XAI Floating Rate & Alternative Income Trust · NYSE:XFLT
XAI Floating Rate & Alternative Income Trust — XAI Octagon Floating Rate & Alternative Income Term Trust — Proxy Contest (December 2023)
45 slides from XAI Floating Rate & Alternative Income Trust's proxy contest presentation, Dec 1, 2023
Slide 1: XFLT Quarterly Webinar
XAI Octagon Floating Rate & Alternative Income Term Trust (the “Trust” or “XFLT”) Quarterly Webinar November 30, 2023, at 10:30am Eastern Time This presentation has been prepared by XA Investments LLC (“XAI” or the “Adviser”) in conjunction with Octagon Credit Investors, LLC (“Octagon” or the “Sub -
Slide 2: General Disclosures
General Disclosures This presentation is intended to be educational in nature and is not for the purpose of recommending a particular investment. The investments discussed may or may not be suitable for the audience of this presentation. Neither XAI nor Octagon is acting as an adviser to the audienc
Slide 3: Before We Begin
Before We Begin XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 3 • Registrants will receive a link to the replay following the webinar. Feel free to share with colleagues. • For additional information on CEFs, please see our website at xainv
Slide 4: Speakers
Steven Perry Vice President XA Investments LLC Kimberly Flynn Managing Director XA Investments LLC Lauren Law Portfolio Manager Octagon Credit Investors, LLC Gr e tchen Lam Senior Portfolio Manager Octagon Credit Investors, LLC Steven Perry is a Vice President at XA Investments focused on product an
Slide 5: Octagon Credit Overview
Octagon Credit Overview CREDIT EXPERTS • Exclusive focus is below investment grade credit since 1994. $34.8bn in AUM as of 9/30/23 DISCIPLINED PROCESS • Seasoned investment process rooted in fundamental credit and relative value analysis PEOPLE • Cohesive, experienced, cycle - tested investment team
Slide 6: Summary of XFLT Proxy Proposals
Summary of XFLT Proxy Proposals XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 6 • On October 25, 2023, the Board of Trustees (the “Board”) of the Trust unanimously approved two proposals (collectively referred to as the “Proposals”), as sum
Slide 7: Questions & Topics for the Speakers
Questions & Topics for the Speakers XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 7 1. Please discuss the XFLT financial highlights for the quarter. 2. What has Board governance looked like in the last 12 months? 3. Describe the methods XFL
Slide 8: XFLT Financial Highlights
XFLT Financial Highlights XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 8 • XFLT has a fiscal year end of September 30 th . Please see XFLT’s Annual Report, Semi - annual Report and quarterly financials at www.XAInvestments.com for more det
Slide 9: Governance, Management and Board Actions Over the Last Twelve Months
Governance, Management and Board Actions Over the Last Twelve Months XFLT is overseen by a team of experienced professionals with expertise in closed - end funds and alternative investments Last 12 Months Transaction Overview • At - the - Market Program • The at - the - market program has issued 9.2
Slide 10: XFLT Overview and Top Holdings
XFLT Overview and Top 10 Holdings As of 9/30/2023 Unaudited. Source: XA Investments LLC; ALPS. 1. Quarter - to - date figures ending on 9/30/2023. 2. Holdings are measured as a percentage of market value over the Trust’s total portfolio investments as of 9/30/2023. Holdings may vary and are subject
Slide 11: XFLT Performance
9/30/2 0 23 12/31/ 2 022 3/31/2 0 23 Source: Octagon Credit Investors, LLC; ALPS; Paralel; data as of 9/30/2023. Performance achieved prior to December 31, 2021 is predominantly based on investments that use USD LIBOR as a reference rate. Overnight and 12 - month US dollar LIBOR permanently ceased a
Slide 12: XFLT Net Returns
XFLT Net Returns XFLT N et Ret urns Source: Unaudited financials. XA Investments LLC; Paralel Notes: Period returns shown net of fees and expenses. 1. Annualized total return as of 9/30/2023, includes reinvestment of dividends. The Morningstar LSTA US Leveraged Loan 100 Index is the Trust's benchmar
Slide 13: XFLT Premium/Discount History
ITD Avg Premium : 3.34% Current Premium : 2.74% XFLT Premium/Discount History From Inception to 11/24/2023 - 4 0 % - 3 0 % - 2 0 % - 1 0 % 0% 1 0 % 2 0 % 3 0 % Premium/Discount Average Premium Source: Bloomberg Notes: Shares of closed - end investment companies frequently trade at a discount from th
Slide 14: XFLT Price/NAV History
