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Why Invest

Our first BDC, Fifth Street Finance Corp. ("FSC"), went public in 2008 and our second, Fifth Street Senior Floating Rate Corp. ("FSFR"), launched in July 2013. Learn how our BDCs provide opportunities for investors to receive dividends from well-positioned portfolios of investments with built-in liquidity:

Dividends

FSC and FSFR have historically provided meaningful income through dividends with yields that are higher than many other income-oriented investments. FSC's and FSFR's current dividend yields stand at 11.4% and 8.5%, respectively, which compare favorably to alternatives like Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs) [1].

Fifth Street's two BDCs (FSC and FSFR) offer attractive dividend yields [2]

chart-fifth-street-dividends-2017

Prudent Approach

Fifth Street aims to invest in private, growing businesses and then pay shareholders recurring dividends based on the net investment income and capital gains we receive. As a result, these dividends are generally supported by predictable cash flows.

We employ a high degree of selectivity, targeting credits with strong underlying fundamentals, which include focusing on high cash flow sectors and shying away from cyclical sectors, such as energy. A prudent trade-off between risk and reward remains our constant goal. For instance, both FSC and FSFR emphasize senior secured loans in their investment portfolios—typically a company's safest loan category.

Proactive Positioning

With interest rates held artificially low, we believe that investors are naturally concerned about continued potential rate increases. Unlike most traditional fixed income solutions, Fifth Street's investment portfolios—particularly FSFR's—actually stand to benefit from rising interest rates as they cross 100 basis points, after an initial negative impact.

Approximately 81% of FSC's debt portfolio is in floating rate investments, and FSFR's is 100% [3]. In other words, we are mostly lending at interest rates that will increase as short-term interest rates rise. In general, this means as interest rates continue to rise over 100 basis points, we should generate additional income on these investments.

FSC and FSFR are positioned to take advantage of rising interest rates.

Estimated Annual Change in FSC and FSFR Net Interest Income Per Share from Rising Interest Rates [4]
chart-fifth-street-interest-rate-fsc-fsfr-2017

Access and Liquidity

By investing in one of our BDCs, you gain exposure to private small and mid-sized businesses primarily via debt investments. These opportunities are typically only available to institutional investors like pensions and endowments through more illiquid structures. They have the wherewithal to commit large sums through limited partnerships or other structures that lock up an investment.

Because our BDCs are publicly-traded, investors can retain the flexibility to buy and sell at any time with minimal transaction costs. Shareholders capture the benefits of middle market exposure without sacrificing daily liquidity.

For example, on average, over 830,000 shares of FSC's stock trade daily [5].

Diversification [6]

Each of Fifth Street’s BDCs has a portfolio of many different companies across various industries. For example, FSC's $2.0 billion portfolio is spread across 123 established small and mid-sized U.S. companies in 34 different industries. The largest single investment accounts for just 3.0% of total assets [7], while the top 10 holdings collectively account for 28.3% of total assets [6].

FSFR’s $540 million portfolio, on the other hand, has 61 U.S. middle market portfolio company investments across 24 industries. The largest single investment accounts for 4.8% of total assets [8], while the top 10 holdings collectively account for 37.4% of total assets [6].

We believe investing in multiple sectors helps reduce industry specific risks—and so does minimizing concentration.

Industries in FSC's Portfolio [9]


[1] As of 3/7/17. There is no assurance that future dividend levels will remain the same.

[2] Sources: Fifth Street and BDCs.com, sponsored by Cliffwater.
Note: Fifth Street dividend yields as of 3/7/17. FSC’s dividend yield is based on annualized dividend of $0.50. FSFR’s dividend yield is based on annualized dividend of $0.76. All other yields are calculated by annualizing the most recent dividend and dividing it by the current price, as of 3/7/17. The yield for MLPs is based on the yield and performance of the JPMorgan Alerian MLP Index ETN; U.S. REITs is based on the iShares U.S. Real Estate ETF; the U.S. high yield bond market is based on the iShares iBoxx $ High Yield Corporate Bond ETF; the bank loan market is based on the PowerShares Senior Loan Portfolio; the U.S. munis market is based on the iShares National AMT-Free Muni Bond ETF; the U.S. Equity market is based on the SPDR S&P 500 ETF; and the 3-7 year U.S. Treasury market is based on the iShares 3-7 Year Treasury Bond ETF.

