In the first quarter, the John Hancock Floating Rate Income Fund recorded a performance below the Morningstar LSTA US Leveraged Loan Index on a net basis. This underperformance was primarily attributed to the weaker contributions from B2-rated loans within the portfolio. Despite these challenges, the fund saw positive contributions from its investments in high-yield bonds and structured credit, which helped to partially mitigate the overall impact. This period highlighted both the difficulties in certain loan segments and the benefits of diversified holdings in other credit instruments.
Looking ahead, the fund is actively taking steps to improve its portfolio quality and adapt to market conditions. Management has been increasing allocations to BB-rated loans, which are considered to have higher credit quality, and has been making strategic adjustments within the single-B loan segment. This rebalancing effort includes maintaining a lower-than-benchmark exposure to CCC-rated assets, reflecting a cautious stance on riskier credits. A significant development for the fund is the upcoming shareholder vote, scheduled for June 2026, to approve the appointment of Manulife | CQS Investment Management as the new fund manager, succeeding Bain Capital Credit. This potential change in management could introduce new strategies and perspectives to the fund's investment approach.
The proactive measures taken by the fund, including strategic portfolio adjustments and a pending management transition, illustrate a commitment to enhancing investor value. By carefully navigating the complexities of the credit market and embracing strategic evolution, the fund aims to achieve more resilient and consistent performance in the future. This forward-looking approach, combined with a focus on risk management and diversification, provides a solid foundation for long-term growth and stability for its investors.