2 , 0 00 2 , 5 00 3 , 0 00 3 , 5 00 4 , 0 00 4 , 5 00 5 , 0 00 $4 $5 $6 $7 $8 $9 $ 1 0 $ 1 1 $ 1 2 XFLT Price XFLT NAV S&P 500 Index Source: Bloomberg Note: Shares of closed - end investment companies frequently trade at a discount from their net asset value. Performance data quoted represents past
Slide 15: XFLT Trading Volume Analysis
From Inception to 11/24/2023 XF L T T rading V olume Analysis Average Daily Trading Volume 343,651 Last 30 Days 1 320,067 Last 60 Days 1 294,916 Last 90 Days 1 241,371 Last 12 Months 1 131,863 Since Inception 1 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Volum
Slide 16: XFLT vs Benchmark Rates
XFLT vs Benchmark Rates Source: Bloomberg Notes: 3 - month LIBOR represented by ICE LIBOR USD 3 Month; Federal Funds Rate represented by US Federal Funds Effective Rate (continuous series). Performance achieved prior to December 31, 2021 is predominantly based on investments that use USD LIBOR as a
Slide 17: XFLT Asset Growth Provides Scale Efficiencies
XFLT has grown, via the Trust’s registration statement, from an At - the - Market program, follow - on equity offerings, preferred conversions, and preferred debt issuances From Inception to 11 / 24 / 2023 XF L T Asset G rowth Provides Scale E f ficiencies $518 m m $500,000,000 $450,000,000 $400,000
Slide 18: XFLT Leverage Sources
XFLT Leverage Sources (as of September 30, 2023) Note 1. As a percent of total managed assets as of 9/30/2023. 2. With a combination of Bank Borrowings and Preferreds, the Trust is allowed to a total leverage limit of up to 50%. 3. Based on Q2 2023 and Q3 2023 average cost of bank borrowings. Prefer
Slide 19: XFLT Distribution History
• XFLT increased its May 1, 2023, declared distribution by 16.44% to $0.085 per share • As of September 30, 2023, the annualized distribution rate was 14.68% based on market price of $6.95 and 15.29% on NAV of $6.67 • From October 1, 2020, through April 1, 2023, XFLT declared regular monthly distrib
Slide 20: CLO Focused CEFs Comparison
CLO Focused CEFs 1 XFLT Higher, Mainly Preferred Leverage (5 - 8.75%) Combination of Credit Facility and Preferreds (6.52% as of 9/30/2023) Leverage Cost Monthly Estimates; Quarterly Audited Daily NAV Internal, Monthly Estimates; Quarterly Official NAV Independent Third - party Valuations Valuation
Slide 21: Credit Fundamentals
4 . 73 % 0% 10% 20% 30% 40% Credit Fundamentals 1. Source: Pitchbook LCD, LLI Default Rates (September 30, 2023). Data for loans represents metrics for the Morningstar LSTA US Leveraged Loan Index (formerly the S&P/LSTA Leveraged Loan Index, the “LLI”). 2. Source: Pitchbook LCD, Morningstar LSTA US
Slide 22: Technical Dynamics
Technical Dynamics R E T A I L LO A N F UN D FLOW S 3 VS . 2 - 10 Y U S T SP R E A D S IN S T I T U T I O N A L N E W I SS U E L EVE R A G E D LO A N V OL U M E 4 QUARTERLY US CLO TOTAL VOLUME 2 Supply and demand outlook appears steady $120B $100B $80B $60B $40B $20B $0B Ne w i s s u e s Re fin an c
Slide 23: Strong YTD Performance for Loans
Strong YTD Performance for Loans Source : Bloomberg, JPMorgan Markets from January 1 , 2023 to September 30 , 2023 . Senior secured loans are represented by the Morningstar LSTA US Leveraged Loan Index, high yield bonds are represented by the ICE/BofA US High Yield Bond Index, TIPS are represented b
Slide 24: XFLT CLO Debt & CLO Equity Portfolio Characteristics
XFLT CLO Debt & CLO Equity Portfolio Characteristics 1 1. Represents CLO Debt and CLO Equity positions as of September 30, 2023. 2. Portfolio Statistics are based upon par value. Excludes the following CLO equity position, which has been called: THL Credit Wind River 2016 - 1 CLO, LTD. Totals may no
Slide 25: Bank Loan Market Conditions & Outlook
Bank Loan Market Conditions & Outlook 3. Source: J.P. Morgan North America Credit Research, “US High Yield and Leveraged Loan Daily Updates” (October 2, 2023). Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or
Slide 26: Positive CLO Debt Performance Across the Capital Stack in 3Q23
Positive CLO Debt Performance Across the Capital Stack in 3Q23 • 3Q23 CLO debt performance by tranche and prices as of 9/30/23 (as measured by J.P. Morgan CLO Index or “CLOIE”) 3 • Loans returned 3.46% in 3Q 2023 6 • Average loan bid price increased to 95.56 as of 9/30/23 from 94.24 at of 6/30 6 WEI
Slide 27: Credit Stress Indicators and Loan Defaults
Credit Stress Indicators and Loan Defaults 1. Source: Pitchbook LCD (September 30, 2023). Morningstar LSTA LLI default rate represents lagging 12 - month default rate by principal amount as of the respective period. The Morningstar LSTA LLI generally mirrors the universe of leveraged loans syndicate
Slide 28: Current Loan Yields Above Historical Median, Trailing Defaults Low
