Commentary: As a private investor, you cannot get access to bank loans unless you are really, really rich. Most bank loan funds come with front-end loads of 2.5% – 4% and annual expense ratios of 1% to 1.5%. They have some of the highest (maybe the highest expenses) in the entire bond funds universe. For this reason the DWS Floating Rate Fund (DFRPX), with no load fees and an annual expense ratio just under 1.0%, stood out.
There are 3 things that you should know about bank loan funds:
For a more detailed explanation, read Talking Bank Loans With Leland Hart.
Short-Term Performance: Average The DWS Floating Rate Fund (DFRPX) has performed within a percent of the other funds in its category over the last 12 months and 3 years. Bank loans funds as a category have returned around 8% for the last 3 years.
Long-Term Performance: Good The fund has only been around since 2007. Over the last 5 years, its performed over 1% better than other bank loan funds.
Returns Relative to Risk Level Relative: Average Bank loans are protected against rising interest rates, as the loans they have their rates tied to LIBOR. No interest rate risk. They do take credit risk, although, less than high yield bond funds. This fund in particular has slight better risk return characteristics than other similar funds.
Fees: Excellent No front end sales load and a very low annual expense for a bank loan fund. You can learn more about bond mutual fund fees here.
Manager Tenure: Excellent Managers have been with the fund since inception.