Additionally, if rates stay low, these bonds could underperform their fixed-rate counterparts. Floating rate ETFs can also have heavy concentrations in the financial sector.
“Fixed-rate bonds have fared well so far in 2013, but a sudden jump in yields – as occurred in 1994 – would hammer pension funds and insurer portfolios, which have loaded up on fixed-rate debt in recent years,” Reuters reported. “As a precaution, some fund managers worried about a sustained sell-off in the bond market have been replacing some of their pricey fixed-rate rate debt with floating-rate.”
Separately, bank loan ETFs have also been popular with investors who are concerned about rising interest rates. [Bank Loan ETFs Hot on High Yields, Rising Rate Fears]
iShares Floating Rate Note Fund
