The persistent outflows in senior floating rate bank loan exchange traded funds suggest that ETF investors don’t believe interest rates are going anywhere soon.

For instance, the PowerShares Senior Loan Portfolio (NYSEArca: BKLN), the largest bank loan-related ETF on the market, has lost $168.8 million in assets so far in March and experienced $1.7 billion in outflows over the past year, according to ETF.com.

For 47 of the past 48 weeks, investors have pulled cash out of bank loans, redeeming $27.5 billion from bank laon funds since April 2014, reports Joel Lewin for Financial Times.

Due to their floating rate component, bank loans are seen as an attractive alternative to traditional corporate bonds in a rising rate environment. Bank loan securities allow their interest rate to shift, or float, along with the rest of the market, whereas a fixed interest rate stays constant until maturity.

With the recent speculation of the Federal Reserve rate changes sometime this year, floating rate bond funds should have been attracting more investors as a way to hedge rising rates.

“That weakness in flows is surprising because most investors expect the Fed to start raising rates around midyear, and HY loan funds give you protection from rate hikes relative to HY bond funds,” Nikolaos Panigirtzoglou, global markets strategist at JPMorgan, said in the article.

Consequently, the consistent outflows suggest that investors do not believe the interest rates will change anytime soon, especially given the surge in the U.S. dollar and unexpectedly weak U.S. data.

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