ETF Education Report: Ares Dynamic Credit Allocation Fund Inc (ARDC)

What this ETF is trying to do

ARDC is an Exchange Traded Fund (ETF) traded on the NYSE. While the specific investment strategy is not detailed in the provided data, ETFs like this are generally designed to provide investors with exposure to specific types of assets.

What the numbers show

It is important to understand that "price return" and "total return" tell different stories. Price return only tracks how much the share price has changed. Total return includes both the price change and the money paid out through distributions.

• Year-to-Date (YTD): The price return is approximately -10.98%. However, the total return is -3.52%.

• One Year: The price return was approximately -18.51%, while the total return was -9.42%.

• Three Years: The price return was approximately -8.22%, but the total return was 24.01%.

To visualize the price change, an investor could look at the estimated prices. The current price is $11.84. The estimated price from roughly one year ago was approximately $14.53.

Income and distribution explanation

This ETF has a distribution yield of approximately 12.35%. This means the fund pays out a significant amount of cash relative to its share price. These distributions usually happen monthly, with 13 payments recorded over the last 12 months.

It is vital to remember that a high distribution yield does not mean an investor earned that same percentage as their total return. Total return is the more complete measurement of how much value was actually gained or lost.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk.

ARDC has an erosion score of 55, which is labeled as "moderate price erosion." This indicates a moderate level of risk regarding price deterioration. However, there is no "severe erosion-risk flag" present for this ETF.

Pros

• The fund offers a high distribution yield of approximately 12.35%.

• Over a three-year period, the total return was positive at 24.01%.

Cons

• The one-year price return has been negative (approximately -18.51%).

• The fund shows a moderate erosion-risk score of 55.

Beginner takeaway

When looking at ETFs with high yields, it is important to look at both the price return and the total return. A fund might pay out a lot of cash (high yield), but if the share price is falling significantly, the total return might be much lower than the yield suggests. Always check the erosion-risk score to understand the level of price risk being measured.