3 Senior Loan ETFs To Play Rising Rates?

Though BKLN provides exposure to intermediate term securities, it has seen an amazing surge in popularity so far in 2013. The fund has gathered over $2.2 billion so far this year, propelling the total asset base to $5.3 billion. The ETF has added 0.57% in the year-to-date time frame while yields 3.57% in annual dividends and 3.86% in SEC 30-Day yield.

SPDR Blackstone/GSO Senior Loan ETF (SRLN)

This is the first actively managed ETF for senior loans and provides investors with current income, along with the preservation of capital. It does not track an index but will instead seek to beat the Markit iBoxx U.S. Leveraged Loan 100 Index through superior security selection.

This is done by partaking in credit analysis, and timely sales and buys of senior loans. For example, the active approach looks to acquire loans at attractive prices before adding those to an index, or find loans that are likely to be removed from a benchmark and then proactively sell them before being kicked out of an index.

Overall, the fund holds 98 securities and charges 90 bps a year in fees, a bit higher than the two passively managed counterparts. Average days to reset is nearly double than the ultra-popular BKLN (see more in the Zacks ETF Center).

The ETF has seen great deal of investor interest since its debut in Apr 2013 and has attracted roughly $493 million in AUM. Trading volume is also solid with more than 84,000 shares per day.

Highland iBoxx Senior Loan ETF (SNLN)

Launched in Nov 2012, this fund seeks to match the price and yield performance of the Markit iBoxx Liquid Leveraged Loan Index, before fees and expenses. The ETF has reached $105 million in total asset base.

The product is cheap relative to other options in the space, charging investors 55 bps a year in fees. Average days to reset are 37 and yield to maturity is 5.32% (read: Buy These ETFs to Profit from The Great Duration Rotation).

SNLN is trades in average daily volume of roughly 35,000 shares. This suggests a wide bid/ask spread, probably increasing the total cost for the fund. The ETF added 1.02% year-to-date and pays a decent 1.23% in dividend per annum.

This article is brought to you courtesy of Eric Dutram.

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