Current Loan Yields are Above Historical Median, Trailing Defaults Remain Low 1. Represents the Yield to Maturity for the Morningstar LSTA LLI. “Long Term Median Yield to Maturity” represents the median of Yield to Maturity at month - end starting January 31, 2010. 2. Represents lagging 12 - month d
Slide 29: CLO Market Themes & Outlook
CLO Market Themes & Outlook XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 29 Please refer to the “CLO Market Commentary – Notes” page 30, for all associated footnotes. Performance data quoted represents past performance. Past performance do
Slide 30: CLO Market Commentary - Notes
CLO Market Commentary - Notes XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 30 1. Source: Pitchbook LCD, “CLO Global Databank” (retrieved from www.lcdcomps.com, October 10, 2023). 2. Source: Pitchbook LCD, “3Q US CLO Wrap: Issuance picks up
Slide 31: How to Vote on XFLT Proxy Proposals
How to Vote on XFLT Proxy Proposals You may vote in any of the four ways listed below: • Internet: • T e l e pho ne : • Mail: • In Person: Vote online and follow instructions on your proxy card. Call 1 - 800 - 431 - 9645 to vote your shares Monday through Friday between 9am and 10pm ET. Vote by mail
Slide 32: Webinar Questions?
Webinar Questions? Please use the Q&A dropdown indicated below to submit your questions XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 32 XAInvestments.com | (888) 903 - 3358 321 North Clark Street Suite 2430 Chicago, IL 60654 Click Q&A Ente
Slide 33: Contact Our Team with Questions
Contact Our Team with Questions XAInvestments.com | (888) 903 - 3358 321 North Clark Street Suite 2430 Chicago, IL 60654 Steven Perry X A In v est m ents Vice President, Product Management Kimb e rly Fl y nn X A In v est m ents Managing Director, Alternative Investments [email protected] (312
Slide 34: XFLT Total Portfolio Holdings and Financials
XFLT Total Portfolio Holdings and Financials Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term
Slide 35: Appendix: Additional Information, Glossary and Risk Considerations
APPE ND IX APPENDIX: Additional Information, Glossary and Risk Considerations
Slide 36: CLO Considerations
CLO Considerations Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEB
Slide 37: Glossary
Glossary Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBINAR | 37
Slide 38: Glossary (cont.)
Glossary (cont.) Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance data quoted. XA INVESTMENTS LLC | XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) QUARTERLY WEBIN
Slide 39: XFLT Summary Risks
• Limited Prior History • Investment and Market Risk • Structured Credit Instruments Risk • Below Investment Grade Securities Risk • Market Discount Risk • CLO Risk • CLO Subordinated Note Risk • Corporate Credit Investments Risk • Senior Loan Risk • Second Lien Loans Risk • Unsecured Loan Risk • Lo
Slide 40: Risk Considerations
Investment in the Trust involves special risk considerations, which are summarized below. The Trust is designed as a long - term investment and not as a trading vehicle. The Trust is not intended to be a complete investment program. The Trust’s performance and the value of its investments will vary
Slide 41: CLO Subordinated Note Risk
CLO Subordinated Note Risk. The Trust may invest in subordinated notes issued by a CLO, which are junior in priority of payment and are subject to certain payment restrictions generally set forth in an indenture governing the notes. In addition, they generally have only limited voting rights and gen
Slide 42: Leverage Risk
Leverage Risk. 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
Slide 43: Swaps Risk
Swaps Risk. The Trust may utilize swap agreements including, without limitation, interest rate, index and currency swap agreements. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary securities transactions. T
Slide 44: Equity Investments Risk
Equity Investments Risk. Incidental to the Trust’s investments in credit instruments, the Trust may acquire or hold equity securities, or warrants to purchase equity securities, of a Borrower or issuer. Common equity securities prices fluctuate for a number of reasons, including changes in investors
Slide 45: Risks of the Proposal to Remove the Termination Date
Risks of the Proposal to Amend the Declaration of Trust to Remove the Termination Date . If shareholders approve the proposal to amend the Declaration of Trust to eliminate the Termination Date (the “Term Amendment”), the Trust will not terminate and liquidate its assets on or before December 31 , 2
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