W. Scott Jardine, Esq.
First Trust Portfolios
L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name
and address of agent for service)
Form N-CSR is to be used by management investment
companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required
to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use
the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information
specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection
of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”)
control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
As of the end of the period covered by the report,
the registrant’s board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee
financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
(a) AUDIT FEES (REGISTRANT) --
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the
audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements were $43,125 for 2022 and $49,000 for 2023.
(b) AUDIT-RELATED FEES (REGISTRANT)
-- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph
(a) of this Item were $0 for 2022 and $0 for 2023.
AUDIT-RELATED FEES (INVESTMENT
ADVISOR) -- The aggregate fees billed in each of the last two fiscal years of the registrant for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are
not reported under paragraph (a) of this Item were $0 for 2022 and $0 for 2023.
(c) TAX FEES (REGISTRANT) -- The
aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning to the registrant were $16,272 for 2022 and $14,023 for 2023. These fees were for tax consultation and/or
tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services.
TAX FEES (INVESTMENT ADVISOR)
-- The aggregate fees billed in each of the last two fiscal years of the registrant for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor were $0 for 2022 and $0 for 2023.
(d) ALL OTHER FEES (REGISTRANT)
-- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the
registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2022 and $0 for 2023.
ALL OTHER FEES (INVESTMENT ADVISOR)
-- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the
registrant’s investment advisor, other than services reported in paragraphs (a) through (c) of this Item were $0 for 2022 and $0
for 2023.
(e)(1) Disclose the audit committee’s
pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter
and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for
the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the
registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee
up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also
responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor
(not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor)
and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant,
if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions
for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s
advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment
advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services
to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit
services is compatible with the auditor’s independence.
The First Trust Advisors Leveraged Finance
Investment team manages a portfolio comprised primarily of U.S. dollar denominated high yield bonds and senior secured floating-rate loans.
The Portfolio Managers are responsible for directing the investment activities within the Fund. William Housey is the Senior Portfolio
Manager and has primary responsibility for investment decisions. Jeff Scott assists Mr. Housey and there are also Senior Credit Analysts
assigned to certain industries. The Portfolio Managers are supported in their portfolio management activities by the First Trust Advisors
Leveraged Finance investment team, including a team of credit analysts, designated traders, and operations personnel. Senior Credit Analysts
are assigned industries and Associate Credit Analysts support the Senior Credit Analysts. All credit analysts, operations personnel and
portfolio managers report to Mr. Housey.
Mr. Housey joined First Trust Advisors L.P. in June
2010 as the Senior Portfolio Manager for the Leveraged Finance Investment Team and has 27 years of investment experience. Mr. Housey
is a Managing Director of Fixed Income and is also a member of the First Trust Strategic Model Investment Committee and the Fixed Income
Sub-Committee. Prior to joining First Trust, Mr. Housey was at Morgan Stanley Investment Management and its wholly owned subsidiary,
Van Kampen Funds, Inc. for 11 years where he last served as Executive Director and Co-Portfolio Manager. Mr. Housey has extensive
experience in the portfolio management of both leveraged and unleveraged credit products, including senior loans, high-yield bonds, credit
derivatives and corporate restructurings. Mr. Housey received a B.S. in Finance from Eastern Illinois University and an M.B.A. in
Finance as well as Management and Strategy from Northwestern University’s Kellogg School of Business. He also holds the FINRA Series
7, Series 52 and Series 63 licenses. Mr. Housey also holds the Chartered Financial Analyst designation. He is a member of
the CFA Institute and the CFA Society of Chicago. Mr. Housey also serves on the Village of Glen Ellyn, IL Police Pension Board.
Mr. Scott is a Portfolio Manager and a Sector Specialist
Credit Analyst for the Leveraged Finance Investment Team at First Trust Advisors L.P. He has 33 years of experience in the investment
management industry and has extensive experience in credit analysis, product development, and product management. Prior to joining First
Trust, Jeff served as an Assistant Portfolio Manager and as a Senior Credit Analyst for Morgan Stanley/Van Kampen from October 2008 to
June 2010. As Assistant Portfolio Manager, Jeff served on a team that managed over $4.0 billion of Senior Loan assets in three separate
funds: Van Kampen Senior Loan Fund; Van Kampen Senior Income Trust; and Van Kampen Dynamic Credit Opportunities Fund. His responsibilities
included assisting with portfolio construction, buy and sell decision making, and monitoring fund liquidity and leverage. Mr. Scott earned
a B.S. in Finance and Economics from Elmhurst College and an M.B.A. with specialization in Analytical Finance and Econometrics and Statistics
from the University of Chicago. He also holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the
CFA Society of Chicago.
(a)(2) Other Accounts Managed by Portfolio
Manager(s) or Management Team Member and Potential Conflicts of Interest
* Information excludes the registrant.
Potential conflicts
of interest may arise when a portfolio manager of the Registrant has day-to-day management responsibilities with respect to one or more
other funds or other accounts. The First Trust Advisors Leveraged Finance Investment Team adheres to its trade allocation policy utilizing
a pro-rata methodology to address this conflict.
First Trust and its
affiliate, First Trust Portfolios L.P. (“FTP”), have in place a joint Code of Ethics and Insider Trading Policies and Procedures
that are designed to (a) prevent First Trust personnel from trading securities based upon material inside information in the possession
of such personnel and (b) ensure that First Trust personnel avoid actual or potential conflicts of interest or abuse of their positions
of trust and responsibility that could occur through such activities as front running securities trades for the Registrant. Personnel
are required to have duplicate confirmations and account statements delivered to First Trust and FTP compliance personnel who then compare
such trades to trading activity to detect any potential conflict situations. In addition to the personal trading restrictions specified
in the Code of Ethics and Insider Trading Policies and Procedures, employees in the First Trust Advisors Leveraged Finance Investment
Team are prohibited from buying or selling equity securities (including derivative instruments such as options, warrants and futures)
and corporate bonds for their personal account and in any accounts over which they exercise control. Employees in the First Trust Advisors
Leveraged Finance Investment Team are also prohibited from engaging in any personal transaction while in possession of material non-public
information regarding the security or the issuer of the security. First Trust and FTP also maintain a restricted list of all issuers for
which the First Trust Advisors Leveraged Finance Investment Team has material non-public information in its possession and all transactions
executed for a product advised or supervised by First Trust or FTP are compared daily against the restricted list.
The compensation structure
for internal portfolio managers is based upon a fixed salary as well as a discretionary bonus determined by the management of FTA. Salaries
are determined by management and are based upon an individual’s position and overall value to the firm. Bonuses are also determined
by management and are generally based upon an individual’s or team’s overall contribution to the success of the firm, assets
under management and the profitability of the firm. Certain internal portfolio managers have an indirect ownership stake in the firm and
will therefore receive their allocable share of ownership related distributions.
Not applicable.
There have been no material changes to the
procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented
after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407)
(as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Not applicable.
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
I, James M. Dykas, certify that:
I, Donald P. Swade, certify that:
I, James M. Dykas, President and Chief Executive Officer
of First Trust High Yield Opportunities 2027 Term Fund (the “Registrant”), certify that:
I, Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer of First Trust High Yield Opportunities 2027 Term Fund (the “Registrant”), certify that:
FIRST TRUST
ADVISORS L.P.
