BlackRock Floating Rate Income Strategies Fund (FRA) — This floating rate, closed-end fund is rated “4 Star” by Morningstar and could provide a protective hedge for bondholders from a rise in interest rates. The fund should benefit from both a rise in income and price, while straight bondholders will see the prices of their fixed-rate bonds fall.
FRA seeks high current income and preservation of capital by investing at least 80% of its assets in leveraged floating-rate debt securities. In other words, as interest rates rise, this fund’s price will rise with them. Currently, FRA pays a monthly dividend for an annualized $0.924, or 6%.
The fund fell from its 200-day moving average during trading Thursday, but in the final 10 minutes, it rallied from $15.08 to its close at $15.37, accompanied by high upside volume. This is the third time in a year that FRA has spiked down on high volume. The prior two spikes reversed, and within several months the fund achieved a new high.
FRA is in an intermediate and long-term bull market. The recent pullback appears to be an excellent opportunity to obtain a fund that should increase its payout and appreciate as interest rates rise.