XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT)

As of 04/20/2018

Closing price

$9.17

 

Closing NAV

$9.72

 

Premium/discount

-5.66%

 

Current distribution rate1

9.03%

Fund overview

The Trust seeks to achieve its investment objective by investing in a dynamically managed portfolio of opportunities primarily within the private credit markets. Under normal market conditions, the Trust will invest at least 80% of its Managed Assets (as defined in the Prospectus) in floating rate credit instruments and other structured credit investments.

Adviser

XA Investments LLC

XA Investments LLC is an affiliate of XMS Capital Partners, LLC, a FINRA member and SIPC member. To review any of its brokers, you may refer to the BrokerCheck website.

Sub-Adviser

Octagon Credit Investors, LLC

Objective

Seeks attractive total return with an emphasis on income generation across multiple stages of the credit cycle. There can be no assurance that the Trust will achieve its investment objective, and you could lose some or all of your investment.

Snapshot (as of 04/20/2018)

Closing price $9.17
Closing NAV $9.72
Premium/discount -5.66%
Current distribution rate1 9.03%
Tax reporting 1099 tax form
CUSIP 98400T106
Ticker XFLT
NAV ticker XFLTX
Shares outstanding 8,347,991
Total common assets $81,160,137
Total managed assets $120,025,137
Leverage Ratio 32.4%

Inception Date

9/27/2017

Inception Price

$10.00

Inception NAV

$9.78

Distribution Frequency

Monthly

Term

20292

1The current distribution rate is calculated as the most recently distribution annualized and divided by the closing price on the date set forth above.

Portfolio management

The Trust’s investment portfolio will be comprised largely of floating-rate credit instruments and other structured credit investments, which XAI and Octagon expect to perform well in a rising interest rate environment. The Trust’s assets will be managed opportunistically primarily within private below investment grade credit markets* including:

  • Senior secured floating-rate loans;
  • Structured credit (CLO debt and CLO equity);
  • Opportunistic credit (long/short Credit investments and stressed credits).

The Trust expects to be able to invest the net proceeds from the initial offering of common shares within three months.

*The Trust currently intends to invest primarily in below investment grade credit instruments, but may invest without limitation in investment grade credit instruments. Credit instruments are considered below investment grade quality if rated below Baa3- by Moody’s or below BBB- by S&P or Fitch or, if unrated, judged to be below investment grade quality by Octagon.

At the heart of Octagon’s disciplined investment philosophy is a deep understanding of fundamental credit analysis, enhanced by a process focused on optimizing returns against target risk profiles. Octagon’s investment philosophy combines relative value focus and active portfolio management. Over Octagon’s 23-year history, it has developed a repeatable and scalable credit selection and investment process.

Octagon’s investment process involves four key steps:

  1. Ongoing assessment of investment opportunities;
  2. Research, analysis and written recommendations with defined investment theses;
  3. Investment committee approval before any credit is considered for investment;
  4. Continual, collaborative monitoring that enhances decision making and risk management.
Octagon Proprietary Evalutions

Octagon Proprietary Evaluations

Octagon’s proprietary evaluations of credit, liquidity and collateral quality are a determinant in position size and target weighting. Octagon’s risk management process includes formal portfolio reviews and real-time portfolio monitoring.

Andrew D. Gordon

Andrew D. Gordon

Chief Executive Officer, Co-Chief Investment Officer

Mr. Gordon co-founded Octagon in 1994 and subsequently managed numerous Octagon funds before assuming his current position. He has over 30 years of experience in the below-investment grade leveraged loan and high yield bond asset classes, in both sell-side and buy-side capacities.

Michael B. Nechamkin

Michael B. Nechamkin

Co-Chief Investment Officer, Portfolio Manager

Mr. Nechamkin joined Octagon in 1999. He has 26 years of industry experience, including 17 years at Octagon. Mr. Nechamkin is a member of Octagon’s Investment Committee and serves as the Senior Portfolio Manager of three CLOs, four Separately Managed Accounts, and three Private Commingled Funds.

