When assessing a portfolio and determining their asset class mix, investors often allocate large portion to equities as this is believed to have a much better longer-term investment return profile than “bonds,” while “bonds” are considered less risky and offer a diversification benefit to a portfolio.
For those concerned about interest rates rising, turning to the floating rate loan market may seem like it could be a great alternative. Over the past few weeks, as we have seen the expectation for higher rates firmly take hold and a spike in Treasury yields, floating rate loans (also called leveraged loans) are once again becoming a popular trade.
Be it how hedge fund returns have been struggling over the past year or how index funds have been gaining some traction, there has seemed to be much in the financial media over the past few weeks about the challenges facing active management.
With all of the talk of the Federal Reserve taking action and raising rates in the next couple months, investors naturally are considering how they position their portfolios.