Picking the right partner is crucial, whether it’s for a mechanical task, baking, or even investing in the financial markets. Just like in life, finding the right partners to work alongside you in your portfolio is essential for success.
Pick The Right Partner: XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT)
The XAI Octagon Floating Rate & Alternative Income Term Trust (NYSE:XFLT) is an income-focused Closed-End Fund (CEF) that has caught my attention. With a yield of 15.4%, XFLT invests in floating-rate corporate loans through direct investments in senior secured corporate loans and Collateralized Loan Obligations (CLOs). These CLOs also invest in senior secured corporate loans with credit ratings in the B range.
What makes XFLT unique is its active management of the CLO portfolio. It can either take on a debt position, where it is owed an amount of principal and paid at a floating interest rate, or own a portion of the equity tranches that keep the profits. While equity tranches offer higher returns, debt tranches are prioritized for payments.
XFLT’s portfolio is well-diversified, with no single borrower accounting for more than 0.7% of its holdings. The fund maintains an equal allocation between senior loans and CLOs, investing in both debt and equity tranches of CLOs.
Given the current market conditions, with rising interest rates, XFLT’s focus on floating-rate loans has helped it withstand the headwinds. The yield to maturity for these loans is over 10%, higher than during the COVID panic.
Moreover, XFLT has taken advantage of the low loan and CLO prices by increasing its assets under management, making it more efficient and attractive for investors. Buying when prices are low is a proven strategy for long-term success, and XFLT seems to have capitalized on this opportunity.
With the Federal Reserve’s impact on the economy and credit markets, XFLT’s high yield provides an opportunity to benefit from the current environment. The management team actively seeks out high-yielding credit investments, which they pass on to investors as income. This income, received regularly, can provide stable cash flow and financial security during retirement.
By choosing the right partner like XFLT, investors can potentially earn substantial returns while enjoying the peace of mind that comes with having reliable income. Investing in income-focused strategies can offer the bedrock for a financially secure retirement and provide the means to meet everyday expenses and enjoy life’s pleasures.
So, if you’re looking for a partner to join you in the market and earn over 15% in yield, consider XFLT as a valuable addition to your income portfolio.