Bank Loan Funds

What are Bank Loan Funds?

Searching for higher yields may lead you to bank loan funds, also known as floating rate funds, prime rate funds, or senior loan funds. While these bond funds carry impressive yields, they can be complicated and are not usually thought of as an especially good investment in a falling-rate environment.

Bank loan funds do not have the traditional correlation of rates rising as prices fall and vice versa. The yields tend to rise as interest rates rise. Most of these funds carry below investment-grade short-term corporate loans that pay a high yield.

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