ARDC: High-Yield Fund, Fully Covered Distribution, Yielding 9.5% Plus, But There Are Risks

2025-03-09 08:30:00 ET

Summary

• Ares Dynamic Credit Allocation Fund is a dynamically managed high-yield fixed-income fund that focuses on generating high current income. Its investment portfolio consists of floating-rate bank loans, high-yield bonds, and CLO securities.
• ARDC currently offers a very attractive and fully covered 9.5% plus distribution yield and is currently trading at a small discount of roughly -4.3%.
• However, there are some risks involved depending on the direction of interest rates. The fund is fairly priced after the premium has moved to a discount in recent weeks, but it can still get cheaper from current levels.

Introduction:

Ares Dynamic Credit Allocation Fund (ARDC) is a closed-end fund that was incepted in Nov. 2012. The fund primarily invests in senior secured loans and high-yield corporate bonds. A portion of the portfolio is also invested in CLOs (collateralized loan obligation securities) and asset-backed securities, but to a maximum extent of 45%. The portfolio is dynamically managed based on the changing market conditions. Most of the portfolio consists of securities of the companies (or loans to the companies) that have below-investment-grade ratings....

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