A Good--and More Liquid--Choice Among Bank-Loan Funds

Brian Moriarty: Investors in the market for a bank-loan fund should consider Virtus Seix Floating Rate High Income. This Bronze-rated fund has low fees and is run by a strong team executing a solid process. The team looks for companies with improving cash flows, strong management teams, and access to liquidity.

The fund's focus on liquidity is one of its notable characteristics. The team tends to avoid smaller loans, which are less liquid in the secondary market, and they try to settle trades faster than many peers. This is important because bank loans have very long settlement times, so speeding up this process is a competitive advantage compared to many bank-loan-fund peers.

The fund's long-term record is solid. Over the trailing 10 years, its 4.7% annualized return has beaten 60% of peers. It did lag a little bit in the rocky markets of 2014 and 2015, but over the long term has generated a solid record. It has a higher Sharpe ratio than many peers, which indicates a strong risk/reward profile.