ETF Case study: Enabling efficient and scalable access to senior loans

Salman Zaidi
brad-smith
and
July 21, 2025
View of street and buildings

Key takeaways

  • The challenge:

    Following a significant distribution, a government pension plan sought to efficiently deploy capital while evaluating private credit opportunities.

  • The approach:

    Senior loans, given their strong correlation with private credit, were identified as a preferred allocation, however, they can present trading and settlement challenges.

  • The solutions:

    The pension plan allocated $122 million to the Invesco Senior Loan ETF (BKLN), leveraging its liquidity and efficient access to senior loans.

Following a significant distribution, a government pension plan sought to efficiently deploy capital while evaluating private credit opportunities. Given their strong correlation with private credit, senior loans emerged as a preferred option. However, the inherent trading and settlement complexities of senior loans presented operational challenges. To address these issues, the plan utilized the Invesco Senior Loan ETF (BKLN) to gain efficient and scalable access to the asset class.

The opportunity

Senior loans have historically exhibited a high correlation with private credit, effectively serving as a proxy for private credit exposure, as demonstrated in the chart below. 

This strong correlation positioned senior loans as an attractive option for the pension plan to efficiently deploy capital while evaluating private credit opportunities. However, direct investment in senior loans can present challenges, including extended settlement periods and operational complexities.

The approach

BKLN, the world’s largest, most established, and most liquid senior loan ETF in the US,1 can help address these challenges. Composed of senior bank loans, BKLN provides access to the 100 largest loan facilities in the Morningstar LSTA US Leveraged Loan Index. This can enhance liquidity and can reduce settlement and operational risks. Its long track record and institutional focus have made BKLN a preferred vehicle for efficient senior loan exposure.

The solution

The pension plan allocated $122 million to BKLN, leveraging its efficient access to senior loans and its ability to serve as a proxy for private credit.

Beyond interim allocations, many institutional investors have maintained significant, long-term positions in BKLN, suggesting its versatility in meeting a range of portfolio objectives. As institutional adoption continues to grow, we believe BKLN is well-positioned to remain a valuable solution for senior loan exposure.

How can we help meet your needs?

Explore how our ETF capabilities can help enhance institutional portfolios and contact our institutional ETF team to learn more about BKLN and how it has supported institutional investors’ portfolio needs for nearly 15 years.

  • 1

    BKLN was launched in 2011 and was the first bank loan ETF, per Bloomberg L.P. Liquidity represented by BKLN trading volumes as a percentage of all LSTA US Leveraged Loan 100 Index secondary market loan trades, sourced from LSTA (Loan Syndications and Trading Association) and Bloomberg L.P., as of Jan. 31, 2025. 

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