BWG - DSL: Increasing Allocation To Bank Loans Despite Impending Fed Rate Cuts

2025-03-07 17:00:35 ET

Summary

• DoubleLine Income Solutions Fund offers a high yield of 10.34%, but its yield is lower than several peers due to its popularity.
• Despite lower yields, the fund's total return performance has been strong, outperforming most peers over the past three years.
• The fund has increased its allocation to bank loans despite the Fed and the market both predicting interest rate cuts this year.
• The fund's expense ratio is reasonable given its performance, but investors should monitor its allocation to bank loans amid potential interest rate cuts.
• The fund's current premium pricing suggests caution; it may be a better buy if it trades at a discount.

The DoubleLine Income Solutions Fund ( DSL ) is a closed-end fund, or CEF, that investors can employ as a method of achieving a very high level of current income from their portfolios. Many funds from DoubleLine have become increasingly popular among investors, which is at least partly due to the near-celebrity status of DoubleLine’s cofounder and CEO Jeffrey Gundlach. Forbes offers a profile on him, and Mr. Gundlach has received accolades from several other financial publications including Barron’s, Institutional Investor, and Bloomberg Markets. Mr. Gundlach is one of the portfolio managers for the DoubleLine Income Solutions Fund, so naturally, his involvement might be one of the reasons for this fund’s popularity. However, we should not buy any fund or other asset simply because a member of its management team has managed to achieve a near-celebrity status in the financial media. Rather, we should look at the fund’s portfolio and the broader macroeconomic conditions to determine whether it is likely to be a worthwhile investment.

The DoubleLine Income Solutions Fund has a yield that some income-focused investors will likely find attractive. As of the time of writing, the fund’s yield is 10.34%, which is far higher than any of the major domestic or international bond indices. We can see that in this comparison chart:

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