Investors tend to think of floating-rate bank loans as the cure for rising interest rates. But our research suggests that a rising-rate environment has historically been the worst time to buy loans.

This may seem strange. High-yield bank loan coupons adjust periodically based on changes in short-term interest rates. That means they don’t lose money the way fixed-rate bonds do during rising-rate environments.

Remember, though, that bank loans are credit assets—and what they lack in interest-rate risk they more than make up for in credit risk. Like other types of credit, they often do well in the late stages of a credit cycle, when rising rates haven’t risen high enough to choke off growth. That’s where we are today.

In fact, it’s not uncommon to see loans outpace other types of credit in this environment, because they’re insulated against the effect of rising rates. For instance, loans returned 3.6% through August 31. High-yield corporate bonds, which carry some interest-rate risk, delivered about 2% over the same period. (This isn’t always the case. Last year, loans trailed high-yield bonds, largely because high demand drove credit spreads and yields lower, allowing borrowers to refinance at lower rates.)

But exposure to bank loans at this late stage of the credit cycle is risky, because they tend to do poorly once the cycle turns, growth slows and defaults start to rise. The Fed’s latest round of tightening began in 2015, and we think we’re getting closer to the turning point. To avoid large drawdowns, investors would have to reduce exposure just before the cycle turns—a tall order for even the most seasoned investors.