Bank loans remain a popular place for investors to find attractive yields — but average investors can’t just buy them. Instead, they’ll have to access the loans — which may also be referred to as senior loans or syndicated loans — through exchange-traded funds or mutual funds. The underlying assets are debt instruments issued by well-known companies, like American Airlines and X, that are considered below investment grade. They are structured and syndicated by banks to large groups of lenders, such as mutual funds and institutional investors. They typically have floating interest rates tied to the secured overnight financing rate (SOFR). Fortunately, retail investors have a plethora of choices these days — there are 16 bank loan ETFS and many more mutual funds, said Brian Moriarty, principal, fixed income strategies at Morningstar. “We’ve seen more launches recently from traditional asset managers launching actively-managed bank loan funds,” he said. “There’s been a couple of them in the last couple of years, more than there was previously, and that’s because more and more investors just want an ETF for everything.” ‘High levels of income’ Both Invesco and Nuveen recently called out the assets as a place to be right now. Saira Malik, chief investment officer at Nuveen, pointed out in her weekly commentary on Jan. 26 that senior loans saw their third consecutive year of strong performance in 2025 and the ninth positive year of the last 10, as measured by the S & P UBS Leveraged Loan Index. “The loan asset class continues to provide high levels of income, even with two Fed rate cuts priced in for 2026,” she wrote. The Invesco Senior Loan ETF (BKLN) was the first bank loan ETF on the market and is the largest, with about $7.3 billion in assets, Moriarty said. It has a 30-day SEC yield of 5.88% and a 0.65% net expense ratio. The passively managed ETF, with three stars and bronze ratings from Morningstar , is in the bottom quartile rank among its peers year to date, but was in the top quartile in 2025. BKLN 1Y mountain Invesco Senior Loan ETF one-year performance Nuveen also has its actively managed Nuveen Floating Rate Income Fund, in which senior loans make up 81.6% of the portfolio. Some 10.4% is in corporate bonds, 7.3% in cash and equivalents and 2.4% in ETFs, as of Dec. 31. Cash, as well as ETFs in mutual funds, are used for liquidity purposes, since the bank loan market is not liquid, Moriarty explained. Nuveen Floating Rate Income Fund’s A-class has a 5.97% 30-day SEC yield and 1% expense ratio. Morningstar gives it four stars and a neutral rating. So far this year, its performance is in the second quartile rank among its peers, as it was in 2025 as well, per Morningstar . NFRAX 1Y mountain Nuveen Floating Rate Income Fund one-year performance In addition to attractive yields, there is a healthy macroeconomic backdrop and discounted prices, Malik said. Floating-rate assets are usually in demand when people are trying to hedge against rising short-term rates, explained Jason Bloom, head of fixed income ETF strategy at Invesco. Short-term rates have come down as the Federal Reserve decreased the federal funds rate, but the central bank opted to pause rate cuts in January. “Valuations are attractive there, yields are pretty attractive there,” Bloom said. “We think there’s room for upside if the economy continues to strengthen and the market begins to price out Fed rate cuts later this year.” Investing in ETFs or mutual funds Investors should do their homework when deciding on which fund to buy. That includes looking at fees and a fund’s past performance. Also be aware that the funds may have different names, including bank loan, senior loan or floating rate. Investors should look at the fund’s makeup and, if screening for investments on your brokerage firm’s website or Morningstar, go by the category of bank loan or senior loan, said Morningstar’s Moriarty. Stay away from the floating-rate category, he warned. “There are other products out there that have ‘floating rate’ in the name that are not strictly bank loan funds, or even might not own many or any bank loan funds,” he explained. “They own other floating-rate assets. You can tell because they’re going to be in a different category.” Some 14 of the 16 ETFs on the market are actively managed, Moriarty said. “Because of the liquidity issues and all the nuances to this market, active tends to outperform passive, because the index is fairly difficult to replicate,” he noted. There is also dispersion in the market, he added. Fitting bank loans in your portfolio Bank loans can be incorporated as a slice of your overall fixed-income allocation as a diversifier, Moriarty said. These loans can also help lower the sensitivity to interest rate risk since they are floating rate, if investors have concerns about that, he noted. In addition, they can provide portfolio income thanks to their attractive yields. Nuveen is of the mindset that senior loans should be a permanent allocation within an overall fixed-income portfolio. “Loans are a unique and distinct asset class that really offers something that bonds do not,” said Scott Caraher, head of senior loans at Nuveen. “If you think about just the duration volatility that pops up from time to time, loans are that nice ballast in your fixed income portfolio,” he added. “When you do have duration volatility, you don’t need to worry about the loan asset class losing value when duration sells off.” It fits within the higher-yielding bucket of your fixed-income allocation, Caraher said.