Introduction:
Floating rate bond ETFs are a type of bond whose interest rates can change over time. These bonds use a variable interest rate that is determined by a reference rate such as LIBOR plus a spread. The combination of these components is the total yield, which will change over time.
FLOT: iShares Floating Rate Bond ETF
This fund tracks an index composed of U.S. dollar-denominated floating rate bonds with investment grade and maturities ranging from one month to five years. The asset collection provides investors with exposure to floating rate bonds in the United States, along with over 300 short-term investment-grade bonds. The fund’s expense ratio is 0.20%, and the one-year total return as of April 30, 2020, was 0.70%.
FLRN: SPDR Bloomberg Barclays Investment Grade Floating Rate ETF
This fund tracks the Bloomberg U.S. Dollar Floating Rate Note < 5 Years index. The index consists of debt instruments that pay a variable interest rate, which primarily relies on a 3-month LIBOR, with a fixed spread. The index may also include U.S. dollar-denominated bonds issued by non-U.S. companies, governments, and supranational entities. The fund's expense ratio is 0.15%, and the one-year total return as of April 30, 2020, was -0.39%.
FLTR: VanEck Investment Grade Floating Rate ETF
This fund from VanEck tracks the MVIS U.S. Investment Grade Floating Rate index. The assets in this fund primarily consist of corporate bonds. More than 58% of the fund’s assets are issued in the United States, but over twenty countries are represented by the fund. The fund’s net expense ratio is 0.14%, and the one-year total return as of April 30, 2020, was 0.26%.
EFR: Eaton Vance Floating Rate Income Trust
This Eaton Vance fund aims to provide broad exposure to the floating rate loan market. It invests in senior loans to corporations, institutional partners, and other commercial entities. A shorter duration may help reduce interest rate risk and decrease portfolio volatility. The fund’s net expense ratio is 2.68%, and the one-year total return as of March 31, 2020, was -16.59%.
SRLN: SPDR Blackstone/GSO Senior Loan ETF
This second SPDR fund aims to outperform the Markit iBoxx USD Liquid Leveraged Loan index. This index includes around 100 tradable leveraged loans that are considered the most liquid. Like the EFR fund, this fund invests heavily in senior loans to large corporations and institutional entities. At least 80% of the fund’s assets are held in senior loans. The fund’s total expense ratio is 0.70%, and the one-year total return as of April 30, 2020, was -5.64%.
BKLN: Invesco Senior Loan ETF
This final Invesco fund is another senior loan fund. BKLN tracks the S&P/LSTA U.S. Leveraged Loan 100 index, which aims to track the performance of the largest senior loans by market weight, spreads, and yields. The fund’s net expense ratio is 0.65%, and the one-year total return as of April 30, 2020, was -4.56%.
Conclusion:
While floating rate bond ETFs provide various advantages, such as certain tax benefits, they are not without risks. No asset is risk-free. Make sure to thoroughly research each floating rate bond fund on this list before making any trades.
When
Consider the floating rate bonds trading box, look at its content, review its performance history, and see how it reacted to different market conditions. If you have any questions or concerns, be sure to consult a financial professional such as a financial advisor or your broker.
Source: https://www.thebalancemoney.com/list-of-floating-rate-etfs-1214733
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