Alternative Credit Income Fund
A
BC Partners
01/02/24
Daily NAV
Unlimited
Core
London, UK
Non-Accredited
$268,469,606
Delaware statutory trust
Private Credit
April, 2015
Non-qualified: $2,500, Qualified: $1,000
7.2%
Without load (5.76%); with load (4.87%)
Sierra Crest Investment Management LLC
ALPS Distributors, Inc.
BBD, LLP
Thompson Hine LLP
Strategy
Alternative Credit Income Fund is a continuously offered, diversified, closed-end management company. The fund is an interval fund that offers to make quarterly repurchases of its shares at the NAV of the applicable class of shares.
The fund’s investment objects are to produced current income and achieve capital preservation with moderate volatility and low to moderate correlation to the broader equity markets. The fund pursues its investment objectives by investing, under normal circumstances, at least 80& of its assets in “fixed income and fixed-income related securities.” The fund many invest without limitation in fixed-income and fixed-income related securities of any sector of any industry.
The fund seeks to achieve through a disciplined allocation among distinct alternative asset categories, including but not limited to: Direct Credit; Public Credit; and Private Credit. These categories offer a different balance of liquidity, yield, and long-term appreciation as well as correlation to the equity markets and other markets. Within each investment category, the fund seeks to maintain the flexibility to invest in both publicly traded and non-=publicly traded securities at all levels of the capital structure. Moreover, the fund seeks to enhance yield and returns within each investment category through asset selection driven by in-depth fundamental research focused on both operational and financial metrics as well as relative value. In addition, the fund seeks to further its objectives by maintaining appropriate diversification by not only diversifying into the three investment strategies, but also by holding multiple positions within each strategy by selecting securities from different regions and industries.
Style
| Value | Core | Growth | |
| Large | |||
| Mid | |||
| Small |
Fit Check
The fund is available to non-accredited investors. There are no restrictions on eligibility for the fund. However, investors should carefully assess their risk tolerance before investing.
Alternative Credit Income fund is a closed-end interval fund that invests in a portfolio of public and private credit investments. The fund is suitable for fee- based business and only suitable for investors who can bear the risks associated with the limited liquidity of the fund and should be viewed as a long-term investment.
Portfolio Snapshot
As of 6/30/23
Asset Type
Geography
Industries
Score Breakdown
BULLS SAY
Mixture of Public, private and Direct Credit: Alternative has the ability to move between private, direct, and public credit markets could benefit risk-adjusted performance and may continue to support return overtime.
Diversification across sectors: Alternative’s approach provides exposure to a wide range of industries, potentially reducing the impact of poor performance in asset types.
High transparency: The fund offers transparent information on its website with diverse materials and literatures for investors to observe. The fund also makes it easy for investors and advisors to reach out and contact with email and phone number clearly stated on its website.
BEARS SAY
Market volatility: The fund might be sensitive to economic changes and unexpected events such as wars. High interest rates may potentially lead to sudden price fluctuations.
Low in private credit and public credit: The fund’s investment objective is to focus on both private and public credit; however, the fund is limited in its exposure in both public and private credit with only 24% in private and 6% in public as compared to 69% in direct credit.
Changes in investment and manager team: Sierra Crest Investment Management LLC replaced Resource Alternative Advisor, LLC as the fund’s investment advisor in 2020 and Michael Terwilliger has joined Sierra Crest as a portfolio manager to the fund in 2017.