[3] As of 12/31/16.

[4] Net spread income calculated as the difference between the change in interest income and interest expenses. Based on total number of shares outstanding as of 2/8/17 for FSC and 2/9/17 for FSFR. At December 30, 3-month LIBOR was 0.99789%.

[5] Three-month average for period ended 3/7/17.

[6] At fair value as of 12/31/16. Diversification does not guarantee a profit or protect against loss. Numbers shown may not sum exactly due to rounding.

[7] Excludes investment in SLF JV I. SLF JV I primarily invests in senior secured loans of middle market companies. FSC has determined that SLF JV I is an investment company under ASC 946, however, in accordance with such guidance, FSC will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary or a controlled operating company whose business consists of providing services to FSC. Accordingly, FSC does not consolidate its noncontrolling interest in SLF JV I. Further information can be found in FSC’s most recent quarterly filing.

[8] Excludes investment in FSFR Glick JV. FSFR Glick JV primarily invests in senior secured loans of middle market companies. FSFR has determined that FSFR Glick JV is an investment company under ASC 946, however, in accordance with such guidance, FSFR will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary or a controlled operating company whose business consists of providing services to FSFR. Accordingly, FSFR does not consolidate its noncontrolling interest in FSFR Glick JV. Further information can be found in FSFR’s most recent quarterly filing.

[9] Financials industry category includes investment in SLF JV I.

An Important Word About Risk

Business Development Companies ("BDCs") invest in private companies and thinly traded securities of public companies, including debt instruments of such companies. Generally, less public information exists for private and thinly traded companies and thus, there is a risk that investors may not be able to make fully informed investment decisions. Less mature and smaller private companies generally involve greater risk than well-established and larger publicly-traded companies. Investing in debt involves risk that the issuer may default on its payments or declare bankruptcy, and debt may not be rated by a credit rating agency. BDCs may not generate income at all times. Additionally, limitations on asset mix and leverage may prohibit the way that BDCs raise capital.

Investing involves substantial risks such as high volatility and/or potential loss of principal. An investor should consider the investment objectives, risks, charges and expenses carefully before investing.

This site may contain certain forward-looking statements, including statements with regard to the future performance of Fifth Street Asset Management Inc. ("FSAM"), Fifth Street Finance Corp. ("FSC") and/or Fifth Street Senior Floating Rate Corp. ("FSFR"). Words such as "believes," "expects," "projects," "anticipates," "estimates," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and such factors are identified from time to time in FSAM's, FSC's and FSFR's filings with the Securities and Exchange Commission. Neither FSAM, FSC nor FSFR undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This site is neither an offer to sell nor a solicitation of an offer to purchase securities of FSAM, FSC and/or FSFR. Such an offer or solicitation can only be made by way of an applicable company prospectus and otherwise in accordance with applicable securities laws.

The summary descriptions and other information included herein and any other materials provided to you by FSAM, FSC, FSFR or their representatives are intended only for informational purposes and convenient reference. The information contained herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. Before making an investment decision with respect to the applicable company, investors are advised to carefully review an applicable prospectus to review the risk factors described therein, and to consult with their tax, financial, investment and legal advisors. These materials do not purport to be complete, and are qualified in their entirety by reference to the more detailed disclosures contained in an applicable prospectus and the applicable company's related documentation.

No representation or warranty, express or implied, is made as to the accuracy or completeness of the information contained herein, and nothing shall be relied upon as a promise or representation as to the future performance of FSAM, FSC or FSFR.