Please stay tuned for important disclosure information at the conclusion of this episode.

Welcome to Investing Insights. I'm your host, Ivana Hampton. A floating rate investment with a risky reputation is growing in popularity.

The bank loan market has doubled in the past decade,

and that's made it a bigger asset class than high-yield bonds. Their adjustable yields boosted demand

when the Federal Reserve was raising interest rates, but the Fed cut interest rates in September

and is signaling more could follow? Could bank loans appeal drop as rates fall? Katie Benz is the

Director of Product Management for Morning Star Indexes. Here's our conversation. Welcome to the podcast, Katie.

Thanks so much for having me on, Ivana. Well, I want us to start with what are bank loans and how do they work?

Great question. So first, this asset class actually goes by many names, which can be a bit confusing.

The Morning Star category for ETFs and mutual funds is called bank loans. Our index that measures this asset class is called the Morning Star LSTA U.S.

Leveraged loan index, and you'll also hear the terms senior secure debt or broadly syndicated loans.

So nuances aside of these terms, very simply defined, a leveraged loan is a commercial loan

provided by a sizable group of lenders to a commercial borrower.

Deals are typically below investment grade, and these loans are broadly investable by

institutional investors, and while not directly investable by retail investors, they're widely

accessible through ETFs and mutual funds.

And bank loans share similarities with junk bonds, but they're still different.

Can you talk about that?

Indeed.

They do share a lot of similarities and some key differences.

So first of all, loans are actually private market transactions, whereas high-ield bonds

are typically publicly issued.

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