses on institutional credits often rated BB- and B-, and posts a 30-day SEC yield near 6.3%.

Passive funds such as BKLN sample a concentrated set of large institutional loans and track an index, which can offer lower turnover and index-like exposure. Active funds such as SRLN, BRLN and TFLR allow managers to change credit exposure, avoid specific issuers and seek relative-value opportunities; active management affects trading frequency, portfolio composition and manager selection risk.

Thirty-day SEC yields for these funds are in the mid-single-digit range, with BKLN and SRLN near the high 6% range, BRLN in the mid-5% range and TFLR around 6.3%. Fixed-income markets are operating with higher-for-longer interest rates and a Federal Reserve that may still alter policy. Financial advisers and investors typically compare expense ratios, assets under management, yield, number of holdings and whether an index or active approach fits their objectives when evaluating floating-rate ETFs.