Late last week we saw a gigantic uptick in trading volume in an ETF that is likely unknown to most portfolio managers because the product only recently celebrated its one year birthday in March.
PowerShares Senior Loan Portfolio (NYSEArca: BKLN) saw more than 4 million shares trade in just one session, compared to average daily volume of about 309,000 shares in the ETF, and the resulting creation activity sent more than $100 million in new assets into the fund (more than 25% of the total AUM in the fund at the time of the trade).
BKLN tracks the S&P/LSTA U.S. Leveraged Loan 100 Index, and aims to follow the institutional leveraged loans market. The current top holdings of the fund are loans to public companies that are likely familiar to the most, including names such as Tribune Company, Springleaf Financial, Texas Competitive Electric, Clear Channel, Intelsat, First Data, and Chrysler.
One would conclude after a quick glimpse of the underlying index portfolio that the holdings are generally rated in the B-C categories from a credit rating standpoint, and maturities on the loans are mostly out 5-6 years from the present.
The ETF issuer, Invesco PowerShares. lists the Yield to Maturity at 6.57%, with an SEC 30 Day Yield of 5.02%, and given the current scenario with Treasury Bonds recently rallying notably in price, and thus with yields plunging once more, it is not terribly hard to understand why institutions may be looking elsewhere outside of U.S. Treasuries for sources of yield in portfolios.
The fund undergoes a rebalance and reconstitution of the index twice per year, in order to reshuffle the holdings where necessary, and since inception just last year, BKLN has already attracted nearly $600 million in assets under management.
PowerShares Senior Loan Portfolio