Bank loan exchange traded funds are looking like the story of the year in the nearly $1.6 trillion U.S. ETF business as investors continue to search for yield while balancing the risks of rising interest rates.

For example, PowerShares Senior Loan Portfolio (NYSEArca: BKLN) is one of the most popular ETFs in 2013, hauling in about $3.6 billion of inflows, according to IndexUniverse data. The ETF has nearly tripled its 2012 inflow just so far this year.

BKLN yields more than 4% and provides some protection against rising interest rates because it invests in floating-rate bonds. [Morningstar’s Favorite Bank Loan ETFs]

Other providers have rolled out ETFs this year designed to track the hot bank-loan sector, including active and passive offerings. Funds in the category include SPDR Blackstone/GSO Senior Loan (NYSEArca: SRLN), Highland/iBoxx Senior Loan (NYSEArca: SNLN) and First Trust Senior Loan Fund (NasdaqGM: FTSL).

SRLN, for instance, has quickly ballooned to about $450 million in assets since launching in April. [Bank Loan ETFs: Shelter from the Rising-Rate Storm]

Also, Morningstar says bank loan funds and ETFs are trending high on the list of most-researched investments by individuals on its platforms.

“A bank loan strategy made the list of both the top funds and ETFs researched by individual investors—no bank loan strategies made the individual investor lists in 2012,” the firm said.

Showing Page 1 of 2