FIXED income assets are typically vulnerable to interest rate rises, but there is one segment that is actually almost impervious to it.
Investments in bank loans, which are part of the leveraged loan market, give you a floating rate asset, usually pegged to the London Interbank Offered Rate (Libor) plus a spread.
While funds that invest in bank loans - also called floating rate funds - are not without risk, their sensitivity to interest rate changes is low.
Alex Yu, Franklin Templeton fixed income group portfolio manager, says that there is currently strong interest among institutions in bank loan funds. Retail investors, however, are less familiar with the asset class. The firm manages around US$18...
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