PROXY VOTING GUIDELINES
First Trust Advisors L.P. (“FTA” or the “Adviser”)
serves as investment adviser to open- and closed-end investment companies, and other collective investments (“Funds”),
as well as separately managed accounts (collectively, “Clients”). As part of these services, the Adviser has, in most
cases, agreed to or been delegated proxy voting responsibility on such Clients’ behalf (“Proxy Clients”). FTA
is required to adopt and implement policies and procedures reasonably designed to ensure proxy voting on behalf of Proxy Clients is conducted
in a manner that is in their best interests and addresses how conflicts of interest between FTA’s interests and Proxy Clients’
interests are managed. FTA has adopted the following policies and procedures to comply with this requirement (the “Policy”).
These records are either maintained at FTA’s office or
are electronically available to FTA through access to the ISS Proxy Exchange portal.
N-2
|
12 Months Ended |
|
May 31, 2023
$ / shares
shares
|
|---|
| Cover [Abstract] |
|
| Entity Central Index Key |
0001810523
|
| Amendment Flag |
false
|
| Entity Inv Company Type |
N-2
|
| Document Type |
N-CSR
|
| Entity Registrant Name |
First
Trust High Yield Opportunities 2027 Term Fund
|
| General Description of Registrant [Abstract] |
|
| Investment Objectives and Practices [Text Block] |
Investment
Objective
The
Fund’s investment objective is to provide current income.
Principal
Investment Policies
The
Fund invests at least 80% of its Managed Assets (as defined below) in high yield debt securities of any maturity that are rated below
investment grade (rated below “BBB-” by S&P Global Ratings (“S&P”) and Fitch Ratings, a part of the Fitch
Group (“Fitch”), or below “Baa3” by Moody’s Investor Services, Inc. (“Moody’s”)) at the
time of purchase or unrated securities determined by the Advisor to be of comparable quality. Such securities include U.S and non-U.S.
corporate debt obligations and senior, secured floating rate loans (“Senior Loans”).
“Managed
Assets” means the average daily gross asset value of the Fund (which includes assets attributable to the Fund’s preferred
shares of beneficial interest (“Preferred Shares”), if any, and the principal amount of any borrowings or commercial paper
or notes issued by the Fund), minus the sum of the Fund’s accrued and unpaid dividends on any outstanding Preferred Shares and accrued
liabilities (other than the principal amount of any borrowings of money incurred or of commercial paper or notes issued by the Fund).
Under
normal market circumstances:
| •
|
The
Fund may invest up to 20% of its Managed Assets in (i) investment grade corporate debt obligations, (ii) U.S. and non-U.S. government
debt securities, (iii) warrants and equity securities, including common stock and other equity securities acquired in connection with
the restructuring of the debt of an issuer, the reorganization of a Senior Loan or as part of a package of securities acquired together
with the Senior Loans of an issuer, and (iv) investment companies; |
| •
|
The
Fund may invest no more than 20% of its Managed Assets in corporate debt obligations that, at the time of purchase using the highest available
rating, either are rated “CCC+” or lower by S&P or Fitch, or “Caa1” or lower by Moody’s, or comparably
rated by another nationally recognized statistical rating organization (“NRSRO”) or, if unrated, determined by the Advisor
to be of comparable quality; |
| •
|
The
Fund may invest no more than 25% of its Managed Assets in any single industry in the corporate debt market; and |
| •
|
The
Fund may not invest more than 5% of its Managed Assets in securities issued by a single issuer, other than securities issued by the U.S.
government. |
The
Fund’s investments may include: (i) securities of issuers located in countries considered to be emerging markets, which may entail
additional risks; and (ii) defaulted or distressed securities (i.e., securities of companies whose financial condition is troubled or
uncertain and that may be involved in bankruptcy proceedings, reorganizations or financial restructurings). The Fund may use certain
credit derivatives to take on additional credit risk and obtain exposure to the high yield corporate debt market. If used, these
instruments will be considered to be an investment in high yield debt securities for the purposes of the Fund’s investment policy
to invest, under normal market conditions, at least 80% of its Managed Assets in high yield debt securities that are rated below investment
grade at the time of purchase or unrated securities determined by the Advisor to be of comparable quality. The Fund primarily uses
total return swaps and credit default swaps to gain such exposure to high yield debt securities as part of its investment strategy. The
Fund also may use credit default swap indices (“CDX”) to take on additional credit risk and obtain exposure to the high yield
debt market. The Fund may use CDX exposure in two ways: when the Fund is a buyer of CDX credit protection, it seeks
to hedge its exposure to volatility in the high yield debt market; when the Fund is a seller of CDX credit protection, it seeks
to gain exposure to the high yield debt market, similar to investing directly in a basket of high yield debt securities. The CDX investments
in which the Fund will invest are cleared on an exchange. The Fund’s usage of total return swaps, credit default swaps and
other derivative transactions other than for hedging purposes may not exceed 20% of the Fund’s Managed Assets, as measured by the
total notional amount of such instruments. The Fund may also enter into futures contracts and options on futures contracts, and
may, but is not required to, use various other derivative transactions to seek to manage the risks of the Fund’s portfolio securities
or for other purposes to the extent the Advisor determines that the use of such transactions is consistent with the Fund’s investment
objective, policies and applicable regulatory requirements.
To
the extent the Fund enters into derivatives transactions, it will do so pursuant to Rule 18f-4 under the 1940 Act. Rule 18f-4 requires
the Fund to implement certain policies and procedures designed to manage its derivatives risks, dependent upon the Fund’s level
of exposure to derivative instruments.
The
Fund intends to liquidate and distribute substantially all of its net assets to shareholders on or about August 1, 2027 (the “Termination
Date”). The Fund is not a so called “target date” or “life cycle” fund whose asset allocation becomes
more conservative over time as its target date, often associated with retirement, approaches. In addition, the Fund is not a “target
term” fund whose investment objective is to return its original NAV on the Termination Date. The Fund’s investment objective
and policies are not designed to seek to return to investors that purchased Common Shares in the initial offering their initial investment
of $20.00 per Common Share on the Termination Date, and such investors and investors that purchased Common Shares after the completion
of the initial offering may receive more or less than their original investment upon termination.
During
temporary defensive periods and the period in which the Fund is approaching its Termination Date (i.e., the “wind-down” period
during which the Fund may begin liquidating its portfolio in anticipation of the Termination Date, which period is expected to begin six
months prior to the Termination Date), the Fund may deviate from its investment policies and objective. During such periods, the
Fund may invest up to 100% of its Managed Assets in cash or short-term investments, including high quality, short-term securities, or
may invest in short- or intermediate-term U.S. Treasury securities. There can be no assurance that such techniques will be successful,
and during such periods, the Fund may not achieve its investment objective.
The
Fund currently uses (and may continue to use) leverage to seek to achieve its investment objective. The Fund anticipates that, under
normal market conditions, it will employ leverage through borrowings from banks or other financial institutions in the amount of approximately
30% of the Fund’s Managed Assets. The costs associated with any issuance and use of leverage are borne by Common Shareholders.
The use of leverage is a speculative technique and investors should note that there are special risks and costs associated with
the leveraging of the Common Shares. There can be no assurance that a leveraging strategy will be successful during any period in
which it is employed. Under normal market conditions, the Fund seeks to limit its overall effective leverage (which represents the
combination of economic leverage, which is when the Fund seeks the right to a return on a capital base that exceeds the investment which
the Fund has contributed to the instrument seeking a return) and the Fund’s senior securities (as defined under the 1940 Act)) to
40% of its Managed Assets.
