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Prospect Floating Rate and Alternative Income Fund
Middle-Market Credit Solution for Income-Focused Investors

45

Portfolio Companies

$315M

Middle-Market Portfolio EBITDA

99%

Underlying Secured Investments

100%

Floating Rate and Alternative Investments 1

8.50%

Distribution Rate 2

FUND OVERVIEW

Prospect Floating Rate and Alternative Income Fund, Inc. (the “Fund” or “PFLOAT”), is a non-traded business development company (“BDC”) that invests primarily in the debt of privately-owned U.S. middle-market companies. The Fund seeks to provide income largely from investing in senior and secured floating rate credits, while building a portfolio of investments across the broad range of economic sectors. The priority in class hierarchy demonstrates the hypothetical capital structure for the Fund’s investments in senior and secured loans.

3

Market Opportunity

There is significant current market opportunity in the U.S. senior and secured loan market.

Growth of Private Credit

Private credit is increasing as a segment of the total addressable sub-investment grade credit market. Private credit consisted 8% of the $0.9 trillion market in 2005 versus 27% of the $3.8 trillion market in 2023.4

Demand for Financing

Private credit industry research suggests the asset class will grow from $1.0 trillion in 2023 to $2.3 trillion in 2027, suggesting an opportunity for alternative sources to meet the continued demand for financing5

Uncertain Economic Environment

During the Great Financial Crisis, the total return of middle market direct lending outperformed other selected credit investments. Between 2005-2008, rising rates through market bottom increased 29.0% within private credit versus syndicated loans decreasing (18.8%), high yield decreasing (13.5%), and investment grade corporate bonds increasing 5.4%6

Demand for Credit

The large amount of uninvested capital held by private equity buyout funds, estimated at $1,500 trillion, continues to drive deal activity and demand for credit7

Track Record

The Fund’s successful track record in the senior and secured loan market employs a proven and repeatable investment process.

Stable Current Income Generation

The Fund seeks attractive risk-adjusted investments with favorable terms, and the 8.5% distribution rate is over 5.0% higher than 5-year treasuries.8

Inflation and Rising Interest Rate Hedge

99% of the Fund’s investments are floating rate, providing a natural hedge against inflation and rising interest rates.

Varied Portfolio

The Fund is invested in 45 distinct companies with low exposure to cyclical industries.

Senior Secured Loans

First-lien senior secured loans are the most senior positions in a company’s capital structure, providing the Fund with the most downside protection compared to any other investment in the company. 

  1. On a fair market value basis, the portfolio is 99% floating rate debt.
  2. Past performance is neither indicative nor a guarantee of future results.
    1. Distributions are not guaranteed. There is no assurance that distributions will be made or that any particular rate of distribution will be maintained. Distributions are made at an 8.14% annualized base distribution based on the most recent quarter end net asset value per share for the monthly distribution declared for August 2024.
    2. The annualized distribution rate is based on the June 30, 2024 net asset value of share class A and is calculated by annualizing the monthly common share distributions for August of $0.03650 per share in aggregate, or $0.38160 per share on an annualized basis announced on August 30, 2024.
  3. Awarded by Capital Finance International (“CFI”) in March 2023, based in part on information submitted as of September 30, 2022 and December 31, 2022. Prospect has provided compensation to CFI for the ability to communicate the results of these awards. The awards described above may not be representative of any one investor’s experience with Prospect and should not be viewed as indicative of future performance.
  4. Source: Bloomberg (“High Yield”) and LCD (“Senior Loans”) as of March 31, 2024. Preqin (“Private Credit”) as of September 30, 2023, which is the latest data available. Total addressable US subinvestment grade credit market defined as the aggregate of the US high yield bonds, US leveraged loans and North American private credit markets. Leveraged loans refer to broadly syndicated loans. Private Credit includes BDCs.
  5. Preqin, as of December 2022
  6. Per Cliffwater Direct Lending Index, Credit Suisse Leveraged Loan Index & IEC BofA High Yield Index, Bloomberg US Corporate Bond Index. Past performance is not indicative of future returns.
  7. Source: Preqin, as of May 28, 2024. For illustrative purposes only. Represents private equity dry powder in North America only. Dry powder is a term for uncalled capital commitments.
  8. Assumes 5 year treasury rate of 3.5% (Bloomberg 09/26/2024).