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

As of

Closing price

Closing NAV

Premium/discount

Current distribution rate1

Fund overview

The Trust invests in a dynamically managed portfolio of floating-rate credit instruments and other structured credit investments within the private markets. Under normal market conditions, the Trust will invest at least 80% of managed assets in senior secured loans, CLO debt and CLO equity.

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.

Adviser

XA Investments LLC

Sub-Adviser

Octagon Credit Investors, LLC

Snapshot (as of )

Closing price
Closing NAV
Premium/discount
Current distribution rate1
Tax reporting 1099 tax form
CUSIP
Ticker XFLT
NAV ticker XFLTX
Shares outstanding
Total common assets
Total managed assets
Leverage Ratio

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 recent 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 25-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 Evaluations 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.

Performance

Total returns (as of )

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“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. Performance data quoted represents past performance. Past performance does not 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 )

Asset Allocations are measured as a percentage of the fund's total investments as of . Allocations are not GAAP adjusted and 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. Performance data quoted represents past performance. Past performance does not guarantee of future results. Current performance may be higher or lower than the data shown.

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 08/31/2019)

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

Fund Characteristics are as of 8/31/19, 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. Performance data quoted represents past performance. Past performance does not guarantee of future results. Current performance may be higher or lower than the data shown.

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 Ten Portfolio Holdings (as of )

Holding% Portfolio
Holding% Portfolio

Holdings are measured as a percentage of the funds Total Investments as of . Holdings are not GAAP adjusted and 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. Performance data quoted represents past performance. Past performance does not guarantee of future results. Current performance may be higher or lower than the data shown.

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.

Maturity breakdown (as of )

Maturities are as of , 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. Performance data quoted represents past performance. Past performance does not guarantee of future results. Current performance may be higher or lower than the data shown.

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 (as of )

DATE CLOSING PRICE($)
High
Low

NAV (as of )

DATE CLOSING NAV($)
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Premium / Discount (as of )

DATE PREMIUM/DISCOUNT
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IPO information

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

Share price and NAV history ()

Pricing History

Date
Share Price
NAV
Premium / Discount
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Premium / Discount Information ()

ANNUAL EXPENSES AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES3 AS A PERCENTAGE OF MANAGED ASSETS
Management fees 2.53% 1.70%
Interest on borrowed funds 1.95% 1.31%
Other expenses    
Investor support and secondary market support services fee 0.30% 0.20%
Other 1.39% 0.94%
Total annual expense 6.17% 4.15%
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Expenses shown in the table are based on actual expenses of the Trust for the twelve months ended September 30, 2019, and the Trust’s average managed assets and average net assets for the twelve months ended September 30, 2019. 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 September 30, 2019, the Trust had outstanding leverage equal to 33.11% of the Trust’s Managed Assets. See the Trust’s Annual Report for full information on expenses.

Distributions

Payable Date Record Date Ex-Date Declaration Date Amount Distribution Type
Income4
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Distributions data is unavailable at this time.

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

2The Trust will terminate on or before December 31, 2029 (the “Termination Date”). However, the Board of Trustees may cause the Trust to conduct a tender offer to purchase 100% of the then outstanding Common Shares of the Trust at a price equal to the net asset value per Common Share on the expiration date of the tender offer, as of a date within twelve months preceding the Termination Date (an “Eligible Tender Offer”). Following the completion of an Eligible Tender Offer, the Board of Trustees may eliminate the Termination Date upon the affirmative vote of a majority of the Board of Trustees and without a shareholder vote.

The Termination Date may be extended (i) once for up to one year (i.e., up to December 31, 2030), and (ii) once for up to an additional six months (i.e., up to June 30, 2031), in each case upon the affirmative vote of a majority of the Board of Trustees and without a shareholder vote. The Trust’s investment objective and policies are not designed to seek to return to investors that purchase Common Shares in this offering their initial investment of $10.00 per Common Share on the Termination Date or in an Eligible Tender Offer, and such investors and investors that purchase Common Shares after the completion of this offering may receive more or less than their original investment upon termination or in an Eligible Tender Offer. The Adviser will pay all costs and expenses associated with the making of an Eligible Tender Offer, other than brokerage and related transaction costs associated with disposition of portfolio investments in connection with the Eligible Tender Offer, which will be borne by the Trust, and indirectly by Common Shareholders. Because assets of the Trust will be liquidated in connection with a termination of the Trust or an Eligible Tender Offer, the Trust will incur transaction costs in connection with dispositions of portfolio securities. The Trust may receive proceeds from the disposition of portfolio investments that are less than the valuations of such investments by the Trust.

