Latest In The World Of Senior Loan Funds (Blog Preview)
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Summary
- Senior loans should benefit from future interest rate increases.
- We ran a screen to find the best valued senior loan funds.
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Note from Stanford Chemist: This is an excerpt of an article currently in the member's section of CEF/ETF Income Laboratory - sign up for to receive the full analysis as soon as they are released to members - start your 2-week free trial now!
Several months ago we took an in-depth look at closed-end funds that invest in senior loans. We went over the pros and cons, and some unique risks that are present in CEFs. Of course, CEFs have to contend with the premium/discount mechanics in their structure - and they can also include leverage to make them more volatile as well. Several funds have now released their year-end data - so we will get an update of distribution coverage figures.
That being said, the main draw for senior loan funds at this time is the idea of increasing interest rates. Most of these investments are tied to floating interest rates tied to LIBOR plus a spread. Therefore, when rates do rise again in the future, these funds should see some of the first benefits. This is in contrast to other fixed-income investments such as; U.S. Treasuries, municipal bonds and other investment-grade corporate bonds.
Though as a friendly reminder, they will still have to break through the "floor" rate before seeing an impact. This means that it might not be as immediate until rates rise sufficiently enough. Stanford Chemist went more in-depth on this subject previously. Additionally, Jerome Powell is indicating that rates should be set to 0% for a considerable amount of time. In fact, they don't anticipate raising rates for at least a couple of years. That being said, you never can say it will never happen.
The data is from the closing on 03/12/2021. We will also be sorting the list from deepest discount to lowest discount. After the screening metrics we used above, we are left with 15 funds.
Name |
Ticker |
Premium/Discount |
Distribution Rate |
Distribution Coverage |
5-Year NAV |
10-Year NAV |
Apollo Senior Floating Rate Fund |
(AFT) |
-10.37% |
6.01% |
96.06% |
6.87 |
5.29 |
First Eagle Senior Loan Fund |
(FSLF) |
-9.72% |
5.85% |
91.29% |
5.89 |
|
Nuveen Short Duration Credit Opps Fund |
(JSD) |
-9.02% |
7.35% |
89.11% |
6.14 |
|
Blackstone Long-Short Credit Income |
(BGX) |
-8.79% |
7.03% |
98.49% |
10.43 |
5.73 |
Nuveen Senior Income |
(NSL) |
-8.54% |
7.32% |
89.12% |
6.23 |
4.93 |
Blackstone Strategic Credit |
(BGB) |
-8.52% |
6.58% |
98.37% |
9.09 |
|
Invesco Senior Income |
(VVR) |
-8.50% |
6.00% |
77.30% |
7.24 |
5.31 |
Nuveen Credit Strategies Income Fund |
(JQC) |
-8.47% |
12.61% |
34.36% |
5.84 |
4.64 |
Blackrock Floating Rate Income |
(BGT) |
-8.15% |
6.21% |
74.52% |
6.01 |
5.41 |
Invesco Dynamic Credit Opp |
(VTA) |
-7.67% |
8.04% |
68.56% |
8.17 |
6.13 |
Nuveen Floating Rate Income Opportunity |
(JRO) |
-7.50% |
7.27% |
85.33% |
6.71 |
5.31 |
Nuveen Floating Rate Income |
(JFR) |
-7.43% |
7.26% |
85.85% |
6.63 |
5.05 |
BlackRock Debt Strategies |
(DSU) |
-7.17% |
6.68% |
76.18% |
7.58 |
6.32 |
Blackstone Senior Floating Rate Term |
(BSL) |
-7.16% |
5.85% |
100.2% |
9.23 |
5.17 |
BlackRock Floating Rate Inc Strategies |
(FRA) |
-7.13% |
6.14% |
74.73% |
6.02 |
5.2 |
(Source - CEFConnect/SEC Reports, compiled by Author)
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