PowerShares Senior Loan Portfolio (BKLN-N)

(A Top Pick Sept 20/16. Up 3%.) This was simply meant to hedge a rise in interest rates.

Most of the ETF’s that are senior bank loans and that are basically yield focused, are basically a substitute for bonds. He doesn’t use these. It is one area he cautions people on, but if you are an individual, maybe you can be nimble enough to work your way around. What he doesn’t like is that the underlying asset is actually illiquid. It is very hard to know what the value of the portfolio is. You have to be very careful on this.

(Top Pick Sep 20/16, Up 0.69%) He was worried about rising interest rates. This is a way to get a respectable yield. It did its job for him within the balanced construct.

Senior bank loans. They effectively differ from high-yield bonds in that 1) they are higher up in the capital structure and 2) they have a floating rate structure. If you are worried about rising interest rates, this is a way to go. A good comparison would be “junk bonds”. He has liked high-yield bonds for a while and has sold them. He is now moving into this ETF.

When he was looking at this, he decided to pass on this for 2 reasons. It was very hard to figure out what exactly you were buying. This is supposedly a senior loan portfolio that is leveraged but it is hard to see exactly what it is in. Gives you 4%-4.5% so you are taking equity like risks. If you do corporate bonds or preferred shares, you would get more than that.