Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Thanks @Mark. Great read. I especially liked the probability curves set on their sides to illustrate the potential return outcomes at higher risk. That was enlightening, to me.
In my view, the thought process set forth in this memo leads to the conclusion that investors should increase their allocations in this area if they are (a) attracted by returns of 7-10% or so, (b) desirous of limiting uncertainty and volatility, and (c) willing to forgo upside potential beyond today’s yields to do so. For me, that should include a lot of investors, even if not everyone.
My recommendation at this time is that investors do the research required to increase their allocation to credit, establish a “program” for doing so, and take a partial step to implement it. While today’s potential returns are attractive in the absolute, higher returns were available on credit a year or two ago, and we could see them again if markets come to be less ruled by optimism. I believe there will be such a time.
HM mentions most of us should be investing in low risk / low volatility debt that will return 7-10% going forward and provide a "fix outcome". Sounds good.
”HM mentions most of us should be investing in low risk / low volatility debt that will return 7-10% going forward and provide a "fix outcome". Sounds good.
But none of the credit vehicles are available except through an advisor; some are interval funds and some do not even trade publicly. If I remember Oaktree was bought by Brookfield, a firm much more focused on real estate and renewables. It looks like all the publicly available funds are RE or energy not "credit".
Mere mortals have to use high yield bond funds or BDCs and pray the manger knows what they are doing
Here are funds I track that returned between 8.7 and 7.23 over the last 12 months while having a positive return in 2022. They are CBLDX, CBRDX, JAAA, FLTR, NEAR, and VRIG.
If you were willing to experience a drop <= 1% in 2022, you could have made between 10.71 and 7.31 with the following funds: DDFLX, FFRHX, TBUX/TRBUX, and VNLA.
The reason I include 2022 is because I see no reason to assume that rates will fall predictably; although it's hard to see them rising as far from where they are now as they rose in 2022.
There may be lots of other funds out there that I missed.
" A non-diversified, non-traded, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 "
It lists minimum income requirements, and although it says "S" shares are available through transactional brokerage accounts, they only trade monthly and orders are due 5 days before, so it seems to be placed only by institutional advisor platform
the only easily traded vehicles I can find are their BDC Oaktree Specialty Lending OCSL (yielding 13% a bit higher than Mark's safe goal!) and a RiverNorth Oaktree High Income fund RNOTX. Oaktree manages the senior loans and high yield bonds.
ICMUX has done better as has RSIIX
Guess we will have to wait until all these "Private Credit" ETFs arrive.
As a point, I own a few BDC's and have been quite happy with how they have performed for me so far. Never expected much in the way of capital gains but you need to be a buyer at the right time and market circumstances. I own them for the income - ARCC, BXSL, CSWC and HTGC. MAIN (don't own) is probably the most well known but it is currently selling at a hefty premium to it's NAV.
Good luck to any who attempt to mimic Marks. An experienced pro. (Not directly relevant … ) CEFs were a lot cheaper at the start of the year than now. Forsyth and others in the media touted their attractive prices back in January. A lot of $$ has been made. I’m not biting after the big run-up.
Comments
Anyone have a list of such investments?
Anyone have a list of such investments?
@bee - You need to mail that request to Santa.
COALX
You don't have to look too far. Oaktree offerings of the promised land of 7-10% returns are conveniently listed below the letter.
Mere mortals have to use high yield bond funds or BDCs and pray the manger knows what they are doing
Here are funds I track that returned between 8.7 and 7.23 over the last 12 months while having a positive return in 2022. They are CBLDX, CBRDX, JAAA, FLTR, NEAR, and VRIG.
If you were willing to experience a drop <= 1% in 2022, you could have made between 10.71 and 7.31 with the following funds: DDFLX, FFRHX, TBUX/TRBUX, and VNLA.
The reason I include 2022 is because I see no reason to assume that rates will fall predictably; although it's hard to see them rising as far from where they are now as they rose in 2022.
There may be lots of other funds out there that I missed.
https://osc.brookfieldoaktree.com/about/overview
" A non-diversified, non-traded, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 "
It lists minimum income requirements, and although it says "S" shares are available through transactional brokerage accounts, they only trade monthly and orders are due 5 days before, so it seems to be placed only by institutional advisor platform
the only easily traded vehicles I can find are their BDC Oaktree Specialty Lending OCSL (yielding 13% a bit higher than Mark's safe goal!) and a RiverNorth Oaktree High Income fund RNOTX. Oaktree manages the senior loans and high yield bonds.
ICMUX has done better as has RSIIX
Guess we will have to wait until all these "Private Credit" ETFs arrive.