Fundamental
Investment Policies
The
Fund, as a fundamental policy, may not:
1)
With respect to 75% of its total assets, purchase any securities if, as a result (i) more than 5% of the Fund’s total assets would
then be invested in securities of any single issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of
any single issuer; provided, that Government securities (as defined in the 1940 Act), securities issued by other investment companies
and cash items (including receivables) shall not be counted for purposes of this limitation;
2)
Purchase or sell real estate or commodities except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other
successor law governing the regulation of registered investment companies, or interpretations or modifications thereof by the SEC, SEC
staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority
of competent jurisdiction;
3)
Borrow money except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation
of registered investment companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent
jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction;
4)
Issue senior securities except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing
the regulation of registered investment companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority
of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction;
5)
Underwrite the securities of other issuers except (a) to the extent that the Fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933, as amended, in connection with the purchase and sale of portfolio securities; and (b) as permitted by (i)
the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies,
or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other
relief or permission from the SEC, SEC staff or other authority of competent jurisdiction;
6)
Make loans except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation
of registered investment companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent
jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction; or
7)
Purchase any security if as a result 25% or more of the Fund’s total assets (taken at current value) would be invested in securities
of issuers in a single industry, except that such limitation shall not apply to obligations issued or guaranteed by the United States
Government or by its agencies or instrumentalities.
Except
as noted above, the foregoing fundamental investment policies cannot be changed without approval by holders of a “majority of the
outstanding voting securities” of the Fund, as defined in the 1940 Act, which includes Common Shares and Preferred Shares, if any,
voting together as a single class, and of the holders of the outstanding Preferred Shares, if any, voting as a single class. Under
the 1940 Act, a “majority of the outstanding voting securities” means (i) 67% or more of the Fund’s shares present at
a meeting, if the holders of more than 50% of the Fund’s shares are present or represented by proxy, or (ii) more than 50% of the
Fund’s shares, whichever is less.
The
foregoing restrictions and limitations will apply only at the time of purchase of securities, and the percentage limitations will not
be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities,
unless otherwise indicated.
|
| Risk Factors [Table Text Block] |
Principal
Risks
The
Fund is a closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund
is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance
that the Fund will achieve its investment objective. The following discussion summarizes the principal risks associated with investing
in the Fund, which includes the risk that you could lose some or all of your investment in the Fund. The Fund is subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and, in accordance therewith, files reports,
proxy statements and other information that is available for review.
CDX
Risk. CDX is an equally-weighted index of credit default swaps that is designed to track a representative
segment of the credit default swap market (e.g., high yield). A credit default swap is a financial derivative that allows an investor
to swap or offset their credit risk with that of another investor. CDX provides exposure to a basket of underlying credit default swaps
in lieu of buying or selling credit default swaps on individual debt securities. The CDX investments in which the Fund will invest are
cleared on an exchange. Regardless of whether the Fund buys or sells CDX credit protection, such investments can result in gains or losses
that may exceed gains or losses the Fund would have incurred investing directly in high yield debt securities, which may impact the Fund’s
net asset value. It is also possible that returns from CDX investments may not correlate with returns of the broader high yield credit
market. There are additional costs associated with investing in CDX, including the payment of premiums when the Fund is a buyer of CDX
credit protection. When the Fund sells CDX credit protection, it assumes additional credit risk. Investment exposure to CDX credit protection
is subject to the risks of the underlying credit default swap obligations, which include general market risk, liquidity risk, credit risk
and counterparty risk. Counterparty risk may be mitigated somewhat compared to buying or selling credit protection using individual credit
default swaps because CDX investments are cleared on an exchange.
Consumer
Discretionary Companies Risk. Consumer discretionary companies, such as retailers, media companies and
consumer services companies, provide non-essential goods and services. These companies manufacture products and provide discretionary
services directly to the consumer, and the success of these companies is tied closely to the performance of the overall domestic and international
economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending.
Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer discretionary products in the marketplace.
Corporate
Debt Obligations Risk. The market value of corporate debt obligations generally may be expected to rise
and fall inversely with interest rates. The market value of corporate debt obligations also may be affected by factors directly related
to the issuer, such as investors’ perceptions of the creditworthiness of the issuer, the issuer’s financial performance, perceptions
of the issuer in the marketplace, performance of management of the issuer, the issuer’s capital structure and use of financial leverage
and demand for the issuer’s goods and services. There is a risk that the issuers of corporate debt may not be able to meet their
obligations on interest and/or principal payments at the time called for by an instrument.
Credit
Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions of such
entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity
of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely
affect the credit
ratings
of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and, as a result, may adversely
affect those securities’ perceived or actual credit risk.
Credit
and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated
party of a debt security in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends and/or
interest or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged to be of
comparable quality, are commonly referred to as high yield securities or “junk” bonds and are considered speculative with
respect to the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline
in market value than investment grade securities due to adverse economic and business developments. High yield securities are often unsecured
and subordinated to other creditors of the issuer. The market values for high yield securities tend to be very volatile, and these securities
are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following specific
risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater risk of loss
due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make dividend,
interest and/or principal payments; (iv) negative perception of the high yield market which may depress the price and liquidity of high
yield securities; (v) volatility; and (vi) liquidity.
Credit
Default Swaps Risk. Credit default swap transactions involve greater risks than if the Fund had invested
in the reference obligation directly. In addition to general market risks, credit default swaps are subject to liquidity risk, counterparty
risk and credit risks. With respect to a reference obligation, a buyer will lose its investment and recover nothing should no event of
default occur. For a seller, if an event of default were to occur, the value of the reference obligation received by the seller, coupled
with the periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of
value. When the Fund acts as a seller of a credit default swap agreement, it is exposed to the risks of leverage since if an event of
default occurs with respect to a reference obligation, the seller must pay the buyer the full notional value of the reference obligation.
Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent or custodian, or
issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches.
The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third party
service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
Defaulted
and Distressed Securities Risk. The Fund may invest in securities that may be in default or distressed—i.e.,
securities of companies whose financial condition is troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations
or financial restructurings. Distressed securities present a substantial risk of future default which may cause the Fund to incur losses,
including additional expenses, to the extent it is required to seek recovery upon a default in the payment of principal or interest on
those securities. The Fund also will be subject to significant uncertainty as to when, in what manner and for what value the obligations
evidenced by the defaulted or distressed securities will eventually be satisfied.
In
addition, the Fund may invest in loans of borrowers that are experiencing, or are likely to experience, financial difficulty. These loans
are subject to greater credit and liquidity risks than other types of loans. In addition, the Fund can invest in loans of borrowers that
have filed for bankruptcy protection or that have had involuntary bankruptcy petitions filed against them by creditors. A bankruptcy proceeding
or other court proceeding could delay or limit the ability of the Fund to collect the principal and interest payments on that borrower’s
loans or adversely affect the Fund’s rights in collateral relating to a loan.
Earnings
Risk. The Fund’s limited term may cause it to invest in lower yielding securities or hold the
proceeds of securities sold near the end of its term in cash or cash equivalents, which may adversely affect the performance of the Fund
or the Fund’s ability to maintain its dividend.
