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Investors, though, should not forget that senior bank loans are denoted high-yield because the issuing firms are highly leveraged, and highly leveraged companies are more at risk of default and bankruptcy. Nevertheless, these bank loans are slightly safer than traditional high-yield bonds since they are secured by collateral and have historically shown lower default rates.
“For investors worried about bank loan liquidity, an actively managed loan fund, like SRLN, can help mitigate liquidity challenges. SRLN’s active management allows it to focus on credit selection to avoid a weak or failing senior loan that might be included in a passive strategy,” according to SSgA.
For more information on the fixed-income assets, visit our bond ETFs category.