BMO Floating Rate Hi Yield ETF (ZFH.TO)

Public market securities. High yield, floating rate. Nothing to do with private credit, but everything to do with credit. BMO does an excellent job minimizing interest rate risk of investing in high-yield debt.

Whenever equities get volatile, credit spreads tend to widen. And you'll get downside price action, or more volatility, in the name.

Designed to extract the yield part of high yield, with less interest rate risk. Outperformed HYG by about 1%. Likes it if you want to be in high yield.

This is bond exposure, so if you're getting income in a taxable account, you don't get the benefit of the CRA tax credit. The floating rate means that if interest rates rise, you get protection; if they fall, you don't benefit. And rates are expected to come down. But if inflation increases, and rates are expected to climb, then you want floating rate exposure.

Just because an ETF pays a distribution doesn't make it a dividend. A lot of investors are confused on this point. This is short-term, federal bond exposure. So you're getting income; if it's in a taxable account, you don't get the benefit of the CRA tax credit. 

If interest rates are rising, you have good protection. If falling, you don't benefit. Current expectation is that interest rates are going to come down, so you want nominal bond exposure. But it's not buy and hold. If all of a sudden inflation starts to be an issue, and rates start to go up again, then floating rate is what you want to hold.

We would be comfortable with ZFH. Floating rate bonds, of course, may see lower distributions if rates fall, but do offer protection in the opposite scenario. Indicated yield is 5.64% and one year return +8.48%. We would consider it a solid, fairly conservative ETF for income. Fees are 0.45%.
Unlock Premium - Try 5i Free

We would be comfortable with ZFH. Floating rate bonds, of course, may see lower distributions if rates fall, but do offer protection in the opposite scenario. Indicated yield is 5.64% and one year return +8.48%. We would consider it a solid, fairly conservative ETF for income. Fees are 0.45%. 
Unlock Premium - Try 5i Free

It shouldn't have that rating. It's a pure credit play, netting out the interest rate risk, and has a low standard deviation. But it pays a high yield, so maybe it get a higher risk rating. There's a little more risk here among ETFs, but not high risk like an equity.

He owns a similar one. You are getting the distribution but the asset value is sliding.

Floating rate notes tend to do very well in general when yields are rising. No price change over the last 5 years, but you're earning about 5.5% right now. Doesn't love that credit spreads are really tight, and that this brings the risk of high yield. This fund won't protect you from widening credit spread in a hard landing, so you have more risk than you think.

Have a look at private mortgage companies and residential exposure -- better protection, diversification, and yield.

They use a derivative structure to get pure credit exposure, but credit spreads are tight. However, it mitigates the interest rate risk.

Not a good option if we head into recession. Would not recommend buying. Not a good defensive name. Products are too complex for average investor. 

ZFH-T is exposure to short-term high yield credit using a swap strategy to mitigate the interest rate risk. You still get credit risk. ZHY trade more like equities than bonds. People are seeking the higher yields. A floating rate note mitigates the interest rate risk only.

4.9% yield. Holds exposure to a high yield index so you get a high yield return. There are risks. It is very similar to the volatility of the market.

Floating rate gives you the resetability when interest rates change. It is a good way to mitigate the downside when interest rates change, although he does not see them changing over the next year or so. You are getting a lower return on this one as well. There are a lot of pros and cons – it depends on the investor’s situation.

Floating rate high yield. Chart is almost flat. You are waiting for central banks. You will wait for another year. It is dead money for a while.