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This Fund Takes a Defensive Approach to Bank Loans

Brian Moriarty

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.

The fund is led by Jeff Bakalar and Dan Norman, two veteran bank-loan managers who each have more than 30 years of investment experience. They are joined by four additional portfolio managers and 13 dedicated bank-loan analysts.

For investors looking for a conservative approach to credit risk, this fund's high-quality approach and veteran team make it a solid choice.