3Common shareholders will pay the expenses set forth in this column.

4The Trust expects that distributions paid on the Common Shares will consist primarily of (i) investment company taxable income, which includes ordinary income (such as interest, dividends, and certain income from hedging or derivatives transactions) and the excess, if any, of net short-term capital gain over net long-term capital loss, and (ii) net capital gain (which is the excess of net long-term capital gain over net short-term capital loss).

To permit the Trust to maintain more stable monthly distributions, the Trust may distribute more or less than the amount of the net investment income earned in a particular period. There is no assurance the Trust will continue to pay regular monthly distributions or that it will do so at a particular rate. Distributions may be paid by the Trust from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital. Shareholders should not assume that the source of a distribution from the Trust is net income or profit.

Risks

The Trust uses leverage to seek to enhance total return and income. The Trust may use leverage through (i) the issuance of senior securities representing indebtedness, including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper (collectively, “Indebtedness”), (ii) the issuance of preferred shares (“Preferred Shares”) and/or (iii) reverse repurchase agreements, securities lending, short sales or derivatives, such as swaps, futures or forward contracts, that have the effect of leverage (“portfolio leverage”). The Trust currently intends to use leverage through Indebtedness and may use Indebtedness to the maximum extent permitted under the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act the Trust may utilize Indebtedness up to 33 1/3% of its Managed Assets (specifically, the Trust may not incur Indebtedness if, immediately after incurring such Indebtedness, the Trust would have asset coverage (as defined in the 1940 Act) of less than 300%). The Trust will not utilize leverage, either through Indebtedness, Preferred Shares or portfolio leverage, in an aggregate amount in excess of 40% of the Trust’s Managed Assets (including the proceeds of leverage).

The Trust has entered into a revolving credit facility and any borrowings through the credit facility are secured by eligible securities held in the Trust’s portfolio of investments. The use of leverage is a speculative technique that involves special risks. The Trust currently anticipates utilizing leverage to seek to enhance total return and income. There can be no assurance that the Advisor’s and the Sub-Adviser’s expectations will be realized or that a leveraging strategy will be successful in any particular time period. Use of leverage creates an opportunity for increased income and capital appreciation but, at the same time, creates special risks. Leverage is a speculative technique that exposes the Trust to greater risk and increased costs than if it were not implemented. The more leverage that is utilized by the Trust, the more exposed the Trust will be to the risks of leverage. The use of leverage by the Trust causes the net asset value of the common shares to fluctuate significantly in response to changes in interest rates and other economic indicators. As a result, the net asset value, market price and dividend rate of the common shares is likely to be more volatile than those of a fund that is not exposed to leverage. Leverage increases operating costs, which may reduce total return. The Trust pays interest on its borrowings, which may reduce the Trust’s return. Increases in interest rates that the Trust must pay on its borrowings will increase the cost of leverage and may reduce the return to common shareholders. The risk of increases in interest rates may be greater in the current market environment because interest rates are near historically low levels. During the time in which the Trust is utilizing leverage, the amount of the investment advisory fee paid by the Trust will be higher than if the Trust did not utilize leverage because the fees paid will be calculated based on the Trust’s Managed Assets, including proceeds of leverage. Common shareholders bear the portion of the management fee attributable to assets purchased with the proceeds of leverage, which means that common shareholders effectively bear the entire management fee.

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 the Trust is subject to investment risk, including the possible loss of your entire investment. There can be no assurance that the Trust’s objectives will be achieved. The Trust is a newly-organized, diversified, closed-end management investment company with no history of operations. As a result, investors have no track record or operational history upon which to base their investment decision. Shares of closed-end management investment companies frequently trade at a discount from their net asset value, which is a risk separate and distinct from the risk that the fund's net asset value could decrease as a result of its investment activities. The Trust intends to invest primarily in below investment grade instruments, which are commonly referred to as “high yield” securities or “junk” bonds. Investments in below investment grade securities are considered predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal when due and such issuers are not perceived as strong financially as those with higher credit ratings. The Trust intends to invest a significant portion of its assets in CLO debt and subordinated notes, which often involve risks that are different from or more acute than risks associated with other types of credit instruments. For more detailed information on the specific risks associated with this fund, please view the Risks.

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