economy
February 6, 2026
How the regular investor can participate in the lucrative, high-yielding bank loan market
Investors can't directly buy bank loans, but they can access them through funds. Here is what to know.
TL;DR
- Average investors can access bank loans, which are debt instruments from well-known companies below investment grade, through ETFs and mutual funds.
- These loans typically have floating interest rates tied to SOFR and are structured by banks for large groups of lenders.
- Both Invesco and Nuveen highlight bank loans as an attractive investment due to high income potential, even with expected Fed rate cuts.
- The Invesco Senior Loan ETF (BKLN) is the largest bank loan ETF, while Nuveen offers actively managed funds that include senior loans.
- Floating-rate assets are generally in demand to hedge against rising short-term rates, though recent rate cuts have occurred.
- Investors should research funds carefully, paying attention to fees, past performance, and fund categories like 'bank loan' or 'senior loan'.
- Active management is often preferred in the bank loan market due to liquidity issues and the difficulty of replicating the index.
- Bank loans can serve as a diversifier in a fixed-income allocation, offering ballast against duration volatility and providing portfolio income.
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