Investing Experts Inside the Income Factory: credit asset investing with Steven Bavaria
Aug 25, 2025
Steven Bavaria, the investing group leader behind Inside the Income Factory, shares insights on high-yield investments and credit assets. He delves into the landscape of credit asset investing, emphasizing the advantages of closed-end funds. Bavaria clarifies misconceptions about expense ratios, particularly regarding PBDC. He also explores collateralized loan obligations (CLOs), discussing their structure and risks. Finally, he highlights strategies from the Barron's Global Short Duration High Yield Fund and the Ares Dynamic Credit Allocation Fund, showcasing effective ways to navigate high-yield markets.
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Credit Assets Over Small-Cap Stocks
- Steven Bavaria focuses on credit assets, high-yield stocks via closed-end funds, and BDCs as primary income sources.
- He argues these credit assets often offer more predictable income and less downside than mid/small-cap stocks.
Use BDC ETFs For Diversified Yield
- Use BDC-focused ETFs like PBDC or BIZD to gain diversified BDC exposure without picking single names.
- Expect yields in the 9–10% range from well-managed BDC funds over multi-year periods.
Defaults Are Predictable And Recoverable
- Default rates in high-yield credit portfolios are measurable and often low, around 1–4% annually in normal times.
- Recoveries of 50%+ mean interest income typically outweighs those losses, making net returns attractive.