Senior Loan ETF an Option in Rising Rates

In today’s current economic climate, SPDR Blackstone/GSO Senior Loan Portfolio (NYSEArca: SRLN) is an attractive option, particularly if the Federal Reserve remains hawkish on any forthcoming data that may signal the inclusion of more interest rate hikes.

All assets under the fund are funneled into the Blackstone / GSO Senior Loan Portfolio, and SRLN’s main objective is to outperform a primary and secondary index–the Markit iBoxx USD Liquid Leveraged Loan Index and the S&P/LSTA U.S. Leveraged Loan 100 Index through its investment in senior loans.

Floating Rate Component

In the last six months, the Federal Reserve has been stepping up its interest rate hikes–fueled by a growing economy that is seeing low unemployment levels and rising inflation.

 


Senior Loan ETF an Attractive Option in Rising Rate Environment 1

As such, SRLN takes advantage of any short-term rate hikes with its floating rate component, allowing the yields in the loan portfolio to move in conjunction with interest rates. This provides for a hedge against interest-rate risk versus a fixed rate loan portfolio and maximizes return simultaneously.