Floating Rate Funds

Resolution Trust securitization set the stage for modern-day CMBS. Roughly $30 billion of distressed commercial real estate debt was sold in 2011 and a similar amount for 2012. In 2007, the CMBS delinquency rate was less than 1%; during October 2011 it reached 9.8% (source: Trepp LLC).

 

Mutual fund investors who are interested in fairly risky bonds should consider bank loan funds. These types of funds have an average maturity of 4.6 years. An advantage to bank loans is they usually have a "floating rate" that adjusts either quarterly or semi-annually. For 2012, bank loan funds returned 9.4%. Annualized returns through 2012 were: 4.1% (5 years), 4.7% (10 years), and 4.0% (15 years). Over the past 10 years, the worst year for bank loan funds was 2008 (-29.8%).