A Compelling Option Among Bank Loan Funds

Kenneth Oshodi: A strong team, solid process, stout returns, and cheap fees make T. Rowe Price Institutional Floating Rate a compelling option among bank loan funds.

Paul Massaro has led the fund as its sole portfolio manager since January 2013. He leads the floating-rate effort for T. Rowe's high-yield group and is supported by a team of 14 dedicated credit analysts. They take a fundamental approach, with a focus on bottom-up security selection and have the flexibility to allocate up to 20% of the portfolio to high-yield bonds, though Massaro has generally kept its allocation in line with its peer group, at 10% or less of assets. The fund has held a few percentage points more than peers in lower-quality CCC and below rated debt when Massaro has found compelling opportunities, but it has shown resilience during periods of market stress. Notably, it lost less than 90% of peers during the high-yield and energy market downturn between June 2015 and February 2016.

Aggregately, the fund has outpaced 90% of its distinct bank loan peers on a risk-adjusted basis during Massaro's January 2013 through October 2018 tenure as lead manager, and its fees are cheaper than its typical, similarly distributed peer's.

Overall, this fund's robust team, effective process, great returns, and affordable expenses have helped it land on our radar.