Emerging
Markets Risk. Investing in emerging market countries, as compared to foreign developed markets, involves
substantial additional risk due to more limited information about the issuer and/or the security (including limited financial and accounting
information); higher brokerage costs; different accounting, auditing and financial reporting standards; less developed legal systems and
thinner trading markets; the possibility of currency blockages or transfer restrictions; an emerging market country’s dependence
on revenue from particular commodities or international aid; and the risk of expropriation, nationalization or other adverse political
or economic developments.
Emerging
market countries may lack the social, political and economic stability and characteristics of more developed countries, and their political
and economic structures may undergo unpredictable, significant and rapid changes from time to time, any of which could adversely impact
the value of investments in emerging markets as well as the availability of additional investments in such markets. The securities markets
of emerging market countries may be substantially smaller, less developed, less liquid and more volatile than the major securities markets
in the United States and other developed nations. The limited size of these securities markets and the limited trading volume of securities
issued by emerging market issuers could cause prices to be erratic and investments in emerging markets can become illiquid. As a result
of the foregoing risks, it may be difficult to assess the value or prospects of an investment in such securities.
Europe
Risk. The Fund is subject to certain risks associated specifically with investments in securities of
European issuers, in addition to the risks associated with investments in non-U.S. securities generally. Political or economic disruptions
in European countries, even in countries in which the Fund is not invested, may adversely affect security values and thus the Fund’s
holdings. A significant number of countries in Europe are member states in the European Union (“EU”), and the member states
no longer control their own monetary policies by directing independent interest rates for their currencies. In these member states, the
authority to direct monetary policies, including money supply and official interest rates for the Euro, is exercised by the European Central
Bank. In a 2016 referendum, the United Kingdom elected to withdraw from the EU (“Brexit”). After years of negotiations between
the United Kingdom and the EU, a withdrawal agreement was reached whereby the United Kingdom formally left the EU. As the second largest
economy among EU members, the implications of the United Kingdom’s withdrawal are difficult to gauge and cannot be fully known.
Trade between the United Kingdom and the EU is highly integrated through supply chains and trade in services, as well as through multinational
companies. The United Kingdom’s departure may negatively impact the EU and Europe as a whole by causing volatility within the EU,
triggering prolonged economic downturns in certain European countries or sparking additional member states to contemplate departing the
EU (thereby perpetuating political instability in the region).
Foreign
Currency Risk. Currency risk is the risk that fluctuations in exchange rates may adversely affect the
value of the Fund’s investments. Currency exchange rates fluctuate significantly for many reasons, including changes in supply and
demand in the currency exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by
U.S. or foreign governments, central banks, or supranational agencies such as the International Monetary Fund, and currency controls or
other political and economic developments in the U.S. or abroad.
Health
Care Companies Risk. Through the Fund’s investments in senior loans, the Fund may be significantly
exposed to companies in the health care sector. Health care companies are involved in medical services or health care, including
biotechnology research and production, drugs and pharmaceuticals and health care facilities and services. These companies are subject
to extensive competition, generic drug sales or the loss of patent protection, product liability litigation and increased government regulation.
Research and development costs of bringing new drugs to market are substantial, and there is no guarantee that the product will ever come
to market. Health care facility operators may be affected by the demand for services, efforts by government or insurers to limit rates,
restriction of government financial assistance and competition from other providers.
Illiquid
Securities Risk. The Fund invests a substantial portion of its assets in lower-quality debt issued by
companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues
tend to be less liquid than larger debt issues. Although the resale or secondary market for senior loans is growing, it is currently limited.
There is no organized exchange or board of trade on which senior loans are traded. Instead, the secondary market for senior loans is an
unregulated inter-dealer or inter-bank resale market. In addition, senior loans in which the Fund invests may require the consent of the
borrower and/or agent prior to the settlement of the sale or assignment. These consent requirements can delay or impede the Fund’s
ability to settle the sale of senior loans. Depending on market conditions, the Fund may have difficulty disposing its senior loans, which
may adversely impact its ability to obtain cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment
opportunities.
Illiquid
securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price
of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund
pays for or recovers upon the sale of such securities. Illiquid securities are also more difficult to value, especially in challenging
markets.
Inflation
Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less
in the future as inflation decreases the value of money. As inflation increases, the present value of the Fund’s assets and distributions
may decline. This risk is more prevalent with respect to debt securities. Inflation creates uncertainty over the future real value (after
inflation) of an investment. Inflation rates may change frequently and drastically as a result of various factors, including unexpected
shifts in the domestic or global economy, and the Fund’s investments may not keep pace with inflation, which may result in losses
to Fund investors.
Information
Technology Companies Risk. Information technology companies produce and provide hardware, software and
information technology systems and services. Information technology companies are generally subject to the following risks: rapidly
changing technologies and existing product obsolescence; short product life cycles; fierce competition; aggressive pricing and reduced
profit margins; the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent
new product introductions and new market entrants. Information technology companies may be smaller and less experienced companies,
with limited product lines, markets or financial resources and fewer experienced management or marketing personnel. Information
technology company stocks, particularly those involved with the internet, have experienced extreme price and volume fluctuations that
are often unrelated to their operating performance. In addition, information technology companies are particularly vulnerable to
federal, state and local government regulation, and competition and consolidation, both domestically and internationally, including competition
from foreign competitors with lower production costs. Information technology companies also face competition for services of qualified
personnel and heavily rely on patents and intellectual property rights and the ability to enforce such rights to maintain a competitive
advantage.
Interest
Rate Risk. The yield on the Fund’s common shares may rise or fall as market interest rates rise
and fall, as senior loans pay interest at rates which float in response to changes in market rates. Changes in prevailing interest rates
can be expected to cause some fluctuation in the Fund’s net asset value. Similarly, a sudden and significant increase in market
interest rates may cause a decline in the Fund’s net asset value.
Many
financial instruments use or may use a floating rate based upon the London Interbank Offered Rate (“LIBOR”). The United Kingdom’s
Financial Conduct Authority (the “FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate
over a phase-out period that began in early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators
indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. The unavailability or replacement of LIBOR
may affect the value, liquidity or return on certain Fund investments and may result in costs incurred in connection with closing out
positions and entering into new trades. Any potential effects of the transition away from LIBOR on the Fund or on certain instruments
in which the Fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. In the United States,
it is anticipated that in many instances the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the reference
rate for many of the floating rate instruments held by the Fund. There is no assurance that the composition or characteristics of SOFR,
or any alternative reference rate, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using
an alternative rate will have the same volume or liquidity. As a result, the transition process might lead to increased volatility and
reduced liquidity in markets that currently rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based investments;
increased difficulty in borrowing or refinancing and diminished effectiveness of any applicable hedging strategies against instruments
whose terms currently include LIBOR; and/or costs incurred in connection with temporary borrowings and closing out positions and entering
into new agreements. Any such effects (as well as other unforeseen effects) of the transition away from LIBOR and the adoption of
alternative reference rates could result in losses to the Fund.
In
addition, for the Fund’s fixed rate investments, when market interest rates rise, the market value of such securities generally
will fall. Market value generally falls further for fixed rate securities with longer duration. During periods of rising interest rates,
the average life of certain types of securities may be extended because of slower than expected prepayments. This may lock in a below-market
yield, increase the security’s duration and further reduce the value of the security. Investments in fixed rate securities with
long-term maturities may experience significant price declines if long-term interest rates increase.
Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
(i) the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without
leverage; (ii) the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result
in fluctuations in the dividends paid on the common shares; (iii) in a declining market, the use of leverage is likely to cause a greater
decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the
market price of the common shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor
will be higher than if the Fund did not use leverage.
Limited
Term Risk. Because the assets of the Fund will be liquidated in connection with the Fund’s termination,
the Fund may be required to sell portfolio securities when it otherwise would not, including at times when market conditions are not favorable,
which may cause the Fund to lose money. In particular, the Fund’s portfolio may still have significant remaining average maturity
and duration, and large exposures to lower-quality credits, as the termination date approaches, and if interest rates are high (and the
value of lower-quality fixed-income securities consequently low) at the time the Fund needs to liquidate its assets in connection with
the termination, the losses due to portfolio liquidation may be significant. Moreover, as the Fund approaches the termination date, its
portfolio
composition may change as more of its portfolio holdings are called or sold, which may cause the returns to decrease and the NAV of the
Common Shares to fall. Rather than reinvesting the proceeds of matured, called or sold securities, the Fund may distribute the proceeds
in one or more liquidating distributions prior to the final liquidation, which may cause fixed expenses to increase when expressed as
a percentage of assets under management, or the Fund may invest the proceeds in lower yielding securities or hold the proceeds in cash,
which may adversely affect its performance. Because the Fund will invest in below investment grade securities, it may be exposed to the
greater potential for an issuer of its securities to default, as compared to a fund that invests solely in investment grade securities.
As a result, should a Fund portfolio holding default, this may significantly reduce net investment income and, therefore, Common Share
dividends, and also may prevent or inhibit the Fund from fully being able to liquidate its portfolio at or prior to the termination date.
When terminated, the Fund’s final distribution will be based upon its NAV at the end of the term and investors in the Fund may receive
more or less than their original investment.
Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be
difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative
impact on the Fund.
Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
Market
Risk. Securities held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations
caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates
and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments as a result of
the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on the
Fund and its investments. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments,
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions,
had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of vaccines has slowed the spread
of the virus and allowed for the resumption of reasonably normal business activity in the United States, many countries continue to impose
lockdown measures in an attempt to slow the spread. Also, in February 2022, Russia invaded Ukraine which has caused and could continue
to cause significant market disruptions and volatility across markets globally, including the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain Fund investments as well as Fund performance. As the global
pandemic and conflict in Ukraine have illustrated, such events may affect certain geographic regions, countries, sectors and industries
more significantly than others. Recent and potential future bank failures could result in disruption to the broader banking industry or
markets generally and reduce confidence in financial institutions and the economy as a whole, which may also heighten market volatility
and reduce liquidity. These events also may adversely affect the prices and liquidity of the Fund’s portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares and result in increased market volatility. During any such events, the Fund’s shares may
trade at increased premiums or discounts to their net asset value and the bid/ask spread on the Fund’s shares may widen.
Non-U.S.
Securities Risk. The Fund may invest a portion of its assets in securities of non-U.S. issuers. Investing
in securities of non-U.S. issuers, which are generally denominated in non-U.S. currencies, may involve certain risks not typically associated
with investing in securities of U.S. issuers. These risks include: (i) there may be less publicly available information about non-U.S.
issuers or markets due to less rigorous disclosure or accounting standards or regulatory practices; (ii) non-U.S. markets may be smaller,
less liquid and more volatile than the U.S. market; (iii) potential adverse effects of fluctuations in currency exchange rates or controls
on the value of the Fund’s investments; (iv) the economies of non-U.S. countries may grow at slower rates than expected or may experience
a downturn or recession; (v) the impact of economic, political, social or diplomatic events; (vi) certain non-U.S. countries may impose
restrictions on the ability of non-U.S. issuers to make payments of principal and interest to investors located in the United States due
to blockage of non-U.S. currency exchanges or otherwise; and (vii) withholding and other non-U.S. taxes may decrease the Fund’s
return. Foreign companies are generally not subject to the same accounting, auditing and financial reporting standards as are U.S. companies.
In addition, there may be difficulty in obtaining or enforcing a court judgment abroad. These risks may be more pronounced to the extent
that the Fund invests a significant amount of its assets in companies located in one region or in emerging markets.
Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not limited
to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund relies on third parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its
investment objective.
Although
the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect
against such risks.
Potential
Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict
with the interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or advise other investment
funds or accounts with the same or substantially similar investment objective and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust for investment advisory and management services are higher than if the Fund
did not use leverage because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to
leverage the Fund.
Prepayment
Risk. Loans and corporate bonds are subject to prepayment risk. Prepayment risk is the risk that the
borrower on a loan or issuer of a bond will repay principal (in part or in whole) prior to the scheduled maturity date. The degree to
which such repayment occurs may be affected by general business conditions, interest rates, the financial condition of the borrower or
issuer and competitive conditions among investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment,
either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced which, in turn, may result
in a decline in distributions to common shareholders. The Fund may not be able to reinvest the proceeds received on terms as favorable
as the prepaid loan or bond.
Reinvestment
Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the
Fund invests the proceeds from matured, traded or called instruments at market interest rates that are below the Fund’s portfolio’s
current earnings rate. A decline in income could affect the common shares’ market price, level of distributions or the overall return
of the Fund.
Second
Lien Loan Risk. A second lien loan may have a claim on the same collateral pool as the first lien or
it may be secured by a separate set of assets. Second lien loans are typically secured by a second priority security interest or lien
on specified collateral securing the borrower’s obligation under the interest. Because second lien loans are second to first lien
loans, they present a greater degree of investment risk. Specifically, these loans are subject to the additional risk that the cash flow
of the borrower and property securing the loan may be insufficient to meet scheduled payments after giving effect to those loans with
a higher priority. In addition, loans that have a lower than first lien priority on collateral of the borrower generally have greater
price volatility than those loans with a higher priority and may be less liquid.
Senior
Loan Risk. The Fund invests in senior loans and therefore is subject to the risks associated therewith.
Investments in senior loans are subject to the same risks as investments in other types of debt securities, including credit risk,
interest rate risk, liquidity risk and valuation risk (which may be heightened because of the limited public information available regarding
senior loans and because loan borrowers may be leveraged and tend to be more adversely affected by changes in market or economic conditions).
Further, no active trading market may exist for certain senior loans, which may impair the ability of the Fund to realize full value
in the event of the need to sell a senior loan and which may make it difficult to value senior loans. Senior loans may not be considered
“securities” and the Fund may not be entitled to rely on the anti-fraud protections of the federal securities laws.
