First Trust Senior Loan FundNASDAQ: FTSL

Floating rate bank loans, like those in the First Trust Senior Loan Fund (FTSL), are attractive in a high-interest-rate environment due to their high yield and risk/return profile. FTSL is actively managed, allowing it to capitalize on market mispricings and adapt to changing conditions better than passive funds. The fund is well-diversified with 222 positions, a 30-Day SEC Yield of 7.76%, and a weighted effective duration of 0.58 years.

FTSL is a simple senior loan ETF, with an above-average 7.7% dividend yield. Senior loans were one of the best-performing income investments of 2022 and 2023, with FTSL outperforming most of its peers. Outperformance has diminished these past few months. Fed hikes and narrow credit spreads could pressure senior loans and FTSL further.

The First Trust Senior Loan Fund ETF is used as a prime example of a "Hold" investment, emphasizing its stable dividend yield and low volatility. The thesis discusses potential downside risks, such as rising default rates and interest rate hikes, and outlines scenarios that could lead to a "Sell" rating. The article clarifies the distinction between "Hold" and "Sell" ratings in investment analysis, focusing on dividend-paying securities with limited upside potential.

First Trust Senior Loan Fund ETF is an exchange-traded fund that invests in leveraged loans. Despite rising interest rates, leveraged loans have delivered robust returns in the past year due to their floating-rate nature. The fund has gained over 6.5% since our last rating, with low volatility, and currently offers a 30-day SEC yield in excess of 8%.

When the Exchange conference starts on Monday, advisors will have a new active floating rate bond ETF to learn about. It's one that's backed by a firm with a rich heritage in the investment style.