Bank on Bank Loans

A specialized fixed income fund that we have covered here periodically will be celebrating its third birthday since inception next week, BKLN (PowerShares Senior Loan Portfolio, Expense Ratio 0.66%).

The fund continues to see healthy net inflows, pulling in >$500 million in new assets year to date, and has grown to a more than $7 billion fund at the moment. This makes BKLN the eleventh largest Fixed Income ETP period, in the U.S. landscape in the moment, which is quite a feat given its specialization in investing in institutional leveraged loans.

Fixed income funds that are bigger than BKLN and perhaps simply not growing at the same pace as BKLN in the FI space include longer tenured names like JNK (SPDR Barclays Capital High Yield Bond, Expense Ratio 0.40%) and SHY (iShares1-3 Year Treasury Bond, Expense Ratio 0.15%) just to name a few.

But more specifically, BKLN is classified in the greater “High Yield” bond space in terms of its makeup and there it is the third largest fund in the category behind HYG (iShares $ High Yield Corporate Bond, Expense Ratio 0.50%) and JNK.

HYG currently has about $13.5 billion in AUM while JNK holds approximately $10.3 billion. This is again quite a statement in terms of this fund’s popularity and surging AUM in a relatively short period of time. BKLN tracks the S&P/LSTA U.S. Leveraged Loan 100 Index, which currently contains loans from companies such as Fortescue Metal, Hilton Worldwide Finance LLC, H.J. Heinz, Asurion Corp. and First Data Corp. to name the top five individual security holdings.

According to fund literature, BKLN “will normally invest at least 80% of its total assets in the component securities that comprise the Index” and “The Index is designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads, and interest payments.”