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If You Own Bonds, Buy This Fund Now

BlackRock Floating Rate Income Strategies Fund can be used as a protective hedge


BlackRock Floating Rate Income Strategies Fund (NYSE:FRA) — This Morningstar “four-star” rated closed-end fund could provide a protective hedge for bond holders from a rise in interest rates. The fund should benefit from both a rise in income and price, while straight bond holders will see the prices of their bonds fall.

Despite the introduction of QE4 in early December, rates on the 30-year U.S. Treasury bond have increased from about 2.8% to 3.18%, and bonds have fallen in price. (See my Feb. 4 Daily Market Outlook for more on this topic.)

FRA seeks high current income and preservation of capital by investing at least 80% of its assets in leveraged floating-rate debt securities. Currently, the fund pays a monthly dividend, which annualized is $0.924 (5.79% yield).   

FRA Chart
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