First Trust Senior Loan ETF (FSL.TO)

First Trust has a good operation. Has looked at the Senior Loan ETF, more in the US, and has tended to stay away from them. There is not enough pick up in yields in past corporates. Worries about the underlying illiquidity of the asset class.

Is this a safe haven for a cash balance? No. Under no circumstances would he. This is not a knock against First Trust. The problem with any of the senior ETF’s is that he doesn’t know what the liquidity in the secondary market is, of bank loans.

(A Top Pick Sept 9/13. Up 4.83%.) This is a medium-high risk sort of product. It would do better than many other products if there was going to be a rate hike.

Not big on this kind of ETF. Contains the kinds of securities from before 2008. A junk bond portfolio of floating rate bonds. High MER. Perhaps as part of portfolio where you want to take risk.

Some people are spooked by senior loans, but to his mind, it is so short term, the default rate historically has been so low that it has the ability to reset. So credit quality is not a factor.

An alternative to high yield. Thinks it will be a good place to be, but not a core holding.

Designed to do well in a rising rate environment. It may not happen in the next year. Prefers over CBO. The rate on FSL resets regularly.

As a core holding for a fixed income portion of a portfolio? How does it react to interest-rates? This is a new product from First Trust which is trying to find something that is not rate sensitive short-term. You are getting the rate of return on floating rate loans, which will be a little bit higher then T-bills. As interest rates go up, this will go up as well.

Has just recently been released so he doesn't own yet. Has senior loans that are fairly high in order of ranking. They have the ability to reset, which is really important. Because of the reset feature and being diversified and having a number of names, it will probably work well. Reset allows it to do fairly well in a rising rate environment. He is only recommending this primarily for people who might liken income products. He doesn’t like bonds and bond ETFs.