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As the Federal Reserve raised interest rates to combat inflation, NorthCoast Asset Management found opportunity in bond ETFs during the third quarter.
The BKLN ETF gives investors a convenient way to gain exposure to floating rate senior loans. The fund pays a moderately high distribution yield of 3.7% that has been rising in recent months.
BKLN is the most popular senior loan / variable rate loan ETF in the market. BKLN's holdings see higher interest rate payments as rates rise, a significant benefit for shareholders, and particularly important in a rising rates environment.
Short-term, high-yield fixed income has been a popular way to play the bond market this year. BKLN is a 2022 outperformer in a year of huge fixed-income losses.
The Federal Reserve is two increases into its interest rate tightening cycle, and more — perhaps much, much more — could be on the way with inflation remaining high. As such, fixed income investors are feeling considerable pain.
These ETFs could be useful if interest rates continue to increase.