ING Prime Rate Trust (PBR)
The main reason why investors fled bounds during the taper tantrum is that bond prices have a negative correlation with rising interest rates. The ING Prime Rate Trust (PPR) avoids some of those problems.
PPR invests in what are called floating-rate bank loans or floaters. These styles of bank loans adjust rates every 30 to 90 days, making them quite attractive in rising rate environments. PPR’s portfolio also tends to focus on the senior tranches of these bank loans. Often they are tied to physical assets such as a pipeline, warehouses or other heavy equipment and provide seniority in instances of default or bankruptcy.
Founded in 1988, PPR has had a long operating history through a variety of credit cycles and has earned a silver rating from Morningstar.
Expenses are a bit on the high side — currently at 2.14%. However, that expense ratio does include fees tied to the fund’s use of leverage. PPR can be bought at a 3% discount to its underlying portfolio of loans, and it comes with a dividend yield of 6.41%.