XAI Octagon Floating Rate & Alternative Income Term Trust

For the quarter ended 12/31, XFLT reported NAV total return of -4.65% and price total return of -5.4%, versus the leveraged-loan benchmark index up 1.84%. Management did not provide revenue, EPS, gross margin, or full financial statements on this webinar. Performance was driven mainly by CLO equity weakness, while the loan and CLO BB sleeves performed solidly. Forward-looking commentary was qualitative rather than formal guidance: management said loan and CLO markets remain volatile but that tighter spreads, healthy borrower fundamentals, and active management could support longer-term value creation.

Management’s strategic message was that XFLT’s mixed asset base gives it more resilience than CLO-equity-heavy peers, and that the fund is being managed with an emphasis on transparency, active credit selection, and distribution discipline. The tone was candid and defensive, acknowledging that NAV and market price performance have been disappointing while arguing that the portfolio is positioned better than many peer funds because of its loans and CLO debt exposure.

Kimberly Flynn highlighted that the fund’s leverage cost came down after an institutional preferred (MRPS) was issued in October, and said XFLT can borrow at a meaningfully lower cost than CLO-equity-focused peers, which often borrow around 7% or 8%. She said the leverage ratio typically runs between 35% and 38%, and noted that the board met 6 times in the last 12 months to discuss XFLT, including the MRPS and distribution changes. She also said there was no return of capital in 2025 and that management is focused on an earnings-based distribution policy to avoid overdistributing.

Analysts and shareholders asked about the average price of CLO equity, default and recovery experience, the difference between CLO/loan exposure and a BDC structure, and whether the board would consider share repurchases given the wide discount. Management answered that CLO equity is not a par asset and that its price alone does not tell the full story; it also said the managers XFLT owns have historically had better-than-average default and recovery experience. On repurchases, management said that is a board decision and did not announce any action, instead stressing active communication and board oversight.