Fixed Income alternative

[RockOn]

I've been watching these for awhile. John Mauldin sent this link by email today.

Too much risk?


http://www.arpllp.com/core_files/The Absolute Return Letter 0308.pdf

 

[brewer12345]

I think bank loans are an extremely attractive opportunity right now. But like everything, be prepared for ups and downs and don't overdo it.

 

[RockOn]

I'm sort of surprised nobody else comments on these.

 

[W2R]

I'm sort of surprised nobody else comments on these.

Personally, with the present credit/mortgage crisis in full swing, and considering my low risk tolerance and lack of investing experience and knowledge about this type of investment, I wouldn't touch them with a ten foot pole.

 

[RockOn]

For those that do not know, the attraction here is a 10% yield which should be good for about 6 years, they hold loans typically out to 2014 (yield is as high as junk bonds), on the 35% leveraged Closed End Funds. Some funds hold loans from over 600 companies so they are diversified. In the case of default the loans get paid first, making this investment less risky than junk bonds.

If the credit problems get solved without a meltdown, there could be some cap gains in addition to the yields. If the meltdown occurs, they might lose some money but so will everything else.

 

[youbet]

How would one participate?

 

[RockOn]

Go to ETF Connect and screen for the Loan Participation funds, there are some open end funds also, yielding 7% or so.

ETF Connect is great if you are at all interested in Closed End funds, the only drawback is they do not update the info very timely.

 

[youbet]

Interesting, thanks.