486BPOS: CION Ares Diversified Credit Fund Announces Offering of Common Shares and Preferred Shares

CION Ares Diversified Credit Fund is offering common shares and has entered into an agreement to issue and sell Series H, I, and J Mandatory Redeemable Preferred Shares, aiming to raise $200 million.

Summary

• CION Ares Diversified Credit Fund, a closed-end management investment company, is offering common shares of beneficial interest.
• The fund's investment objective is to provide superior risk-adjusted returns by investing in a diversified portfolio of liquid and illiquid asset classes.
• The fund primarily invests in directly originated loans, syndicated loans, corporate bonds, asset-backed securities, and commercial real estate loans, representing at least 80% of its managed assets.
• On March 22, 2024, the Fund agreed to issue and sell 4,000,000 Series H, 2,000,000 Series I, and 2,000,000 Series J Mandatory Redeemable Preferred Shares, expecting gross proceeds of $200 million.
• The sales of the Series H and I MRP Shares are expected to close in June 2024, and the Series J MRP Shares in July 2024, subject to customary closing conditions.
• The fund employs leverage through senior secured revolving credit facilities and outstanding Mandatory Redeemable Preferred Shares.
• The management fee is calculated at an annual rate of 1.25% of the average daily value of the Funds Managed Assets.
• The incentive fee is calculated quarterly based on pre-incentive fee net investment income, subject to a hurdle rate of 6.00% annually, with a catch-up feature.
• The fund offers quarterly repurchase offers for between 5% and 25% of its outstanding shares at NAV.
• Investors purchasing Class A Shares may be charged a sales load of up to 5.75% of the investors subscription.

Sentiment

Score: 6

Explanation: The document is neutral in tone, providing factual information about the fund's operations and offering. The risks are clearly outlined, but the overall sentiment is balanced.

Positives

• The fund's investment strategy aims for superior risk-adjusted returns across various market cycles.
• The fund's diversified portfolio includes both liquid and illiquid asset classes.
• The fund's investment approach seeks to capitalize on market inefficiencies and relative value opportunities.
• The fund's management team has extensive credit research expertise and actively monitors credit risk.
• The fund's quarterly repurchase offers provide some liquidity to Shareholders.

Negatives

• The fund's shares are not listed on any securities exchange, and there is not expected to be any secondary trading market.
• Shareholders should not expect to be able to sell their Shares regardless of how the Fund performs, making the investment illiquid.
• If a Shareholder is able to sell its Shares outside the quarterly repurchase process, the Shareholder likely will receive less than their purchase price and the then current net asset value (NAV) per Share.
• There is no assurance that monthly distributions paid by the Fund will be maintained at the targeted level or that dividends will be paid at all.
• The Funds distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to the Fund for investment.

Risks

• The fund's shares are not listed on any securities exchange, and there is not expected to be any secondary trading market.
• Shareholders should not expect to be able to sell their Shares regardless of how the Fund performs, making the investment illiquid.
• If a Shareholder is able to sell its Shares outside the quarterly repurchase process, the Shareholder likely will receive less than their purchase price and the then current net asset value (NAV) per Share.
• There is no assurance that monthly distributions paid by the Fund will be maintained at the targeted level or that dividends will be paid at all.
• The Funds distributions may be funded from unlimited amounts of offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to the Fund for investment.
• A return of capital to Shareholders is a return of a portion of their original investment in the Fund, thereby reducing the tax basis of their investment.
• The Funds distributions may result from expense reimbursements from CION Ares Management, LLC (CAM or the Adviser), which are subject to repayment by the Fund.
• The Fund currently employs leverage through senior secured revolving credit facilities and its outstanding Mandatory Redeemable Preferred Shares (MRP Shares and, together with any other preferred shares the Fund may have outstanding, Preferred Shares).
• The Fund intends to continue to utilize leverage and may utilize leverage to the maximum extent permitted by law for investment and other general corporate purposes.

Future Outlook

The Fund intends to continue to utilize leverage and may utilize leverage to the maximum extent permitted by law for investment and other general corporate purposes.

Industry Context

The announcement reflects a common strategy among closed-end funds to utilize leverage and offer diverse investment options to attract investors in a competitive market.

Comparison to Industry Standards

• Comparable closed-end funds, such as those managed by BlackRock or Nuveen, also utilize leverage and offer multiple share classes to cater to different investor needs.
• The management and incentive fee structure is typical for closed-end funds, aligning manager incentives with fund performance.
• The quarterly repurchase offers are a common mechanism for providing limited liquidity in an otherwise illiquid investment.

Stakeholder Impact

• Shareholders will have the opportunity to invest in a diversified portfolio of credit assets.
• Shareholders will be subject to the risks associated with investing in an illiquid investment.
• Financial Intermediaries will receive compensation for selling and servicing the Funds Shares.
• The Adviser and Sub-Adviser will receive fees for managing the Funds investments.

Next Steps

• The Fund will proceed with the offering of common shares.
• The Fund will proceed with the closing of the sales of Series H and I MRP Shares in June 2024, and the Series J MRP Shares in July 2024, subject to customary closing conditions.
• The Fund will continue to monitor and manage its investments in accordance with its investment objective and strategies.
• The Fund will continue to make quarterly repurchase offers to Shareholders.

Key Dates

Keywords

CION Ares Diversified Credit Fund, Mandatory Redeemable Preferred Shares, credit instruments, interval fund, investment, shares, loans, bonds, fees, risk