<< Back to Member's Home




Mutual Fund Spotlight - PFFRX

T. Rowe Price Institutional Floating Rate Fund - F Class (PFFRX)

Date: 10/1/2017

Author: Stock & Mutual Fund Hotline


Earlier this year, I wrote an article that reviewed some of the challenges Bonds and Bond funds can face in a rising interest rate environment. And although historical data showed that rising rates don’t necessarily spell doom and gloom for Bond funds, they can certainly create headwinds and help hold back total returns for this asset class.

As a viable addition or alternative to traditional Bond fund investments, I think it’s worth considering the T. Rowe Price Institutional Floating Rate Fund – F Class (PFFRX). Floating Rate funds, also called Bank Loan funds, are mutual funds that buy loans made by banks or other financial institutions to companies that pay interest based on a floating rate. As its name implies, a floating rate is not a fixed rate, but rather a rate that adjusts periodically based on a publicly available, short-term referenced interest rate such as the London Interbank Offered Rate (LIBOR), or the U.S. Prime Rate. This being the case, rising interest rates can potentially be beneficial to both the current yield and underlying share price of these funds.

Bank loans are usually senior secured debt and are mostly rated below investment grade because the borrower’s ability to repay may be viewed as speculative. Such loans are used for general corporate purposes as well as to refinance debt and fund acquisitions, leveraged buyouts or recapitalizations. In an effort to manage risk, the fund is broadly diversified across 125 - 150 credit facilities, with strict exposure limits.

This fund pays dividends on a monthly basis, and currently has an annual yield of 4.23%. The lead manager of the fund is Paul Massaro, who has been at the helm since 2009. With all share classes combined, the fund has in excess of $5 billion under management.

I don’t consider this fund a replacement for core Bond fund holdings, but in some scenarios, it might make a nice addition to a well-diversified portfolio, offering an attractive monthly payout and the potential for capital appreciation. If you’d like to see if this type of fund may be suitable for your situation, please feel free to call Ted Black, CFP® at 888-878-0001, extension 3.

PLEASE NOTE: This is a no-load fund; however, there is a 2.00% redemption fee if held less than 90 days.

Performance annualized and updated through 09/30/2017:
1-Year: +4.29; 3-Year: +3.93%; 5-Year: +3.99%.
The gross annual expense ratio is 0.72%.

If you questions about how your current situation might be affected by recent events, please feel free to call Ted Black, CFP® at 888-878-0001, extension 3.

Ted Black, CFP®
888-878-0001, extension 3
Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.

Statistics and information provided by Morningstar and T. Rowe Price. Please visit the T. Rowe Price website at www.troweprice.com for the most recent performance information. The principal value and investment return will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns shown, unless otherwise indicated, are total returns, including any capital gains or losses and all dividend and capital gains distributions. The performance data quoted represents past performance and in no way guarantees future results. Mutual funds are not FDIC insured.

Mutual funds are sold by prospectus. An investor should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. Please go to www.troweprice.com or contact our office at 888-878-0001 to obtain a prospectus. Please read the prospectus carefully before you invest or send money. Advisory services offered through Royal Palm Investment Advisors, Inc., a Registered Investment Advisor.

© 2017 International Administrative Services, Inc. All rights reserved.