Bank-loan funds lacked investor appeal in 2019 and 2020 as interest rates fell. But economic recovery and the potential for rising short-term interest rates have put the category back in favor in 2021. Bank-loan mutual funds have received net inflows of more than $13 billion for the year to date through April 2021, which was almost a fourth of the category’s assets at the beginning of the year. Demand for high-yield bond funds has been milder this year despite the similarities of the two asset classes. While high-yield bonds have greater upside potential, bank loans' defensive characteristics make them an attractive portfolio diversifier. Bank loans’ unique floating-rate feature, their hierarchy in the capital structure, and the loan market’s industry composition all make for an appealing relative value opportunity versus high-yield bonds.