Junk bond ETFs have been great performers but some investors worried the sector is overvalued have been exploring senior bank loan funds that are offering yields in the 5% range.
“We believe it’s a safer yield,” says Brad Ross, president of Pyxis Capital. [High-Yield Investors Moving Into Bank Loan ETFs]
ETF Trends Editor Tom Lydon recently spoke with Ross about the firm’s new fund, Pyxis iBoxx Senior Loan (NYSEArca: SNLN).
Senior bank loans are private debt instruments issued by a bank and provide capital to companies that typically fall below investment-grade credit ratings. As such, many investors have associated senior bank loans with speculative grade or junk bonds. However, while senior loans may be rated below investment-grade, senior bank loans come with a little less risk since the notes are secured by collateral in the event of bankruptcy. [Bank Loan ETFs]
Ross also talks about why the high-yield bond market could be near a top and how the ETF structure is an efficient package for senior loans. [Competition in Bank Loan ETFs]
Watch the video to see the full interview.