In
the event a borrower fails to pay scheduled interest or principal payments on a senior loan held by the Fund, the Fund will experience
a reduction in its income and a decline in the value of the senior loan, which will likely reduce dividends and lead to a decline in the
net asset value of the Fund’s common shares. If the Fund acquires a senior loan from another lender, for example, by acquiring a
participation, the Fund may also be subject to credit risks with respect to that lender. Although senior loans may be secured by specific
collateral, the value of the collateral may not equal the Fund’s investment when the senior loan is acquired or may decline below
the principal amount of the senior loan subsequent to the Fund’s investment. Also, to the extent that collateral consists of stock
of the borrower or its subsidiaries or affiliates, the Fund bears the risk that the stock may decline in value, be relatively illiquid,
and/or may lose all or substantially all of its value, causing the senior loan to be under collateralized. Therefore, the liquidation
of the collateral underlying a senior loan may not satisfy the issuer’s obligation to the Fund in the event of non-payment of scheduled
interest or principal, and the collateral may not be readily liquidated. The senior loan market has seen a significant increase in loans
with weaker lender protections including, but not limited to, limited financial maintenance covenants or, in some cases, no financial
maintenance covenants (i.e., “covenant-lite loans”) that would typically be included in a traditional loan agreement and general
weakening of other restrictive covenants applicable to the borrower such as limitations on incurrence of additional debt, restrictions
on payments of junior debt or restrictions on dividends and distributions. Weaker lender protections such as the absence of financial
maintenance covenants in a loan agreement and the inclusion of “borrower-favorable” terms may impact recovery values and/or
trading levels of senior loans in the future. The absence of financial maintenance covenants in a loan agreement generally means that
the lender may not be able to declare a default if financial performance deteriorates. This may hinder the Fund’s ability to reprice
credit risk associated with a particular borrower and reduce the Fund’s ability to restructure a problematic loan and mitigate potential
loss. As a result, the Fund’s exposure to losses on investments in senior loans may be increased, especially during a downturn in
the credit cycle or changes in market or economic conditions.
Valuation
Risk. The valuation of senior loans may carry more risk than that of common stock. Market quotations
may not be readily available for some senior loans and securities in which the Fund invests and valuation may require more research than
for liquid securities. In addition, elements of judgment may play a greater role in the valuation of senior loans and certain other securities
than for securities with a secondary market, because there is less reliable objective data available. These difficulties may lead
to inaccurate asset pricing.
|
| Effects of Leverage [Text Block] |
Effects
of Leverage
The
aggregate principal amount of borrowings under the credit agreement (the “Credit Agreement”) with The Toronto-Dominion Bank,
New York Branch represented approximately 17.84% of Managed Assets as of May 31, 2023. Asset coverage with respect to the borrowings under
the Credit Agreement was 560.49% as of May 31, 2023 and the Fund had $192,000,000 of unutilized funds available for borrowing under the
Credit Agreement as of that date. As of May 31, 2023, the maximum commitment amount under the Credit Agreement was $315,000,000. As of
May 31, 2023, the approximate average annual interest and fee rate for the borrowings under the Credit Agreement was 6.56%.
Assuming
that the Fund’s leverage costs remain as described above (at an assumed average annual cost of 6.56%), the annual return that the
Fund’s portfolio must experience (net of expenses) in order to cover its leverage costs would be 1.17%.
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on Common Share
total return, assuming investment portfolio total returns (comprised of income and changes in the value of securities held in the Fund’s
portfolio) of (10)%, (5)%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily
indicative of the investment portfolio returns experienced or expected to be experienced by the Fund.
The
table further assumes leverage representing 17.84% of the Fund’s Managed Assets, net of expenses, and an annual leverage interest
and fee rate of 6.56%.
|
Assumed Portfolio Total Return (Net of Expenses)
|
-10%
|
-5%
|
0%
|
5%
|
10%
|
|
Common Share Total Return
|
-13.60%
|
-7.51%
|
-1.42%
|
4.66%
|
10.75%
|
Common
Share total return is composed of two elements: the Common Share dividends paid by the Fund (the amount of which is largely determined
by the net investment income of the Fund after paying dividends or interest on its leverage) and gains or losses on the value of the securities
the Fund owns. As required by SEC rules, the table above assumes that the Fund is more likely to suffer capital losses than to enjoy capital
appreciation. For example, to assume a total return of 0% the Fund must assume that the distributions it receives on its investments are
entirely offset by losses in the value of those securities.
|
| Annual Interest Rate [Percent] |
6.56%
|
| Annual Coverage Return Rate [Percent] |
1.17%
|
| Effects of Leverage [Table Text Block] |
|
Assumed Portfolio Total Return (Net of Expenses)
|
-10%
|
-5%
|
0%
|
5%
|
10%
|
|
Common Share Total Return
|
-13.60%
|
-7.51%
|
-1.42%
|
4.66%
|
10.75%
|
|
| Return at Minus Ten [Percent] |
(13.60%)
|
| Return at Minus Five [Percent] |
(7.51%)
|
| Return at Zero [Percent] |
(1.42%)
|
| Return at Plus Five [Percent] |
4.66%
|
| Return at Plus Ten [Percent] |
10.75%
|
| Effects of Leverage, Purpose [Text Block] |
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on Common Share
total return, assuming investment portfolio total returns (comprised of income and changes in the value of securities held in the Fund’s
portfolio) of (10)%, (5)%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily
indicative of the investment portfolio returns experienced or expected to be experienced by the Fund.
The
table further assumes leverage representing 17.84% of the Fund’s Managed Assets, net of expenses, and an annual leverage interest
and fee rate of 6.56%.
|
| Share Price |
$ 13.52
|
| NAV Per Share |
$ 15.40
|
| Capital Stock, Long-Term Debt, and Other Securities [Abstract] |
|
| Outstanding Security, Title [Text Block] |
Common Shares outstanding (unlimited number of Common Shares has been authorized)
|
| Outstanding Security, Held [Shares] | shares |
36,772,989
|
| C D X Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
CDX
Risk. CDX is an equally-weighted index of credit default swaps that is designed to track a representative
segment of the credit default swap market (e.g., high yield). A credit default swap is a financial derivative that allows an investor
to swap or offset their credit risk with that of another investor. CDX provides exposure to a basket of underlying credit default swaps
in lieu of buying or selling credit default swaps on individual debt securities. The CDX investments in which the Fund will invest are
cleared on an exchange. Regardless of whether the Fund buys or sells CDX credit protection, such investments can result in gains or losses
that may exceed gains or losses the Fund would have incurred investing directly in high yield debt securities, which may impact the Fund’s
net asset value. It is also possible that returns from CDX investments may not correlate with returns of the broader high yield credit
market. There are additional costs associated with investing in CDX, including the payment of premiums when the Fund is a buyer of CDX
credit protection. When the Fund sells CDX credit protection, it assumes additional credit risk. Investment exposure to CDX credit protection
is subject to the risks of the underlying credit default swap obligations, which include general market risk, liquidity risk, credit risk
and counterparty risk. Counterparty risk may be mitigated somewhat compared to buying or selling credit protection using individual credit
default swaps because CDX investments are cleared on an exchange.
|
| Consumber Discretionary Companies Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Consumer
Discretionary Companies Risk. Consumer discretionary companies, such as retailers, media companies and
consumer services companies, provide non-essential goods and services. These companies manufacture products and provide discretionary
services directly to the consumer, and the success of these companies is tied closely to the performance of the overall domestic and international
economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending.
Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer discretionary products in the marketplace.
|
| Corporate Debt Obligations Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Corporate
Debt Obligations Risk. The market value of corporate debt obligations generally may be expected to rise
and fall inversely with interest rates. The market value of corporate debt obligations also may be affected by factors directly related
to the issuer, such as investors’ perceptions of the creditworthiness of the issuer, the issuer’s financial performance, perceptions
of the issuer in the marketplace, performance of management of the issuer, the issuer’s capital structure and use of financial leverage
and demand for the issuer’s goods and services. There is a risk that the issuers of corporate debt may not be able to meet their
obligations on interest and/or principal payments at the time called for by an instrument.
|
| Credit Agency Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit
Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions of such
entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity
of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely
affect the credit
ratings
of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and, as a result, may adversely
affect those securities’ perceived or actual credit risk.
|
| Credit And Below Investment Grade Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit
and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated
party of a debt security in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends and/or
interest or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged to be of
comparable quality, are commonly referred to as high yield securities or “junk” bonds and are considered speculative with
respect to the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline
in market value than investment grade securities due to adverse economic and business developments. High yield securities are often unsecured
and subordinated to other creditors of the issuer. The market values for high yield securities tend to be very volatile, and these securities
are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following specific
risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater risk of loss
due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make dividend,
interest and/or principal payments; (iv) negative perception of the high yield market which may depress the price and liquidity of high
yield securities; (v) volatility; and (vi) liquidity.
|
| Credit Default Swaps Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit
Default Swaps Risk. Credit default swap transactions involve greater risks than if the Fund had invested
in the reference obligation directly. In addition to general market risks, credit default swaps are subject to liquidity risk, counterparty
risk and credit risks. With respect to a reference obligation, a buyer will lose its investment and recover nothing should no event of
default occur. For a seller, if an event of default were to occur, the value of the reference obligation received by the seller, coupled
with the periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of
value. When the Fund acts as a seller of a credit default swap agreement, it is exposed to the risks of leverage since if an event of
default occurs with respect to a reference obligation, the seller must pay the buyer the full notional value of the reference obligation.
|
| Cyber Security Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Cyber
Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber security.
A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information,
suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent or custodian, or
issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches.
The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third party
service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
|
| Defaulted And Distressed Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Defaulted
and Distressed Securities Risk. The Fund may invest in securities that may be in default or distressed—i.e.,
securities of companies whose financial condition is troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations
or financial restructurings. Distressed securities present a substantial risk of future default which may cause the Fund to incur losses,
including additional expenses, to the extent it is required to seek recovery upon a default in the payment of principal or interest on
those securities. The Fund also will be subject to significant uncertainty as to when, in what manner and for what value the obligations
evidenced by the defaulted or distressed securities will eventually be satisfied.
In
addition, the Fund may invest in loans of borrowers that are experiencing, or are likely to experience, financial difficulty. These loans
are subject to greater credit and liquidity risks than other types of loans. In addition, the Fund can invest in loans of borrowers that
have filed for bankruptcy protection or that have had involuntary bankruptcy petitions filed against them by creditors. A bankruptcy proceeding
or other court proceeding could delay or limit the ability of the Fund to collect the principal and interest payments on that borrower’s
loans or adversely affect the Fund’s rights in collateral relating to a loan.
|
| Earnings Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Earnings
Risk. The Fund’s limited term may cause it to invest in lower yielding securities or hold the
proceeds of securities sold near the end of its term in cash or cash equivalents, which may adversely affect the performance of the Fund
or the Fund’s ability to maintain its dividend.
|
| Earnings Markets Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Emerging
Markets Risk. Investing in emerging market countries, as compared to foreign developed markets, involves
substantial additional risk due to more limited information about the issuer and/or the security (including limited financial and accounting
information); higher brokerage costs; different accounting, auditing and financial reporting standards; less developed legal systems and
thinner trading markets; the possibility of currency blockages or transfer restrictions; an emerging market country’s dependence
on revenue from particular commodities or international aid; and the risk of expropriation, nationalization or other adverse political
or economic developments.
Emerging
market countries may lack the social, political and economic stability and characteristics of more developed countries, and their political
and economic structures may undergo unpredictable, significant and rapid changes from time to time, any of which could adversely impact
the value of investments in emerging markets as well as the availability of additional investments in such markets. The securities markets
of emerging market countries may be substantially smaller, less developed, less liquid and more volatile than the major securities markets
in the United States and other developed nations. The limited size of these securities markets and the limited trading volume of securities
issued by emerging market issuers could cause prices to be erratic and investments in emerging markets can become illiquid. As a result
of the foregoing risks, it may be difficult to assess the value or prospects of an investment in such securities.
|
| Europe Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Europe
Risk. The Fund is subject to certain risks associated specifically with investments in securities of
European issuers, in addition to the risks associated with investments in non-U.S. securities generally. Political or economic disruptions
in European countries, even in countries in which the Fund is not invested, may adversely affect security values and thus the Fund’s
holdings. A significant number of countries in Europe are member states in the European Union (“EU”), and the member states
no longer control their own monetary policies by directing independent interest rates for their currencies. In these member states, the
authority to direct monetary policies, including money supply and official interest rates for the Euro, is exercised by the European Central
Bank. In a 2016 referendum, the United Kingdom elected to withdraw from the EU (“Brexit”). After years of negotiations between
the United Kingdom and the EU, a withdrawal agreement was reached whereby the United Kingdom formally left the EU. As the second largest
economy among EU members, the implications of the United Kingdom’s withdrawal are difficult to gauge and cannot be fully known.
Trade between the United Kingdom and the EU is highly integrated through supply chains and trade in services, as well as through multinational
companies. The United Kingdom’s departure may negatively impact the EU and Europe as a whole by causing volatility within the EU,
triggering prolonged economic downturns in certain European countries or sparking additional member states to contemplate departing the
EU (thereby perpetuating political instability in the region).
|
| Foreign Currency Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Foreign
Currency Risk. Currency risk is the risk that fluctuations in exchange rates may adversely affect the
value of the Fund’s investments. Currency exchange rates fluctuate significantly for many reasons, including changes in supply and
demand in the currency exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by
U.S. or foreign governments, central banks, or supranational agencies such as the International Monetary Fund, and currency controls or
other political and economic developments in the U.S. or abroad.
|
| Health Care Companies Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Health
Care Companies Risk. Through the Fund’s investments in senior loans, the Fund may be significantly
exposed to companies in the health care sector. Health care companies are involved in medical services or health care, including
biotechnology research and production, drugs and pharmaceuticals and health care facilities and services. These companies are subject
to extensive competition, generic drug sales or the loss of patent protection, product liability litigation and increased government regulation.
Research and development costs of bringing new drugs to market are substantial, and there is no guarantee that the product will ever come
to market. Health care facility operators may be affected by the demand for services, efforts by government or insurers to limit rates,
restriction of government financial assistance and competition from other providers.
|
| Illiquid Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Illiquid
Securities Risk. The Fund invests a substantial portion of its assets in lower-quality debt issued by
companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues
tend to be less liquid than larger debt issues. Although the resale or secondary market for senior loans is growing, it is currently limited.
There is no organized exchange or board of trade on which senior loans are traded. Instead, the secondary market for senior loans is an
unregulated inter-dealer or inter-bank resale market. In addition, senior loans in which the Fund invests may require the consent of the
borrower and/or agent prior to the settlement of the sale or assignment. These consent requirements can delay or impede the Fund’s
ability to settle the sale of senior loans. Depending on market conditions, the Fund may have difficulty disposing its senior loans, which
may adversely impact its ability to obtain cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment
opportunities.
