The DoubleLine Income Solutions Fund: A 12% Yield Backed By Risky Credit

DoubleLine Income Solutions Fund is a leveraged CEF focused on below-investment-grade bonds and emerging market debt, currently trading at a 6.6% discount to NAV. DSL’s 12% dividend yield is not fully covered by investment income; only ~75% of distributions are from income, with the rest from return of capital, eroding NAV. The portfolio carries substantial left-tail risk due to high leverage and 80% exposure to sub-investment-grade or unrated credit, making it vulnerable in credit downturns. I rate DSL a Hold, as the current discount and yield do not sufficiently compensate for under-earning dividends, high expenses, and significant credit risk.

The DoubleLine Income Solutions Fund (DSL) is what I would consider a leveraged closed-end fund (CEF) whose main activity is investing in below-investment-grade bonds, emerging market debt, structured credit, and other credit offerings. At today’s market This article was written by Rubicon Research 152 Followers Follow Rubicon Research is an independent long/short equity analyst and investor who focuses on finding deep value and GARP in equities, as well as event-driven special situations. Investment Philosophy: We practice a mix of expectation investing and gauging market psychology as the main tools for our investment decisions. A stock's price implies a certain expectation for the company. We take a long or short position when the expectation diverges too much from what we believe to be the fundamental value of a company. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.