Lauren M. Basmadjian

Lauren M. Basmadjian

Portfolio Manager

Ms. Basmadjian joined Octagon in 2001. She has 15 years of industry experience. She is a member of Octagon’s Investment Committee and serves as the Portfolio Manager of ten CLOs, two Separately Managed Accounts, and two Private Commingled Fund. Prior to becoming a Portfolio Manager, Ms. Basmadjian managed Octagon’s workout efforts and also oversaw Octagon’s investments in the leisure and entertainment, retail, consumer products, business services, food and beverage and technology industries.

Gretchen M. Lam, CFA

Gretchen M. Lam, CFA

Portfolio Manager

Ms. Lam joined Octagon in 1999. She has 17 years of industry experience. She is a member of Octagon’s Investment Committee and serves as the Portfolio Manager of six CLOs, two Separately Managed Accounts, and three Private Commingled Funds. Prior to becoming a Portfolio Manager, Ms. Lam oversaw Octagon’s investments in the software, business services, finance and insurance, paper and packaging, gaming and lodging, homebuilding and real estate industries.

Performance

Total returns (% as of 3/31/18)

  1M 3M QTD YTD Since
Inception
Price -0.08 2.69 2.69 2.69 3.43
NAV -2.16 2.71 2.71 2.71 -2.05
Benchmark 0.24 1.38 1.38 1.38 2.42

“Price” is based on the closing prices of XFLT on the NYSE at the end of trading on the last trading day of each period. “Benchmark” is the S&P/LSTA U.S. Leveraged Loan 100 Index, which is a market value-weighted index designed to measure the performance of the U.S. leveraged loan market. Past performance is no guarantee of future results. Current performance may be higher or lower than the data shown. Returns assume reinvestment of distributions, and NAV returns are net of fund expenses. See “Risks” at the bottom of this page.

Portfolio composition

Asset allocation (% as of 2/28/2018)

Asset Allocations are measured as a percentage of the funds Managed Assets as of 2/28/2018. Allocations may vary and are subject to change without notice. The total may not equal 100% due to rounding.

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end funds are subject to investment risks, including the possible loss of principal invested. Past performance is no guarantee of future results.

An investment in this fund presents a number of risks and is not suitable for all investors. Investors should carefully review and consider potential risks before investing. For more detailed information on the specific risks associated with this fund, please view the XFLT Fund page.

Fund characteristics (as of 2/28/2018)

Number of Holdings 148
Average bond price as a percentage of par 97.68%
Effective maturity 8.59 years

Fund Characteristics are as of 2/28/18, may vary and are subject to change without notice.

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end funds are subject to investment risks, including the possible loss of principal invested. Past performance is no guarantee of future results.

An investment in this fund presents a number of risks and is not suitable for all investors. Investors should carefully review and consider potential risks before investing. For more detailed information on the specific risks associated with this fund, please view the XFLT Fund page.

Credit quality (as of 12/31/2017)

Top Ten Portfolio Holdings (as of 2/28/2018)

View All Holdings
Holding % Portfolio
RR 1, LLC 2017-1A 3.24
Ares, Ltd. 2017-46A 3.18
Madison Park Funding, Ltd. 2015-18A 3.14
Apidos 2017-28A 2.70
OZLM, Ltd. 2017-19A 2.68
Taconic Park 2016-1A 2.58
Carlyle Global Market Strategies, Ltd. 2013-1A 2.42
CIFC Funding, Ltd. 2017-5A 2.33
Marble Point, Ltd. 2017-2A 2.30
Dryden, Ltd. 2014-34A 2.20
Holding % Portfolio
Taconic Park 2016-1A 2.58
Carlyle Global Market Strategies, Ltd. 2013-1A 2.42
CIFC Funding, Ltd. 2017-5A 2.33
Marble Point, Ltd. 2017-2A 2.30
Dryden, Ltd. 2014-34A 2.20

Holdings are measured as a percentage of the funds Managed Assets as of 2/28/2018. Holdings may vary and are subject to change without notice.

