The largest “Bank Loans” based ETF in the U.S. listed landscape, BKLN (PowerShares Senior Loan Portfolio, Expense Ratio 0.65%, $6.4 billion in AUM) has seen some dip buying this week.
With inflows rising, BKLN has flirted with its 50 day Moving Average for the first time since late June’s weakness. In spite of a recent fall from its highs, the fund has turned in a stellar year thus far in terms of attracting flows, with greater than $2.3 billion entering the fund via creation activity.
These inflows have helped propel BKLN, which debuted in March of 2011, even further ahead of the next largest ETF in the “Bank Loan” space, which happens to be SRLN (SPDR Blackstone GSO Senior Loan, Expense Ratio 0.70%).
SRLN debuted in April of 2013 and has raised nearly $1 billion since inception (currently around $934 million in AUM). Unlike BKLN, which tracks a passive index known as the S&P/LSTA U.S. Leveraged Loan 100 Index, SRLN is an actively managed fund. Fund literature states that SRLN “invests substantially all of its assets in the Blackstone/GSO Senior Loan Portfolio, a separate series of the SSGA Master Trust with an identical investment objective as the Fund. As a result, the Fund invests indirectly through the Portfolio. In pursuing its investment objective, the Portfolio seeks to outperform the Markit iBoxx USD Liquid Leveraged Loan Index (the “Primary Index”) and the S&P/LSTA U.S. Leveraged Loan Index by normally investing at least 80% of its net assets (plus any borrowings for investment purposes) in Senior Loans. For purposes of this 80% test, “Senior Loans” are first lien senior secured floating rate bank loans.”
Year-to-date, the passive approach of BKLN has handily outperformed SRLN, and this could be one factor driving the substantial inflows into BKLN. SRLN has attracted $125 million in new assets accordingly during the 2016 time frame, versus BKLN’s aforementioned $2.3 billion.
Two other “Senior Bank Loan” funds that have respectable if not giant asset levels that also are “Actively Managed” funds in comparison to BKLN’s passive index approach are FTSL (First Trust Senior Loan, Expense Ratio 0.85%, $591 million in AUM) and SNLN (Highland/iBoxx Senior Loan, Expense Ratio 0.55%, $401 million in AUM).