Confused about ‘Floating Rate’ Bank Loans?

With interest rates at rock bottom and a growing expectation that rates will move upwards over the next year, many investment managers are jumping back into the floating rate bank loan space—an asset class which historically performs very well in low and rising interest rate environments. However, I’ve noticed with my own clients that while the conventional bond space is fairly well understood among experienced investors, the bank loan space is not. Most people don’t know what differentiates these loans from traditional bonds and as a result abandon an asset class which may be a useful, low-correlation diversifier at the moment. So below is my attempt to demystify this asset class.

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