We have profiled the “Bank Loans” space in the past in this piece and it is worth revisiting today because the largest fund in the segment, BKLN (Expense Ratio 0.65%, $8.8 billion in AUM), has attracted more than $1 billion year-to-date in terms of new assets via creation flows.
Even though the “Bank Loan” niche only has four funds populating it presently, there is clearly potential in terms of investor demand here judging by BKLN’s lofty asset base, and noting that the fund debuted back in 2011 and has built a loyal following since then.
Three of the four funds in this space are north of $1 billion in terms of AUM size, including BKLN, with actively managed SRLN (Expense Ratio 0.70%, $1.8 billion in AUM) and FTSL (Expense Ratio 0.86%, $1.3 billion in AUM) impressively raising their asset levels to date. Having only debuted back in 2013, these two funds have given BKLN a two year head start.
In fact, with only four funds in the space presently there is no “small” or “irrelevant” offering in the space as the $551 million SNLN (Highland iBoxx Senior Loan, Expense Ratio 0.55%) certainly has attained a respectable asset level considering it is the only fund from issuer Highland Capital Management. SRLN and FTSL have reeled in $745 million and $523 million respectively year-to-date, and SNLN a much lesser $83 million during this time frame.
Regardless, there is obviously investor appetite across the board for these funds and this segment in general, which basically has been the steady trend since these funds debuted several years back and there is likely opportunity for new entrants and perhaps new approaches here given the momentum. PowerShares’ website in regards to BKLN points out the following in terms of what may very well make Bank Loans within an ETF wrapper a hit among investors: “1) Yield – Floating rate loans offer attractive current income potential. 2) Senior Status – Secured bank loans are senior to other claims 3) Less rate sensitivity – Floating rates mean less interest rate sensitivity.”
Presently we see a Yield-to-Maturity in BKLN of 4.66%. The fund has pulled back a bit from its late July highs and continues to pivot around its 50 day MA lately.
The PowerShares Senior Loan Portfolio was trading at $23.11 per share on Tuesday afternoon, down $0.01 (-0.04%). Year-to-date, BKLN has gained 1.20%, versus a 12.79% rise in the benchmark S&P 500 index during the same period.
BKLN currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 39 ETFs in the High Yield Bond ETFs category.