**Floating Rate Strategies Fund: Performance and Market Insights**
As of June 30, 2024, the Floating Rate Strategies Fund (Institutional Class) reported a 1-year return of 9.17%, with a 5-year return of 4.83% and a 10-year return of 4.10%. Since its inception on November 30, 2011, the fund has delivered a return of 4.93%. The fund’s expense ratio is 0.90% (gross), 0.80% (net), and 0.78% (adjusted).
**Market Performance**
In the second quarter, the fund returned 1.00% (net), underperforming its benchmark, the Credit Suisse Leveraged Loan Index, which returned 1.86%. Year-to-date, the fund’s return was 3.11%, compared to the benchmark’s 4.44% return. Idiosyncratic credit issues in the Communications and Consumer sectors were the primary detractors to performance during the period. However, the fund benefited from an underweight to CCCs and an overweight to the Consumer Non-Cyclicals sector.
**Loan Market Trends**
Loan discount margins (spreads) remained flat over the quarter, ending June at 525 basis points. Defaults continued to rise, reaching 2.6% in June, but remain below the long-term average of approximately 2.8%. Despite concerns around tail risk in the market, the fund’s outlook on loans has turned positive due to the strong carry trade and manageable market losses from defaults and lower recoveries.
**Portfolio Positioning**
The fund remains positioned up in quality versus its benchmark, with an underweight to the CCC-and-lower segment by approximately 311 basis points. The distress ratio (loans trading below 80) was 3.6% for the portfolio, compared to 4.1% for the benchmark. The fund continues to focus on the primary market, with a selective approach, and looks to opportunistically exit or trim positions that have traded near fair value.
**Risk Considerations**
Investors should be aware of the risks associated with floating rate senior secured syndicated bank loans and other floating rate securities, including credit rate risk, interest rate risk, liquidity risk, and prepayment risk. The fund’s market value will change in response to interest rate changes and market conditions, and its exposure to high-yield securities may subject it to greater volatility.
**Index Definition**
The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market.
**Important Disclosures**
Please read the prospectus for more detailed information regarding the fund’s risks, fees, expenses, and holding periods. This material is not intended as a recommendation or as investment advice of any kind, and should not be relied upon for or in connection with the making of investment decisions.
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