The Invesco Senior Loan ETF (BKLN) has garnered significant interest as investors search for yield in the current environment.
ETFs that track senior bank loans have seen increased attention in recent weeks, with BKLN being a leader in the pack in terms of bringing in new money. According to Invesco’s website, the SEC yield of the fund is 6.6%.
BKLN follows the market-weighted performance of the 100 largest senior bank loans. The fund provides relatively strong income generation without taking on much interest rate risk, Todd Rosenbluth, head of research at VettaFi, said in October.
Despite starting with outflows at the start of the year, flows into BKLN reversed in its favor. The fund took in $727 million in inflows during October and, as of November 7, has seen an additional $101 million flow into the fund since November 1, according to VettaFi.
Senior bank loans are debt securities issued to a company by a bank or similar financial institution and then repackaged and sold to investors. Senior bank loans have variable interest rates and adjust periodically with the market, which is why they’ve surged in popularity in the current rising rate environment.
BKLN is based on the Morningstar LSTA US Leveraged Loan 100 Index. The fund will normally invest at least 80% of its total assets in the component securities that comprise the index. The index tracks the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads, and interest payments, according to Invesco’s website.
The fund does not purchase all of the securities in the index; instead, it utilizes a sampling methodology to seek to achieve its investment objective. Both the fund and index are rebalanced and reconstituted bi-annually, in June and December, according to Invesco’s website.
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