ACP: Turning Point Could Be Approaching But I'm Still Cautious (Rating Upgrade)

2025-03-30 21:35:40 ET

Summary

• ACP has continued to experience price declines amidst the higher interest rate environment. However, we are at a turning point where things can start to improve.
• ACP trades at a significant discount to NAV; concerns remain about credit market outlook and sustainability of distributions.
• The fund's portfolio is diverse but lacks tech exposure and relies heavily on consumer-facing investments, posing risks in high inflation and tariff uncertainty.
• Upgraded to a hold rating; potential improvement if interest rates cut in 2025, but risks persist with lower net investment income and reliance on realized gains.

Overview

abrdn Income Credit Strategies Fund ( ACP ) operates as a closed end fund that aims to provide attractive total returns through its portfolio of diverse credit investments. I previously covered ACP a few quarters ago and issued a sell rating due to the underlying weaknesses and continued underperformance of the fund. Since my last coverage, the fund has released an updated annual report that does reveal some improvements in earnings, so I wanted to take this as an opportunity to reassess ACP's potential....

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