Are you looking for a high-yield investment opportunity in the financial markets? If so, you should consider BlackRock Floating Rate Income Trust (NYSE:BGT), a closed-end fund that focuses on leveraged loans and aims to provide current income to investors. With a current yield of 11.7%, this fund has caught the attention of many investors and traders.
One of the key features that sets BGT apart is its short duration profile, with an overall duration of just 0.27 years. This means that the fund is well-positioned to benefit from the current high-rate environment and pass on the high rate of interest to its holders. Even if there is an unexpected spike in inflation and the Federal Reserve is forced to raise rates again, floating rate loans like those held by BGT will not experience a negative price impact.
When considering a leveraged loan CEF like BGT, it’s important to assess the asset management platform’s research capabilities, the fund’s leverage ratio, credit risk profile, and historic track record. BGT comes from BlackRock, a premier global asset manager, and has a conservative leverage ratio of 25%. Additionally, the fund has a robust historic performance and compares favorably to other golden standards in the leveraged loan CEF space.
In terms of performance, BGT has outperformed its peers this year. When benchmarked against other industry leaders like Invesco Senior Income Trust (VVR), Apollo Tactical Income Fund (AIF), and the unleveraged ETF Invesco Senior Loan ETF (BKLN), BGT comes out on top. While BKLN lags due to its lack of leverage, BGT continues to deliver strong total returns.
Looking at the premium/discount to NAV, BGT has a close correlation to interest rates. During normalized interest rate environments, the fund’s discount to NAV has been stable around -10%. Although we do not expect significant fluctuations or windfall opportunities from the discount narrowing in the next 12 months, it’s worth considering as a factor in the fund’s returns.
Overall, BGT has a conservative composition, with a low leverage ratio and a collateral pool that does not take excessive risks. The fund covers its distribution yield well, with 96% of the distribution coming from the income received from the underlying loans. With high rates forecasted to continue, the coverage for the distribution yield is expected to remain strong.
If you are seeking a high-dividend provider in the current interest rate environment, BGT is worth considering. Its focus on floating rate loans provides a duration hedge and the potential for attractive returns. With its strong historic performance, low standard deviation, and proven profitability, BGT stands out as an appealing investment opportunity for those seeking high-yield options in the financial markets.