Investors could also complement existing credit positions in high-yield and investment-grade credit with alternatives like bank loans that access floating rate, move up the capital structure and shortens duration exposure. For example, the actively managed SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN) could help investors with better exposure as a manager is more freely able to weave in and out of the fixed-income market. Blackstone/GSO, which subadvises SRLN, is backed by one of the largest senior loan asset managers in the world.
Due to their floating rate component, bank loans are seen as an attractive alternative to traditional high-yield 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.
Senior loans, bank loans or leveraged loans may act as an attractive alternative. A Senior loan is a private loan a firm takes from a bank or a syndicate of lenders. The loans are backed by the borrowers’ assets, which act as collateral. If the borrower defaults, lenders have a senior claim on the defaulters’ assets.
Financial advisors who are interested in learning more about fixed-income investment strategies can register for the Wednesday, July 25 webcast here.