Fees
|
Fees & Expenses |
Class A |
Class C |
Class I |
Class W |
|
Minimum initial investment |
2500 for regular accounts and 1000 for retirement plan accounts |
2500 for regular accounts and 1000 for retirement plan accounts |
2500 for regular accounts and 1000 for retirement plan accounts |
2500 for regular accounts and 1000 for retirement plan accounts |
|
Availability |
Brokerage and transaction accounts |
Brokerage and transaction accounts |
Wrap accounts and through participating broker-dealers and RIA’s |
Wrap accounts and through participating broker-dealers and RIA’s |
|
Under $100000 – 5% $100000 to $249999 – 4% $250000 to $499999 – 3% $500000 to $999999 – 2% $1000000 and above - 1% |
Subject to annual expenses |
Subject to annual expenses |
Subject to annual expenses |
|
|
0.75% * Reduced to 0.50% for trades of $500,000 to $999999 Reduced to 0% for trades of $1000000 and above |
Subject to annual expenses |
Subject to annual expenses |
Subject to annual expenses |
|
|
1.85% |
1.85% |
1.85% |
1.85% |
|
|
None |
0.75% |
None |
None |
|
|
0.25% |
0.25% |
0.50% |
0.49% |
|
|
Total Annual Fund Expenses |
4.75% |
5.5%3 |
4.51% |
4.75% |
To help you compare the cost of investing in this offering with other offerings, the fund has provided an example of the projected dollar amount of total expenses that would be incurred over various periods with respect to a hypothetical investment for each class of common stock assuming investors do not redeem any shares.
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In calculating the projections above, we made a few assumptions:
(1) A hypothetical 5.0% annual return, as required by regulation of the SEC and applicable to all registered investment companies. The assumed return is not a prediction of, and does not represent, the projected or actual performance of the Fund. Performance will vary and may result in a return greater or less than 5.0%
(2) Annual operating expenses and offering expenses remain at the levels set forth in the Price Tag table above.They should not be considered a representation of future expenses. Actual expenses may be greater or less than those shown.
(3) Net return after payment of fees and expenses is distributed to shareholders and reinvested at NAV.
Managers
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Industry Experience Ted joined BCP credit to lead BCP Credit in 2017. Previously, he served as the president at Apollo Investment Corporation and the Chief Investment Officer of Apollo investment Management. At Apollo, he served as the head of US Opportunistic platform and oversaw the private origination business.
Career highlights Ted has worked at Goldman Sachs for 13 years. He has worked at Special Situations Group as well as Apollo Investment Corporation
Education Bachelor of Commerce from Queen’s University.
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Industry Experience Matthias joined BCP Credit in 2017 and joined as part of the creation of BC Partners Credit. Before joining BCP Credit, he served as a founding member of Wingspan Investment Management.
Career highlights He has worked seven years in Goldman Sachs’ Special Situations Group and Bank Loan Distressed Investing Group both in NY and London. Prior to BCP, he has also joined Wingspan Investment Management for 5 years.
Education MPhil in Economics from Oxford University. BSc Economics from the University of Warwick.
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Industry Experience Henry joined BCP Credit in 2017 serving as managing director. Prior to BCP Credit, he has formerly been a partner at Stonerise Capital Partners.
Career highlights He worked for over seven years at Goldman Sachs in a special situations group under the investment banking division. He has also worked for Vulcan Capital and Thomas Weisel Partners.
Education MBA from the Kellogg School of Management at Northwestern University. BA from Boston University.
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Industry Experience Michael serves as the portfolio manager for the Alternative Credit income Fund. He oversees the day-to-day management of the fund. He has had nearly two decades of experience in the industry with expertise in a range of products such as high yield bonds, distressed debt, structured securities, bank loans, and convertibles.
Career highlights Prior to BC Partners, Michael has served as an officer of Resource Alternative Advisor as managing director. He also worked as a senior credit analyst at Shenkman Capital for three years. Moreover, he is an experienced analyst at Bank of America-Merrill Lynch where he was ranked in top 3 in various team for his excellent work.
