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This Fund Takes a Defensive Approach to Bank Loans

Bronze-rated Voya Floating Rate is a solid choice for a conservative approach to credit risk.


Brian Moriarty: The Voya Floating Rate fund was recently rated for the first time, and earned a Morningstar Analyst Rating of Bronze. This fund invests in bank loans, and focuses primarily on senior first-lien loans, which makes it a higher quality relative to many peers. Some funds in the category like to add risk by investing in second-lien loans, high-yield bonds, and equities.

The strategy focuses on free cash flow, business quality, and performance throughout a full credit cycle. This has resulted in a portfolio that is higher quality than many peers. For example, 2014 and 2015--two very difficult years for bank-loan funds--this fund managed to land in the top quartile of its category. On the other hand, it will likely lag during periods where risky loans are rewarded; this was the case in 2016, when it lagged many peers.

Brian Moriarty does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.