FS Credit Assiudus Corp. It offers the right type of yield.
The credit portfolio of this closed fund is attractive and its investment strategy is changing to reflect market dynamics.
The fund has some risks that investors need to know about.
10 shares we like better than FS ››
Some distributions are attractive. And some distributions are juicy. Think FS Credit Applise Corp.s (Nyse: FSCO) The distributions definitely belong in the last category.
This closed fund (CEF) is managed by FS Investments. It focuses on global credit markets, especially for senior secured loans and bonds. FS Credit Applise Corp. is currently 10.9% at the moment. That’s why I just bought shares from this ultra-high income fund and plan to buy even more.
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You probably wouldn’t believe me if I said that the yield of the high distribution offered by FS Credit Assiudision Corp. is not the main reason I bought the fund. And you will be justified in such skepticism. The juicy yield is certainly ranked as an important factor for why I invest in the gated fund.
More importantly, however, FS Credit Apportids Corp. Provides the right type of high yield. What do I mean by this? Other CEFs come with even higher distribution yields, but if you look at their records carefully, you will find that many of them pay distributions by selling assets. At least part of the yield you can get from these funds comes from your original director.
This is not the case with the FS Credit Apportids Corp., at least not since the current management team took over in 2018. The allocation has been fully funded through net income from investment, as the FS Global Credit team has taken over the fund management.
The ultra-high yield for this CEF is not due to poor performance, with the cost of sinking the shares stimulating the yield higher. FS Credit Assiudus Corp. gave exceptional return in the last year. The management increased the monthly distribution rate by 7.5% in the early 2025. As the fund was included in the New York Stock Exchange in November 2022, its distribution increased by approximately 52%.
I also like the main reason why FS Credit Apportids Corp. It can pay such a great distribution: its attractive credit portfolio. The Fund has assets of $ 2.1 billion invested in 77 portfolio companies representing multiple sectors. About 73% of these companies are privately held, with 93% of them based in the US
FS credit options focus mainly on senior secured loans. Approximately 72% of his participation is the first detained loans for the first bet, with a 3% second bet. Another 9% of the portfolio is in senior secured bonds. I like senior secured debt because it is supported by the assets of borrowers. Debt is also headed in the repayment list. This reduces the risk of the fund from default.
Fund managers are adjusting their investment strategy to reflect a changing market dynamic. For example, they give priority to private investment now, because they usually have better coverage of assets and are more insulated than instability than public credit markets. FS Investments stated in its last quarterly update, “we continue to position a defensive portfolio, adding what they believe are higher quality investments that have a low risk of default with solid agreements given the competitive environment in the credit markets.” That’s what I like to hear.
CEF’s highlights of private companies in the middle market are a good thing. FS credit opportunities can often structure investments with those businesses that give it more risk protection while receiving an attractive return.
Although I like this closed fund, I do not want to give the impression that investing in it does not come with risks. One of the main risks of FS credit capabilities is that it uses leverage (loan) to increase its performance. Leverage is a two -edged sword that can help and harm depending on the removal of interest.
The Fund’s focus on the higher secured debt does not completely isolate it from the risk of default. For example, the value of the assets of borrowers used as collateral may decline. Although FS’s loan opportunities can be controlled over the collateral in the worst scenario, CEF can still lose money from its investments.
FS Credit Loan Possibilities have provided an average annual return on the basis of the net asset value (NAV) of 7.75% as of January 1, 2018. However, there is no guarantee that the fund will be able to give a positive return in the future.
But I like the overall risk profile offered by this CEF. Unless something changes dramatically, I plan to buy more shares in the not too distant future.
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Keith Speights has positions in FS credit. Motley Fool has no position in any of the reserves mentioned. Motley Fool has a policy of disclosure.
Why I just bought this 10.9%-live fund and plan to buy even more shares, was originally published by Motley Fool
