When inflation rises and interest rates climb, traditional bond funds often struggle. That’s where floating rate funds shine. These funds invest in loans or bonds with variable interest rates, meaning payouts adjust as rates move higher. For investors looking for income plus inflation protection, floating rate funds can be a smart portfolio addition. Below are the top 10 floating rate funds for inflation hedge, each offering unique advantages for income-focused investors in today’s uncertain market.
1. Invesco Senior Loan ETF (BKLN)
The Invesco Senior Loan ETF (BKLN) is one of the most popular floating rate funds for inflation hedge strategies. It invests primarily in senior secured loans, which typically sit higher in the capital structure than traditional bonds. Because these loans carry variable interest rates, income payments adjust upward when benchmark rates rise. BKLN offers broad diversification across industries and has historically delivered attractive yields during tightening cycles. For investors seeking liquidity, transparency, and exchange-traded flexibility, BKLN stands out as a cost-efficient and accessible option in the floating rate space.
2. SPDR Blackstone Senior Loan ETF (SRLN)
The SPDR Blackstone Senior Loan ETF (SRLN) combines institutional loan expertise from Blackstone with the accessibility of an ETF structure. It focuses on actively managed senior secured loans with floating rates, offering strong income potential during inflationary periods. SRLN emphasizes credit quality and risk management, making it attractive for conservative income investors. Because senior loans reset with short-term interest rates, the fund’s yield tends to rise as rates climb. Investors looking for professional active management within a liquid ETF wrapper often consider SRLN a compelling inflation hedge solution.
3. iShares Floating Rate Bond ETF (FLOT)
The iShares Floating Rate Bond ETF (FLOT) takes a slightly different approach by investing in investment-grade floating rate notes rather than leveraged loans. This gives it a more conservative risk profile compared to high-yield loan funds. Managed by BlackRock, FLOT aims to provide steady income while minimizing interest rate risk. Its shorter duration and high-quality holdings make it appealing during periods of rising rates and economic uncertainty. Investors seeking lower volatility but still wanting inflation protection through floating coupons may find FLOT particularly attractive.
4. JPMorgan Floating Rate ETF (FLTR)
The JPMorgan Floating Rate ETF (FLTR) invests in U.S. dollar-denominated floating rate corporate bonds. Backed by JPMorgan’s deep credit research capabilities, FLTR focuses on balancing income and risk. Its portfolio includes high-quality issuers, helping reduce default risk compared to lower-rated loan funds. Because coupon payments adjust periodically, the fund’s yield increases alongside short-term rate hikes. FLTR works well for investors wanting moderate credit exposure without heavy volatility, making it a solid addition to diversified portfolios aiming to hedge inflation pressures.
5. Fidelity Floating Rate High Income Fund (FFRHX)
The Fidelity Floating Rate High Income Fund (FFRHX) is a mutual fund specializing in senior secured floating rate loans. Fidelity’s experienced credit team actively manages the portfolio, targeting high income while controlling risk. Because these loans sit at the top of corporate capital structures, they often provide better recovery potential during downturns. FFRHX appeals to long-term investors who prefer mutual fund structures over ETFs. With strong historical income generation, it remains a popular choice for those seeking inflation protection and steady cash flow.
6. Vanguard Floating Rate Fund (VFRAX)
The Vanguard Floating Rate Fund (VFRAX) combines Vanguard’s low-cost philosophy with active management in senior loans. It primarily invests in below-investment-grade floating rate loans, aiming to deliver attractive income during rising rate environments. Vanguard’s disciplined approach to expenses makes VFRAX competitive among mutual fund peers. While it carries credit risk typical of leveraged loans, it has historically performed well when interest rates increase. Investors who value cost efficiency and professional oversight often consider VFRAX for inflation-resistant income strategies.
7. Nuveen Floating Rate Income Fund (JFR)
The Nuveen Floating Rate Income Fund (JFR) is a closed-end fund offering exposure to floating rate senior loans. Unlike ETFs, closed-end funds can trade at discounts or premiums to net asset value, creating additional opportunities. JFR often uses leverage to enhance yield, making it attractive to income-focused investors. However, leverage can increase volatility. For those comfortable with higher risk in exchange for stronger income potential, JFR can serve as a powerful inflation hedge within a diversified income portfolio.
8. First Trust Senior Loan Fund (FTSL)
The First Trust Senior Loan Fund (FTSL) is an actively managed ETF focused on high-quality senior secured loans. Its managers emphasize credit analysis and aim to avoid the weakest issuers in the leveraged loan market. This selective approach can help reduce default risk while maintaining attractive yields. As rates rise, the floating nature of loan coupons supports higher income distributions. FTSL appeals to investors seeking active oversight within the flexible and transparent ETF format.
9. Eaton Vance Floating-Rate Income Fund (EFT)
The Eaton Vance Floating-Rate Income Fund (EFT) is another closed-end option specializing in floating-rate loans. Eaton Vance has long experience in credit markets, and EFT focuses on income generation with active management. Like many closed-end funds, EFT may employ leverage to enhance returns, which can amplify both gains and risks. For investors seeking higher yields and willing to navigate discount fluctuations, EFT offers a robust inflation hedge through floating rate exposure.
10. Franklin Floating Rate Daily Access Fund (FRIFX)
The Franklin Floating Rate Daily Access Fund (FRIFX) invests primarily in senior secured floating rate loans with a focus on capital preservation and income. Managed by Franklin Templeton, the fund seeks to balance yield with credit discipline. Its daily liquidity feature makes it suitable for investors who value flexibility while maintaining exposure to rate-sensitive income. During inflationary periods, FRIFX’s variable coupon structure helps protect purchasing power, making it a practical option for diversified income portfolios.
Conclusion
Floating rate funds can play an important role in protecting portfolios during inflation and rising-rate environments. Whether you prefer ETFs, mutual funds, or closed-end funds, the options above provide diversified exposure to senior loans and floating rate bonds. As always, consider credit risk, fees, and overall asset allocation before investing. When used wisely, these top floating rate funds for inflation hedge strategies can enhance income while reducing interest rate sensitivity in your portfolio.