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end funds are subject to investment risks, including the possible loss of principal invested. Past performance is no guarantee of future results.

An investment in this fund presents a number of risks and is not suitable for all investors. Investors should carefully review and consider potential risks before investing. For more detailed information on the specific risks associated with this fund, please view the XFLT Fund page.

Top 5 Industries (as of 12/31/2017)

Industry % Portfolio
Asset Backed Securities 48.20
Software 8.00
Media 3.90
Hotels, Restaurants & Leisure 3.80
IT Services 3.30

Maturity breakdown (as of 2/28/2018)

Maturities are as of 2/28/18, may vary and are subject to change without notice.

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end funds are subject to investment risks, including the possible loss of principal invested. Past performance is no guarantee of future results.

An investment in this fund presents a number of risks and is not suitable for all investors. Investors should carefully review and consider potential risks before investing. For more detailed information on the specific risks associated with this fund, please view the XFLT Fund page.

Pricing & fees

Share Price

  Date Closing
Price($)
High 10/3/17 11.50
Low 4/20/18 9.17

NAV

  Date Closing
NAV($)
High 2/4/18 9.91
Low 11/15/17 9.68

Premium / Discount

  Date Premium/
Discount
High 10/3/17 17.95%
Low 4/20/18 -5.66%

IPO information

Date 9/27/2017
Price $10.00
NAV $9.78
NAV ticker XFLTX
CUSIP 98400T106

Share price and NAV history (as of 04/20/2018)

Pricing History

Date Share Price NAV Premium / Discount
04/20/2018$9.17$9.72-5.66%
04/19/2018$9.20$9.73-5.45%
04/18/2018$9.23$9.73-5.14%
04/17/2018$9.26$9.72-4.73%
04/16/2018$9.27$9.72-4.63%
04/13/2018$9.30$9.72-4.32%
04/12/2018$9.40$9.78-3.89%
04/11/2018$9.32$9.78-4.70%
04/10/2018$9.33$9.78-4.60%
04/09/2018$9.33$9.77-4.50%

Premium / Discount Information (as of 04/20/2018)

Annual Expenses As a percentage of net assets attributable to Common Shares3 As a percentage of Managed Assets
Management fees 2.44% 1.70%
Interest on borrowed funds 1.18% 0.82%
Other expenses    
Investor support and secondary market support services fee 0.29% 0.20%
Other 1.12% 0.78%
Total annual expense 5.03% 3.50%
Fee waiver4 -0.69% -0.48%
Total annual expense after fee waiver 4.34% 3.01%

Expenses shown in the table are based on actual expenses of the Trust for the quarter ended December 31, 2017, annualized, and the Trust's average managed assets and average net assets for the quarter ended December 31, 2017. Common shareholders bear the expenses of the Trust, including the management fee, which is calculated on the basis of the Trust's Managed Assets, including proceeds from leverage, and the cost of leverage, as shown in the column "As a Percentage of Net Assets Attributable to Common Shares" above. As of December 31, 2017, the Trust had outstanding leverage equal to 32.42% of the Trust's Managed Assets. See "Risks" at the bottom of this page.

Distributions

Payable Date Record Date Ex-Div Date Declaration Date Amount Distribution Type
5/1/2018 4/16/2018 4/13/2018 4/2/2018 $0.069 Income5
4/2/2018 3/15/2018 3/14/2018 3/1/2018 $0.069 Income5
3/1/2018 2/15/2018 2/14/2018 2/1/2018 $0.069 Income5
2/1/2018 1/16/2018 1/12/2018 1/2/2018 $0.069 Income5
12/29/2017 12/15/2017 12/14/2017 12/1/2017 $0.069 Income5
12/1/2017 11/15/2017 11/14/2017 11/1/2017 $0.069 Income5