ARES - ARDC: A Value-Priced 10.32%-Yielder In An Uncertain Environment (Rating Upgrade)

2024-02-20 17:28:44 ET

Summary

• The Ares Dynamic Credit Allocation Fund, Inc. is a closed-end fund designed to provide income-focused investors with a high level of income from their assets.
• The ARDC closed-end fund has a strong performance track record and is managed by Ares Management Corporation, known for being one of the best credit managers in the industry.
• The fund's portfolio is designed to generate strong returns regardless of whether interest rates go up or down, making it a good choice in the current uncertain interest rate environment.
• The fund is fully covering its distributions and yields 10.32% right now.
• The fund is trading at an attractive discount on net asset value, so the entry price is certainly decent.

The Ares Dynamic Credit Allocation Fund, Inc. ( ARDC ) is a closed-end fund, or CEF, that income-focused investors can purchase as a method of achieving their goals. In particular, this fund is designed to provide investors with a very high level of income from the assets that they already possess. It can also be useful for those who are still in the process of building their wealth, as the fund’s sizable 10.32% current yield provides a lot of money that can be reinvested in the fund or used to purchase additional assets.

The fund also has a strong performance track record and has the advantage of being managed by Ares Management Corporation ( ARES ), which has earned a reputation of being one of the best credit managers in the industry among institutional investors. Finally, this fund could be a good choice right now because there still exists a great deal of uncertainty about the direction in which interest rates will go over the remainder of 2024 and its portfolio is designed to generate strong returns regardless of whether rates go up or down.

As regular readers may recall, we last discussed the Ares Dynamic Credit Allocation Fund in late November 2023. At the time, the bond market was in the midst of a powerful bull run as various market participants began to believe that the Federal Reserve would aggressively reduce interest rates in 2024. As a result, they were bidding up the price of just about anything that produced a positive yield in an attempt to front-run this expected series of rate cuts. This bull run has since been tempered somewhat as recent economic data has cast a great deal of doubt on the rate cut narrative, but bonds in general have not yet given up the gains that they earned during that period. This period of bull market optimism has benefited this fund’s share price, as the price of the Ares Dynamic Credit Allocation Fund is up 7.31% since our previous discussion. This is a substantially better performance than the 1.03% gain that was delivered by the Bloomberg U.S. Aggregate Bond Index ( AGG ):

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