Bank Loan ETF Inflows Continue to Amaze
May 22nd, 2013 at 7:08am by Tom Lydon
Junk bond ETFs such as the iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG) and the PIMCO 0-5 Year High Yield Corp Bond Index ETF (NYSEArca: HYS) hauled in about $10 billion in new investments last year, but that placed slowed to $1 billion through the first four months of 2013, according to recent research from S&P Capital IQ.
That is not a bad four-month tally, but one area of the high-yield bond ETF universe that has seen stellar inflows in 2013 is bank loan ETFs.
One reason for the soaring popularity of senior bank loan ETFs is the buffer these funds offer should interest rates rise. While it doesn’t look like interest rates will budge anytime soon, rates will not stay at these historically low levels forever. [Bank Loan, Floating Rate ETFs For Rising Rates]
A case can be made that either preparation for or the expectation of rising rates have bolstered the popularity of ETFs such as the PowerShares Senior Loan Portfolio (NYSEArca: BKLN). While traditional junk bond ETFs such as HYG and HYS raked in “just” $1 billion in inflows through the first four months of this year, BKLN, the original senior loan ETF, has attracted $2.75 billion in assets, according to PowerShares data.
That is nearly twice as much as the second-best PowerShares ETF in terms of year-to-date inflows, the wildly popular PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV), which has drawn in over $1.5 billion in new assets.
Next page: More bank loan ETFs