Investors have grown increasingly concerned about the possibility of rising interest rates in the coming months. Consequently, floating-rate loan funds have experienced massive inflows over the past year. But not all floating-rate funds are created equal. Many of these funds take on significant risk to generate high yields. Investors should stick with reliable managers who can contain risk.

Despite the Fed’s repeated assertion that rates will remain low for “an extended period,” futures trading indicates that many expect rates to rise sooner rather than later—the Federal Open Market Committee is keen to prevent another asset bubble. The Fed has also announced that it will not commit new money to its second quantitative easing program after it comes to an end this month. Consequently, many economists suspect that real interest rates may soon begin to rise, regardless of whether the Fed adjusts the benchmark rate.

Investors should stop fretting over the timing of an interest rate hike. It’s time to accept the inevitable and position your portfolio accordingly.

Floating-rate loans—also known as bank loans—are an excellent way to hedge your portfolio against rising interest rates. Tied to the three-month London Interbank Offered Rate, the rates borrowers pay on such loans will head higher when the Federal Reserve begins tightening monetary policy.

Investors have been wary of floating-rate loan funds over the past few years, but they’ve changed their tune in 2011.  More than $10 billion has flowed into these investments vehicles year- to-date. These inflows have caught the eye of fund companies; eight new floating-rate loan funds were launched in the past year. Rather than race for shares of the newest fund on the street, we recommend investors choose funds with a track record of success.

Fidelity Floating Rate High Income (FFRHX) is one of the best ways to gird your portfolio against higher interest rates. Christine McConnell, who has helmed the fund since its inception, takes a conservative approach to portfolio management.

Unlike many of her peers who often load up on highly illiquid or poorly rated loans, McConnell places a premium on liquidity and holds many higher-quality loans—the portfolio’s average credit rating is BB. Only a little more than 1 percent of the portfolio is invested in loans rated below investment grade.

McConnell also favors debt from large-cap issuers—small-cap companies have high historically high default rates and typically have trouble raising cash in a pinch—and doesn’t rely on leverage. The fund also invests primarily in loans to asset-heavy companies that carry strong collateral claims, providing ample recourse in the unlikely event that a company goes under.

That conservative investment approach helped protect the fund from heavy losses in 2008. While the fund declined 16.5 percent that year, its average peer gave up about a third of its value. That outperformance in a tough year has helped vault the fund to the top of its category based on a trailing three-year basis.

And unlike many mangers who delegate the bulk of the research, McConnell insists on scrutinizing and vetting each loan herself. Bank loans entail a high degree of credit and risk and can be extremely volatile. However, McConnell does an excellent job of risk management. The fund’s beta, a measure of its volatility relative to its benchmark, is only 0.52 relative to the S&P/LSTA Leveraged Loan Index and just 0.23 relative to the broader Barclays Capital US Aggregate Bond Index.

But the fund isn’t a pure play on floating-rate bank loans; McConnell devotes about 6 percent of investable assets to short-dated, plain-vanilla bonds that offer high yields. The fund also holds a cash stake of 14 percent of assets.

Fidelity Floating Rate High Income sports an expense ratio of just 0.73 percent, one of the lowest in its category, so McConnell’s expertise comes cheap. The fund yields 3.4 percent and pays monthly distributions, providing a nice income kick with appreciation potential.

But the fund isn’t a risk-free proposition. The bank loan market is notoriously illiquid and these investments are usually the first to be hit when the economy stumbles. But given the conservative nature of this fund, Fidelity Floating Rate High Income is the least risky option in the floating-rate market.