This is a bond ETF that tracks an index of US dollar-denominated investment-grade floating rate bonds. The coupons on its holdings reset periodically in line with market benchmark rates, so its prices are less sensitive to interest rate changes than those of fixed-rate bonds.

It suits conservative investors who want short-term income while reducing interest rate risk, or who need a short-term place to park money as a substitute for cash equivalents.

It is a passively managed (index-tracking) ETF run by BlackRock (iShares).

The fund holds a broad range of investment-grade floating rate bonds whose coupons are linked to market benchmark rates. Because coupons reset periodically and duration stays short, interest income adjusts when rates rise, while price swings remain relatively limited.

• Low duration thanks to rate-linked coupons
• Broad diversification centered on investment-grade issuers

Assets under management (AUM) stand at $11.7B, and the total expense ratio is 0.15% per year.

Given the nature of short-term floating rate bonds, price stability tends to be relatively high during periods of interest rate change.

Because coupons reset according to the level of interest rates, price movements tend to be gentler than those of fixed-rate bonds, while income is directly affected by the short-term rate environment. Returns over any given period vary with the interest rate cycle.

When rates are rising or uncertainty is high, money seeking both price protection and income tends to flow into floating rate bonds. When rates are being cut, the income appeal fades and fund flows may slow.

Low duration and investment-grade diversification are its strengths, while shrinking income appeal when rates fall is its weakness.

Products such as FLRN hold similar investment-grade floating rate bonds with comparable expense ratios, making them direct comparisons. Products such as FLRT and PFRL focus on floating rate loans, offering higher income but also higher credit risk and expense ratios, and USLN is likewise in the floating rate loan category, with a different balance between stability and income. Among direct substitutes not shown in the table, products such as USFR and TFLO, which track US short-term Treasury floating rates, are Treasury-based and carry lower credit risk. Products such as NEAR, which extends duration slightly with short-term investment-grade bonds, are also worth considering.

Here are the points to review before investing in FLOT. Although it is a defensive income vehicle, it is wise to check the direction of the rate cycle, the credit environment of the underlying bonds, and the currency effect when converting to won before making an investment decision.

The main risk factors are lower income when rates fall and wider credit spreads during an economic slowdown. Price fluctuations are small, but it is hard to say there is no possibility of loss at all.

It is a suitable defensive choice for investors who want short-term income while reducing interest rate risk. To lower credit risk further, consider Treasury-based products such as USFR and TFLO, and to add a bit of duration and yield, consider products such as NEAR.