Toronto-based Horizons ETFs Management (Canada) Inc. has announce the launch of Horizons Active Floating Rate Senior Loan ETF, a U.S. senior secured floating rate loan ETF alternative to high yield bonds, which will offer some protection from potential rising interest rates.

Class E units (TSX:HSL) and Advisor Class units (TSX:HSL.A) began trading Wednesday on the Toronto Stock Exchange.

The fund seeks to provide unitholders with a high level of current income by investing primarily in a diversified portfolio of U.S. senior secured floating rate loans, which are generally rated below investment grade (loans rated at or below BB+ by Standard & Poor’s, or a similar rating by a designated rating organization) and debt securities, with capital appreciation as a secondary objective. The fund will, to the best of its ability, seek to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.

“In today’s low interest rate environment, income investors should be aware of how potential interest rate increases could impact the value of their bond portfolios,” said Howard Atkinson, president of Horizons ETFs, in a release. “Since senior loan prices are generally not impacted as negatively by rising interest rates as traditional bonds, HSL can be considered a diversification tool for fixed income investors that may help offset some of their interest rate risk.”

“The U.S. senior loan market is much larger than the Canadian corporate bond market, which means there is a sufficiently large universe of investments available to HSL,” said Atkinson.

“It can be a compelling alternative to holding high yield bonds, particularly for investors who are interested in generating an attractive monthly income that will generally rise or fall with short-term interest rates.”

Sub-advised by AlphaFixe Capital Inc., a Quebec-based investment management firm focused on fixed income investing, HSL will be actively managed by Sébastien Rhéaume and Diane Favreau with their team, who, collectively, have over 50 years of experience investing in senior loans.

HSL also offers a number of structural advantages compared to other senior loan products, such as its flexible asset allocation policy, which allows the ETF to hold cash, high yield bonds, and even investment grade bonds, that can all provide additional liquidity during adverse credit markets, Horizons noted.