Ares Dynamic Credit Allocation Fund, Inc. (the “Fund”) is a closed-end management investment company. The Fund’s investment objective is to provide an attractive level of total return, primarily through current income and, secondarily, through capital appreciation. There can be no assurance that the Fund will be able to achieve its investment objective or structure its investment portfolio as anticipated.
By the Numbers
|Closing Market Price||$11.77|
|Premium / Discount||-12.75%|
|Average Monthly Volume||93,995|
All data as of May 31, 2020
|Distribution* based on 5/29/20 price||10.87%|
|Inception Market Price||$20.00|
Fees and Expenses
|Annual Gross Expense Ratio**||3.20%|
*Monthly dividend per share annualized and divided by the May 31, 2020 market price per share. The Fund’s May 2020 distributions were comprised of net investment income and short-term capital gains. The distribution rate alone is not indicative of Fund performance. To the extent that any portion of the current distributions were estimated to be sourced from something other than income, such as return of capital, the source would have been disclosed in a Section 19(a) Notice located under the “Investor Information” section of the Fund’s website. Please note that the distribution classifications are preliminary and certain distributions may be re-classified at year end. Please refer to year-end tax documents for the final classifications of the Fund’s distributions for a given year. Distribution rates represent the latest declared regular distribution, annualized, relative to the most recent market price and NAV. The Fund’s NAV is inclusive of operating expenses. Please see the Fund’s most recent Annual Report for description of the operating expenses.
**Represents the ratio of annualized expenses, inclusive of interest expense and amortization of debt issuance, to net assets for the two months ended December 31, 2019. For the year ended October 31, 2019, this ratio was 3.37%.
Investment Strategies and Policies
The Fund invests primarily in a broad, dynamically managed portfolio of (i) senior secured loans (“Senior Loans”) made primarily to companies whose debt is rated below investment grade; (ii) corporate bonds (“Corporate Bonds”) that are primarily high yield issues rated below investment grade; (iii) other fixed-income instruments of a similar nature that may be represented by derivatives; and (iv) securities of collateralized loan obligations (“CLOs”).
Ares Capital Management II LLC (the “Adviser”) serves as the Fund’s investment adviser. The Adviser is an affiliate of Ares Management LLC (“Ares”). The Adviser’s investment philosophy, portfolio construction and portfolio management involve an assessment of the overall macroeconomic environment, financial markets and company specific research and analysis. Its investment approach emphasizes capital preservation, low volatility and minimization of downside risk. In addition to engaging in extensive due diligence from the perspective of a long-term investor, the Adviser’s approach seeks to reduce risk as further described below.
Advantages of a Dynamic Credit Strategy
Under normal market conditions, at least 80% of the Fund’s Managed Assets (as defined below) will be invested in debt instruments, including (i) Senior Loans made primarily to companies whose debt is rated below investment grade, (ii) Corporate Bonds that are primarily high yield issues rated below investment grade, (iii) other fixed-income instruments of a similar nature that may be represented by derivatives, and (iv) debt and subordinated (or residual) securities issued by CLOs. The Fund expects that almost all of the senior loans and corporate bonds in which the Fund invests will be below investment grade. Corporate bonds rated below investment grade are often referred to as “high yield” securities. Senior Loans made to companies whose debt is rated below investment grade and high yield securities are often high risk and have speculative high risk and have speculative characteristics. Under normal market conditions,
the Fund will not invest more than (i) 40% of its Managed Assets in securities issued by entities commonly referred to as CLOs (“CLO Securities”) and other asset-backed securities, or (ii) more than 10% of its Managed Assets in subordinated (or residual) tranches of CLO Securities. The Fund can invest in investment grade, below investment grade and non rated CLO Securities. The underlying obligations collateralizing such CLO Securities will principally be Senior Loans, diversified by industry and borrower. “Managed Assets” means the total assets of the Fund (including any assets attributable to any preferred shares that may be issued or to indebtedness) minus the Fund’s liabilities other than liabilities relating to indebtedness.
The Fund may use leverage through borrowings, including loans from certain financial institutions and/ or the issuance of debt securities, as well as through the issuance of shares of preferred stock. The Fund has a revolving funding facility with an institutional lender, pursuant to which the Fund may borrow funds to make additional investments, subject to available collateral. The use of leverage is a speculative technique that involves special risks. There can be no assurance that the Fund’s leveraging strategy will be successful.
Risks and Considerations
Investing in the Fund’s common shares involves certain risks and the Fund may not be able to achieve its intended results for a variety of reasons. Because the value of your investment in the Fund will fluctuate, there is a risk that you will lose money. Your investment will decline in value if, among other things, the value of the Fund’s investments decreases. The value of your common shares also will be affected by the Fund’s ability to successfully implement its investment strategy, as well as by market, economic and other conditions. As with any security, complete loss of investment is possible.
444 West Lake Street, Suite 1700, Chicago, IL 60606
Destra Capital Advisors LLC
Destra Capital Advisors LLC is a registered investment adviser. Registration of an investment adviser does not imply any level of skill or training and does not constitute an endorsement of the Firm by the US Securities and Exchange Commission.
The material contained on this website is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity.
The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.
Investors should consider the investment objective and policies, risk considerations, charges and ongoing expenses of an investment carefully before investing. For more information, please contact your investment representative, Destra Capital Advisors LLC at 877.855.3434.
The information on this website is intended for U.S. residents only. The information provided does not constitute a solicitation of an offer to buy, or an offer to sell securities in any jurisdiction to any person to whom it is not lawful to make such an offer. Market information used on this website is obtained from non-proprietary market sources. While we believe this information to be accurate, Ares Management LLC and its affiliates cannot attest to the validity of information culled from other sources.
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