Education BA from Northwestern University. MBA from the University of Virginia Darden School of Business. CFA Charter holder
Full Review
AVERAGE
The fund charges a Performance fee in which portfolio managers are motivated to deliver results to earn higher compensation, aligning their interests more closely with those of investors. It is unclear if the Portfolio managers have any of their own personal capital at risk in the fund. So, the lack of personal investment raises concerns about the alignment between the investors and the managers
ABOVE AVERAGE
Alternative Credit Income fund has an above average performance track record, generating a 5.76% annualized net return since inception (April 2015). Approximately, 70% of the portfolio is allocated in Direct Credit, while Private Credit took 24% and Public Credit took 6%. About 43% of its holdings are concentrated in Bank loans, followed by 25% of private investment funds, 11% of common equity and 16% of others (consolidated portfolio composition as of March 2023).
RACIAX has provided adequate returns and income for investors ever since its inception back in 2015. As of Nov 3, 2023, cumulative performance illustrates a 4.03 YTD return as well as a 63.07% since inception for RACIAX NAV.
AVERAGE
The Alternative Credit Income fund has charted most of its history amid a difficult backdrop for credit investing, as low yield, tight spreads, and low volatility combined to create relatively few exciting opportunities. While spreads remain muted, higher rates and bouts of volatility have created a much more attractive investment environment for both traditional and non-traditional fixed income.
Currently, Alternative Credit Income fund is seeking more opportunities than there is capital in the current market. inflation is starting to normalize, but still elevated. It is crucial that five percent interest rates could be the new normal going forward. Unexpected global events such as wars may also result in different forms of market volatility.
AVERAGE
Alternative has experienced just three defaults in nearly seven years. Of those losses, only one resulted in low recovery, and this represented just a 1.0% position in the fund. Other defaults would not have happened absent COVID.
Sierra Crest Investment Management LLC replaced Resource Alternative Advisor LLC as the fund’s investment advisor in 2020. Michael Terwilliger has also joined as a portfolio manager to the fund in late 2020. These two major changes to the managing team might add on certain risks as investors need to consider.
The fund has a 2.1% debt to equity ratio. This low leverage ratio is a favorable indicator which reduces the fund’s debt risk and makes it less vulnerable to financial distress or insolvency.
AVERAGE
Liquidity is provided to shareholders only through the fund’s quarterly repurchase offers for no less than 5% of the shares outstanding at NAV and there is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer.
The fund may invest without limit in securities that, at the time of investment, are illiquid. The fund may also invest in restricted securities which could have the effect of increasing the amount of the fund’s assets invested in illiquid securities if qualified buyers are unwilling to purchase.
ABOVE AVERAGE
Detail-oriented website, regular performance updates, and an extensive library of fund literature and materials boosts its transparency to its investors. Prospectuses are straightforward with extensive information including reports both monthly and annually. Alternative has also provided its own page for investors to disclose the lastest NAV. Daily NAV is uploaded with the previous week NAV included for investors to compare. While information is transparent, call and email are clearly provided on the website, it is a little difficult to reach out to the investor relation team as the wait time is quite long.
Peer Group
 |
 |
 |
|
|---|---|---|---|
| Vehicle name | Alternative Credit Income Fund | PIMCO Flexible Credit Income Fund | Apollo Debt Solutions BDC |
| Minimum investment | $2,500 | $2,500 | $2,500 |
| Holding period | Permanent Capital | Permanent Capital | Permanent Capital |
| Annual management fee | 1.85% | 2.10% | 1.25% |
| Distribution and Servicing Fee | None | None | 0.85% |
| Sales Load | Under $100000 – 5% $100000 to $249999 – 4% $250000 to $499999 – 3% $500000 to $999999 – 2% $1000000 and above - 1% |
0% | 3.5% |
| Inception Date | April, 2015 | February, 2017 | February, 2022 |
| 1-Year Net Returns | -4.72% (without load) | 0.18% | + 6.35% (with sales charge) |
| Net Returns Since Inception (Annualized) | 5.76% (without laod) | 3.16% | +8.30% (with upfront placement fee) |
| Annualized Distribution Rate | 7.2% | 9.00% | 8.86% |
| NOYACK® Score |
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