FLRT offers a high 7% yield by investing primarily in non-investment-grade floating-rate loans with a flexible strategy. The portfolio is well-diversified, with 204 holdings, 53% in bank loans, 32% in CLOs, and 78% rated below investment grade. Compared to peers, FLRT delivers the highest yield and total return since 2016, but also comes with higher volatility, deeper drawdowns, and higher fees.
Pacer Pacific Asset Floating Rate High Income ETF strategically blends leveraged loans and CLO tranches, with a notable and commendable large cash position, reflecting prudent management in a tight credit spread environment. The ETF exhibits exceptionally low historical volatility and shallow drawdowns, attributed to the floating-rate nature of its holdings and its focus on higher-quality below-investment-grade debt. FLRT offers a respectable yield with "honest" distributions, meaning the yield is generated by the underlying assets, avoiding return of capital.
Elevated rates are great for floating rate funds. FLRT focuses on non-investment grade holdings which have done well in this cycle. So long as we have elevated rates and a strong economy, this fund makes sense to consider allocating to.