FS Credit Opps (FSCO) Update | Still A Great Holding

Have you heard about private credit and think it is only for investors who use financial advisors or are ultra-high net worth? The closed-end fund wrapper is, by far, the best way to hold your bonds because it allows the fund to hold illiquid investments and not have to worry about redemptions.

A closed-end bond fund portfolio can significantly outperform an active open-end bond fund over time because of its structural advantages. It is why most private credit vehicles are 'closed' wrappers.

Closed doesn't mean you cannot ever sell it. It just means that additional share issuance is typically restricted so the pool of assets is fixed. You, as the shareholder, have liquidity because you have the ability to sell it to another investor.

This is the best of both worlds.

You have liquidity but the fund is closed and doesn't have to worry about redemptions and illiquid holdings.

Enter FS Credit Opportunities Fund (FSCO). They were an interval fund until late 2022 when they shifted to a closed-end fund. FSCO is a larger, floating-rate loan CEF that focuses on a blend of public and private debt.

The discount has closed significantly since becoming a CEF two-and-a-half years ago. In that time, they've raised the distribution four times and the current yield is 10.71%.

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