“Suppressed interest rates and central bank asset purchases have seen bank loan ETFs grow in popularity, as investors look for ways to adjust with inflation,” WallachBeth said in a recent note.
FLOT and other floating rate note ETFs are different from the bank loan funds.
The key difference is that floating rate notes are typically investment grade, whereas most bank loans are rated below investment grade, explains Matt Tucker, head of fixed income strategy at iShares.
“Because of this, bank loans have the potential for higher yield, but of course this comes with greater credit and liquidity risk,” Tucker said. Investors often consider floating rate notes when they want to reduce their overall exposure to interest rate risk, but favor investment grade credit risk, he added. [iShares: Floating Rate Note ETF for Rising Rates]
FLOT has a 30-day SEC yield of 0.40%.
Other ETFs in the category include Market Vectors Investment Grade Floating Rate Bond Fund (NYSEArca: FLTR) and SPDR Barclays Capital Investment Grade Floating Rate ETF (NYSEArca: FLRN).
iShares Floating Rate Note ETF
