Some well-heeled investors seeking income investments at a time of near-record low interest rates are turning to direct-lending funds, which make loans to companies.

Many of the funds, often offered by hedge funds, have provided annual returns between 10 and 14 percent over the last two years, industry participants tell The Wall Street Journal.

That far exceeds the 6 percent average return offered by The Barclays U.S. Aggregate Bond index during that period.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

As for the loans, they generally go to mid-size companies. It used to be banks making these loans. But they have grown more cautious since the financial crisis, leaving companies wanting for capital, according to The Journal.

The loans are usually senior secured, which means they are the first to be repaid, giving investors some protection.

Fees are high like hedge funds, with many charging 2 percent of assets and 20 percent of profits. And the loan funds generally have lock-up periods of at least five years.

Still, "there's a lot of interest" from wealthy investors, Marc Lasry, head of hedge fund manager Avenue Capital Group, tells The Journal.

Bank loan funds, which are more accessible to average investors, also have proven attractive.

“Where else can you get 4 percent to 5 percent [yield] with zero duration?” Christopher Remington, a money manager for Eaton Vance, told Bloomberg last year. Duration measures the sensitivity of bond prices to interest-rate changes.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.