Priority Income Fund, a closed-end investment fund, bridges the gap between banks and financial markets to provide the capital American-based businesses need to flourish. The fund is managed by Prospect Capital Management, an SEC registered investment adviser since 2004, with $8.8bn of assets under management as of December 31, 2022.
Priority Income Fund follows an investment strategy that prioritises investing in Collateralized Loan Obligations (CLOs), which are pools of first lien, floating rate, senior secured loans. These loans benefit from a history of benign market default rates, averaging just over two percent over the past 20 years, which translates to a low 0.55 percent average annual market credit loss rate when coupled with a 75 percent historical market recovery rate.
Over the last four years, the Priority portfolio achieved a lower average default rate (0.80 percent) than the market (1.59 percent). Senior secured loans also offer collateral and lender protections through a first lien on assets of the borrower. Priority Income Fund favours disciplined underwriting practices and has selected to collaborate with only 25 of the 130 CLO managers that have issued since the credit crisis. The fund has a nine-year track record of paying consistent income to shareholders. Minimum investments start at $1,000 and the current dividend of 10.91 percent annualised is paid monthly. The CFI.co judging panel announces Priority Income Fund as the 2023 award winner for Best CLO Closed-End Fund Investor (US).