A Fund that Focuses on U.S. Dollar-Denominated Assets

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The SPDR Bloomberg Barclays Investment Grade Floating Rate ETF (FLRN) is an exchange-traded fund (ETF) that focuses on securities that have between one month and five years until maturity.

FLRN tracks an index of U.S. dollar-denominated, investment-grade floating notes. Investing in this fund exposes the investor to floating-rate notes that are spread around the world (since U.S. issues make up a little more than half of the FLRN’s debt holdings) and have a low expense ratio.

The fact that the portfolio is full of floating-rate notes means that the value of the notes will be less affected by changes in the interest rate. As a result, investing in FLRN or a similarly structured ETF might be a wise idea at a time when the Federal Reserve has decided to finally increase interest rates.

Indeed, the Fed had increased the federal funds rate from 2% to 2.25% at the end of September and will very likely increase it again it to 2.5% in December. Given that the last increase caused a panic on Wall Street and a plunge in the value of many stocks, it is conceivable that some prospective investors might want to consider a fund that is less vulnerable to interest rate changes.

Furthermore, FLRN’s portfolio has the indications of being a strong portfolio since the majority of this portfolio’s assets are in AAA, AA or A backed securities and there are no assets invested in what have been popularly called “junk bonds.” In terms of sector, FLRN is most heavily invested in financial institutions, then industry, then supranational organizations and then agencies. Not surprisingly, most of its funds are in corporate bonds from issuers such as Morgan Stanley (NYSE:MS), the Inter-American Development Bank (NYSE:ITAD), Goldman Sachs (NYSE:GS), the Asian Development Bank (NYSE:ATB) and the UBS AG London Branch (NYSE:AG).

Exclusive  A Fund that Grows with the Economy

It is also important to note that the fund currently has $4.49 billion in assets under management, has a $41.83 million average daily trading volume and has an average 60-day spread of 0.03%. It also has an expense ratio of 0.15%, meaning that it is relatively cheap to hold in comparison to other exchange-traded funds.

The returns from FLRN’s holdings have been weaker than the segment benchmark over the course of the past three years. For instance, FLRN’s holdings have grown 2.12% over the course of the last year, but the Bloomberg Barclays U.S. Floating Rate Note Index has risen 2.39% over the same period.

In short, while FLRN does have several advantages over some of its peer funds, its risks are not zero. Interested investors should, as always, do their due diligence and decide whether the fund is suitable for their portfolios.

Chart Courtesy of stockcharts.com

I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Like This Article?
Now Get Jim's FREE Special Report:
The Top 11 Dividend ETFs to
Buy Right Now

Get up to 5X the yields of traditional income plays.

Get Access to the Report, 100% FREE


img
previous article

Investing expert Jim Woods explains why the spooky Halloween headlines this year for the market aren't as scary as they have been in the past.

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE