There are also floating-rate bond ETFs, which are debt funds that hold these floating-rate bonds or seek to replicate floating-rate bond benchmarks. If you trying to minimize interest rate risk, these types of ETFs may be a good fit for your portfolio. Below, you’ll find some example ETFs to jump-start your research.
FLOT: iShares Floating Rate Bond ETF
This ETF from iShares tracks an index composed of U.S. dollar-denominated, investment-grade, floating-rate bonds with remaining maturities between one month and five years. The combination of assets gives investors exposure to both U.S. floating-rate bonds, as well as more than 300 shorter-term, investment-grade bonds. The ETF’s expense ratio is 0.20%, and its one-year total return, as of April 30, 2020, was 0.70%.
FLRN: SPDR Bloomberg Barclays Investment Grade Floating Rate ETF
This float-rate ETF is an SPDR that tracks the Bloomberg U.S. Dollar Floating Rate Note < 5 Years Index. As for the index, it consists of debt instruments that pay a variable coupon rate, a majority of which are based on the 3-month LIBOR, with a fixed spread. The index may also include U.S.-registered, dollar-denominated bonds of non-U.S. corporations, governments, and supranational entities. The ETF has an expense ratio of 0.15%, and its one-year total return, as of April 30, 2020, was -0.39%.
FLTR: VanEck Vectors Investment Grade Floating Rate ETF
This floating-rate fund from VanEck tracks the MVIS U.S. Investment Grade Floating Rate Index (MVFLTR). The holdings in this ETF are mostly corporate bonds. More than 58% of the fund’s holdings were issued in the U.S., but more than a dozen countries are represented by the ETF. The fund’s net expense ratio is 0.14%, and its one-year total return, as of April 30, 2020, was 0.26%.
EFR: Eaton Vance Senior Floating-Rate Trust ETF
This fund from Eaton Vance looks to provide broad exposure to the floating-rate loan market. It invests in senior loans to corporations, institutional partners, and other business entities. The low durations may help reduce interest-rate risk and lower portfolio volatility. The net expense ratio is 2.68%, and its one-year total return, as of March 31, 2020, was -16.59%.
SRLN: SPDR Blackstone/GSO Senior Loan ETF
The second SPDR on this list seeks to outperform the Markit iBoxx USD Liquid Leveraged Loan Index. That benchmark includes roughly 100 tradable, leveraged loans that are determined to be the most liquid. Like EFR, this fund invests heavily in senior loans to major corporations and institutional entities. At least 80% of the ETF’s funds are held in senior loans. The gross expense ratio is 0.70%, and its one-year total return, as of April 30, 2020, was -5.64%.
BKLN: Invesco Senior Loan ETF
The last fund on the list, this one from Invesco, is another senior loan ETF. BKLN tracks the S&P/LSTA U.S. Leveraged Loan 100 Index, which is designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads, and interest payments. The net expense ratio for this fund is 0.65%, and its one-year total return, as of April 30, 2020, was -4.56%.
The Bottom Line
While ETFs offer a lot of advantages, like some tax benefits, they are not without risk. No asset is risk-free. Be sure to research each floating rate fund on this list before making any trades. When considering an ETF, look under the hood and see what’s in it. Take a look at 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.
