Steven Bavaria

Is It Becoming A Great Time For Income Investors? | Steven Bavaria

• Top takeaway The guest's top point is that rising bond yields are a net advantage for his income-factory approach rather than a cost: senior loans and BDCs reprice within a few months with little real duration risk, and a higher risk-free base rate slowly lifts income, which is why he calls late September 2026 one of the better times to start building one.
• He says he only buys funds — closed-end funds, BDCs and some ETFs — and deliberately ignores their market-price swings, judging each on total return against net asset value and on whether it can keep paying an 8-10% distribution over a five-to-ten-year holding period.
• He argues the 10-25% discounts now seen on many BDCs and closed-end funds price in default and loss rates far above anything historically observed, since even the worst credit crash produced roughly 10-12% defaults with about half of the money recovered, a loss rate near 6%.
• As of the interview he named specific discounted credits he considers attractive, including Bearings BDC at what he puts at roughly a 19-20% discount despite Mass Mutual's credit record, the actively managed Putnam BDC ETF yielding about 11% with average annual total return near 14% over its roughly four years, and PIMCO's PDI, PFN and PTY now at discounts rather than their usual premiums.
• He also pointed to Eaton Vance closed-end funds such as EOS, which he says averaged about 13% annual total return for 15 straight years on distributions in the 8% range, and to MLP and infrastructure funds like EMO, SRV and TYG, while screening out any fund whose price erosion drags total return below its distribution.

Higher yields help income investors: floating-rate loans and BDCs (business development companies) reprice within months, lifting cash income. For bond funds, skip the daily price and track net asset value returns, cash distributions, and whether capital is quietly eroding. Wide discounts to net asset value price in default rates far above history, the guest argues, which is why credit funds screen as bargains. For retirees drawing income, distributions that exceed total returns shrink the capital base, which the guest calls sequence-of-returns risk. He points to business development companies and private credit, plus closed-end funds from PIMCO and Eaton Vance, as current openings.

Buy Income On The Cheap | Steven Bavaria

Private credit concerns have created deep discounts in BDCs and other income assets, offering attractive entry points for yield-focused investors. The Income Factory strategy targets 9-10% annual returns through high yield compounding rather than relying on capital appreciation. Quality BDCs, dynamic credit funds, activist closed-end funds, and midstream energy MLPs present compelling value opportunities today.