Fabian's Favorite Floating Rate Fund
Despite how negative the geopolitical and general news feeds have been, the stock market has been surprisingly resilient, says David Fabian, editor of Flexible Growth and Income Report.
Turning to the fixed-income markets, it’s notable that investors did pile into quality assets over the last 5-10 trading sessions, pushing rates back to their June lows.
With the hurricane winding down and risk assets perking back up, it’s likely we will see a move higher in the short-term on the chart of the 10-Year Treasury Note Yield.
An opportunity we have been analyzing is adding back a senior loan position to our portfolio to both increase income and benefit from any short to intermediate-term rise in interest rates.
As a refresher, senior loans are below investment grade floating rate notes, that adjust to a baseline index, such as LIBOR. One of the benefits of this asset class is their short duration, typically 90 days or less, making them an excellent spot to hideout during cyclical periods of rising interest rates.
You often see price increases commensurate with a rising interest rate environment as institutions and investors shorten durations but want to maintain income in their portfolios. We believe we are at an inflection point where we could see this rotation occur once again.
We are pleased to welcome back the BlackRock Floating Rate Income Strategy Fund (FRA) to our portfolio.