T. Rowe Price Floating Rate Fund (PRFRX)
Ticker Symbol:
PRFRX
Fund Status:
Open to new Retail investors  /  Open to subsequent Retail investments
Fund Management
Fund Manager
  • Paul M. Massaro
  • Managed Fund Since: 07/29/2011
  • Joined Firm On 06/30/2003*
  • B.S., Cornell University; M.B.A., University of Pennsylvania, The Wharton School

*Firm refers to T. Rowe Price Associates and Affiliates
Quarterly Commentaries
as of 06/30/2015

The bank loan market generated modest gains for the second quarter of 2015, outperforming high yield bonds in June as volatility resurfaced. New issue supply to date in 2015 has been somewhat less robust than last year, but the market is buttressed by solid demand for higher-yielding products. Strategic merger and acquisition (M&A) activity should continue to be a positive for companies in the asset class. Many industries are rationalizing costs and operations to generate efficiencies, boosting revenues, earnings, and cash flow growth. The Federal Reserve continued to prepare the market for its first interest rate increase since 2006, which could happen later in 2015. We believe that the focus on our asset class is likely to increase and investor demand should improve as interest rates rise and the resetting rate feature of loans becomes a beneficial factor.

The Floating Rate Fund returned 0.78% in the quarter compared with 0.82% for the S&P/LSTA Performing Loan Index. For the 12 months ended June 30, 2015, the fund returned 2.41% versus 2.58% for the S&P/LSTA Performing Loan Index. The fund's 1-year and Since Inception (07/29/2011) average annual total returns were 2.41% and 3.92%, respectively, as of June 30, 2015. The fund's expense ratio was 0.86% as of its fiscal year ended May 31, 2014.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Floating Rate Fund charges a 2% redemption fee on shares held 90 days or less. The performance information shown does not reflect the deduction of the redemption fee; if it did, the performance would be lower.

Benchmark Definitions

Credit selection contributed to returns, particularly in the health care industry. We have added to our health care holdings, a segment that includes many solid, high-quality companies with good asset coverage. The industry, and our positioning within it, has benefited from a steady flow of loan issuance and strategic M&A deals. Our reserves allocation, which is necessary for liquidity purposes, detracted from performance in an overall positive market environment. Aside from cash, there were few meaningful performance detractors; however, our underweight allocation to energy hurt relative results as the sector rallied in April and May.

Leveraged loans have performed as expected in recent months amid an uptick in volatility. Our market has been more defensive than high yield bonds and has continued to generate steady income. Bank debt has become an increasingly attractive option for investors looking for above-average yield and below-average interest rate sensitivity compared with most other fixed income sectors. The fundamentals underpinning the companies in the asset class continue to improve, as evidenced by the deleveraging of corporate balance sheets and strong cash flow generation. This leads us to believe that the default rate in the loan market will remain reasonably low through 2015.

See Glossary for additional details on all data elements.