AFT - AIF: The Opportunity Is Not As Good As It Was But This Fund Still Makes Sense
2024-02-18 09:05:04 ET
Summary
- The Apollo Tactical Income Fund offers a high level of income with a current yield of 10.74%, higher than many other investment options.
- The fund has outperformed the Bloomberg U.S. Aggregate Bond Index over the past five years, giving it a history of very strong performance.
- The fund's management has been actively adjusting its portfolio, increasing its allocation to floating-rate loans and reducing exposure to junk bonds.
- The fund appears better at navigating interest-rate uncertainty than many peers, which could be advantageous right now.
- Investors in the fund will receive a sizable cash payout if the merger with MFIC goes through in a few months.
The Apollo Tactical Income Fund ( AIF ) is a closed-end fund that can be utilized by investors who are seeking to earn a very high level of income from the assets in their portfolios. The fund certainly appears to be doing a fairly good job at this task, as its 10.74% current yield is higher than many other things that can be purchased today. Indeed, this yield is higher than just about any investment-grade or junk bond fund and only floating-rate funds, such as the Apollo Senior Floating Rate Fund ( AFT ) which is also offered by Apollo Global Management ( APO ). The Apollo Tactical Income Fund is also a pretty good fund for those investors who do not want to be actively moving their assets between fixed-rate and floating-rate funds in order to maximize their incomes, as this fund invests in both asset classes. Apollo Global Management has managed to earn itself a reputation as a very good alternative credit manager so investors should generally be able to take confidence in the management's ability to move between fixed-rate and floating-rate securities to maximize their incomes and return on capital. We can see this in the fact that the Apollo Tactical Income Fund has managed to achieve a 58.45% total return over the past five years:
We can clearly see that the fund has managed to substantially outperform the Bloomberg U.S. Aggregate Bond Index ( AGG ) over the period. I have also included the Ares Dynamic Credit Allocation Fund ( ARDC ) on the chart as well, as that is another well-regarded fund that employs a very similar strategy. As we can see, the Apollo Tactical Income Fund managed to outperform its counterpart from Ares Management ( ARES ) over the five-year period. Admittedly, though, some of the outperformance that we see in the past few months could be driven by investors buying shares of this fund in anticipation of the $0.25 special distribution that will be paid when this fund merges with MidCap Financial Investment Corporation ( MFIC ). I will admit that receiving that payment is one reason why I have been adding to my positions in both of Apollo's publicly traded closed-end funds over the past few months. With that said, the mergers have not been approved by the shareholders yet and I have not received any voting proxy regarding this merger as of mid-February. As such, this article will discuss this fund as it is today and will be for at least the next few months....
AIF: The Opportunity Is Not As Good As It Was, But This Fund Still Makes Sense