What are Floating Rate Bonds? Should I be interested in Doubleline's new fund?

mnzdedwards

Tomorrow (Feb 1), Doubleline will launch their newest fund - Doubleline Floating Rate Fund.

http://www.sec.gov/Archives/edgar/data/1480207/000119312513024208/d440347d485bpos.htm

Since I was curious as to what benefits this type of fund might add to my portfolio, I did some snooping and came across this Vanguard White Paper titled, "A Primer on Floating-Rate Bond Funds." It was written in August 2011. See link below:

https://personal.vanguard.com/pdf/icrpfr.pdf?cbdForceDomain=false

Under the Executive Summary, the white paper concludes,
"Ultimately, we conclude that floating-rate funds minimize interest rate sensitivity, although at the cost of incurring significant credit risk. As a result, we suggest that investors may be best served viewing these funds in a light similar to that of high-yield fixed income funds, and not as an alternative to high credit-quality bond holdings."

Figure 4 in the paper lists the floating-rate benchmark correlations versus other asset classes during the period between 1992-2011. The ones of interest are shown below:

U.S. Aggregate Bond = -0.02
U.S. Corporate Bond = 0.28
Total U.S. Stock Market = 0.42
Corporate High-Yield = 0.74

FWIW.

Mike_E

hank

Your Vanguard link is excellent. Should be helpful for anyone considering such a move. Here's a pretty good one at Franklin Templeton which was helpful to me in contemplating a move into T. Rowe Price's Floating Rate Fund (PRFRX) in early December. I wrote about the decision extensively than, so won't regurgitate all the gory details.

https://www.franklintempleton.com/forms-literature/download/489-FLTPK