Senior Bank Loan ETF Offers High-Yield Alternative
December 5th, 2012 at 1:19pm by John Spence
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.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.