Abrdn Income Credit Strategies FundNYSE: ACP

The ACP fund has performed well, delivering 22% in total returns in the past year based on dual tailwinds of tighter credit and lower long-term interest rates. The ACP fund also pays an attractive 17.3% forward yield. However, the sustainability of the fund's distributions is a concern, as it has historically under-earned its distribution, with 2.0% p.a. returns over 10 years.

Work smarter, not harder, the adage tells us. One way to do that is with passive income, which is derived from ownership rather than labor or active involvement in an enterprise.

We provide an update for the PIMCO CEF suite. Coverage for PIMCO CEFs saw marginal declines for Muni funds and remained nearly flat for taxable funds. Borrowing and leverage levels remained fairly steady.

The abrdn Income Credit Strategies Fund has a high distribution rate of over 17%, but it is not fully covered by income generated from the fund. ACP charges a high management fee and has a history of risk-adjusted underperformance. The fund's current 3.3% discount to NAV is not attractive relative to historical norms and other CEF discounts.

Abrdn Asset Management is acquiring several closed-end investment companies advised by First Trust Advisors, increasing its assets under management. The abrdn Income Credit Strategies Fund is set to acquire the First Trust High Income Long/Short Fund, with the merger subject to shareholder approval. The market currently values ACP more positively than FSD, with ACP trading at a -6% discount to NAV compared to FSD's -13% discount.

The abrdn Income Credit Strategies Fund offers a high level of current income with a 17.14% distribution yield. The fund's net assets have been declining, but it has not altered its distribution and has released a semi-annual report. The fund has been rising in share price over the past three months, indicating improved market perception, but it is no longer trading at a discount on net asset value.

Investors today are desperate for income due to the rapidly rising cost of living in most developed nations. abrdn Income Credit Strategies Fund invests in a portfolio of bonds from around the world in an attempt to provide investors with this high level of income. The fund's portfolio is very nice for American investors that need to increase their foreign exposure.

ACP.PA is a Series A preferred equity from the Abrdn Income Credit Strategies Fund. The CEF preferred equity represents a fixed term funding structure that accounts for leverage in the vehicle. While technically 'equity', preferred shares represent a slice of debt in reality, and benefit from the structural subordination of the common equity.