Monday, April 29, 2013

VTA or BKLN versus JNK or HYG

I think loans offer a better value proposition than high yield debt.  Currently, one can earn only a 1% premium for taking on higher risk JNK or HYG relative to BKLN.  In addition, if one is willing to take on a little bit of leverage, VTA offers a compelling story as well and they earn a higher yield.

BKLN is now a legitimate investment vehicle that trades on average $25 million of volume per day.  The other loan funds are much smaller in turns of turnover and one has to be more careful with timing.  In particular, VTA (and VVR which I have and have written about) trade at premiums to their NAV (net asset value) and one must tread lightly there, I think.  I am very reluctant to pay more than 1-2% premium to NAV.   BKLN is at parity with it's NAV.






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