Illiquid
securities may be difficult to dispose of at a fair price at the times when the Fund believes it is desirable to do so. The market price
of illiquid securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Fund
pays for or recovers upon the sale of such securities. Illiquid securities are also more difficult to value, especially in challenging
markets.
|
| Inflation Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Inflation
Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less
in the future as inflation decreases the value of money. As inflation increases, the present value of the Fund’s assets and distributions
may decline. This risk is more prevalent with respect to debt securities. Inflation creates uncertainty over the future real value (after
inflation) of an investment. Inflation rates may change frequently and drastically as a result of various factors, including unexpected
shifts in the domestic or global economy, and the Fund’s investments may not keep pace with inflation, which may result in losses
to Fund investors.
|
| Information Techonology Companies Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Information
Technology Companies Risk. Information technology companies produce and provide hardware, software and
information technology systems and services. Information technology companies are generally subject to the following risks: rapidly
changing technologies and existing product obsolescence; short product life cycles; fierce competition; aggressive pricing and reduced
profit margins; the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent
new product introductions and new market entrants. Information technology companies may be smaller and less experienced companies,
with limited product lines, markets or financial resources and fewer experienced management or marketing personnel. Information
technology company stocks, particularly those involved with the internet, have experienced extreme price and volume fluctuations that
are often unrelated to their operating performance. In addition, information technology companies are particularly vulnerable to
federal, state and local government regulation, and competition and consolidation, both domestically and internationally, including competition
from foreign competitors with lower production costs. Information technology companies also face competition for services of qualified
personnel and heavily rely on patents and intellectual property rights and the ability to enforce such rights to maintain a competitive
advantage.
|
| Leverage Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Leverage
Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains
from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares
will be less than if leverage had not been used. Leverage involves risks and special considerations for common shareholders including:
(i) the likelihood of greater volatility of net asset value and market price of the common shares than a comparable portfolio without
leverage; (ii) the risk that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result
in fluctuations in the dividends paid on the common shares; (iii) in a declining market, the use of leverage is likely to cause a greater
decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the
market price of the common shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor
will be higher than if the Fund did not use leverage.
|
| Limited Term Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Limited
Term Risk. Because the assets of the Fund will be liquidated in connection with the Fund’s termination,
the Fund may be required to sell portfolio securities when it otherwise would not, including at times when market conditions are not favorable,
which may cause the Fund to lose money. In particular, the Fund’s portfolio may still have significant remaining average maturity
and duration, and large exposures to lower-quality credits, as the termination date approaches, and if interest rates are high (and the
value of lower-quality fixed-income securities consequently low) at the time the Fund needs to liquidate its assets in connection with
the termination, the losses due to portfolio liquidation may be significant. Moreover, as the Fund approaches the termination date, its
portfolio
composition may change as more of its portfolio holdings are called or sold, which may cause the returns to decrease and the NAV of the
Common Shares to fall. Rather than reinvesting the proceeds of matured, called or sold securities, the Fund may distribute the proceeds
in one or more liquidating distributions prior to the final liquidation, which may cause fixed expenses to increase when expressed as
a percentage of assets under management, or the Fund may invest the proceeds in lower yielding securities or hold the proceeds in cash,
which may adversely affect its performance. Because the Fund will invest in below investment grade securities, it may be exposed to the
greater potential for an issuer of its securities to default, as compared to a fund that invests solely in investment grade securities.
As a result, should a Fund portfolio holding default, this may significantly reduce net investment income and, therefore, Common Share
dividends, and also may prevent or inhibit the Fund from fully being able to liquidate its portfolio at or prior to the termination date.
When terminated, the Fund’s final distribution will be based upon its NAV at the end of the term and investors in the Fund may receive
more or less than their original investment.
|
| Management Risk And Reliance On Key Personnel [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Management
Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends
upon the continued contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be
difficult to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative
impact on the Fund.
|
| Market Discount From Net Asset Value [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Market
Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently
trade at a discount from their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset
value.
|
| Market Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Market
Risk. Securities held by the Fund, as well as shares of the Fund itself, are subject to market fluctuations
caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates
and perceived trends in securities prices. Shares of the Fund could decline in value or underperform other investments as a result of
the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism,
spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on the
Fund and its investments. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments,
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions,
had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of vaccines has slowed the spread
of the virus and allowed for the resumption of reasonably normal business activity in the United States, many countries continue to impose
lockdown measures in an attempt to slow the spread. Also, in February 2022, Russia invaded Ukraine which has caused and could continue
to cause significant market disruptions and volatility across markets globally, including the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain Fund investments as well as Fund performance. As the global
pandemic and conflict in Ukraine have illustrated, such events may affect certain geographic regions, countries, sectors and industries
more significantly than others. Recent and potential future bank failures could result in disruption to the broader banking industry or
markets generally and reduce confidence in financial institutions and the economy as a whole, which may also heighten market volatility
and reduce liquidity. These events also may adversely affect the prices and liquidity of the Fund’s portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares and result in increased market volatility. During any such events, the Fund’s shares may
trade at increased premiums or discounts to their net asset value and the bid/ask spread on the Fund’s shares may widen.
|
| Non U S Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Non-U.S.
Securities Risk. The Fund may invest a portion of its assets in securities of non-U.S. issuers. Investing
in securities of non-U.S. issuers, which are generally denominated in non-U.S. currencies, may involve certain risks not typically associated
with investing in securities of U.S. issuers. These risks include: (i) there may be less publicly available information about non-U.S.
issuers or markets due to less rigorous disclosure or accounting standards or regulatory practices; (ii) non-U.S. markets may be smaller,
less liquid and more volatile than the U.S. market; (iii) potential adverse effects of fluctuations in currency exchange rates or controls
on the value of the Fund’s investments; (iv) the economies of non-U.S. countries may grow at slower rates than expected or may experience
a downturn or recession; (v) the impact of economic, political, social or diplomatic events; (vi) certain non-U.S. countries may impose
restrictions on the ability of non-U.S. issuers to make payments of principal and interest to investors located in the United States due
to blockage of non-U.S. currency exchanges or otherwise; and (vii) withholding and other non-U.S. taxes may decrease the Fund’s
return. Foreign companies are generally not subject to the same accounting, auditing and financial reporting standards as are U.S. companies.
In addition, there may be difficulty in obtaining or enforcing a court judgment abroad. These risks may be more pronounced to the extent
that the Fund invests a significant amount of its assets in companies located in one region or in emerging markets.
|
| Operational Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Operational
Risk. The Fund is subject to risks arising from various operational factors, including, but not limited
to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund relies on third parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its
investment objective.
Although
the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect
against such risks.
|
| Potential Conflict Of Interest Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Potential
Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict
with the interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or advise other investment
funds or accounts with the same or substantially similar investment objective and strategies as the Fund. In addition, while the Fund
is using leverage, the amount of the fees paid to First Trust for investment advisory and management services are higher than if the Fund
did not use leverage because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to
leverage the Fund.
|
| Prepayments Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Prepayment
Risk. Loans and corporate bonds are subject to prepayment risk. Prepayment risk is the risk that the
borrower on a loan or issuer of a bond will repay principal (in part or in whole) prior to the scheduled maturity date. The degree to
which such repayment occurs may be affected by general business conditions, interest rates, the financial condition of the borrower or
issuer and competitive conditions among investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment,
either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced which, in turn, may result
in a decline in distributions to common shareholders. The Fund may not be able to reinvest the proceeds received on terms as favorable
as the prepaid loan or bond.
|
| Reinvestment Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Reinvestment
Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the
Fund invests the proceeds from matured, traded or called instruments at market interest rates that are below the Fund’s portfolio’s
current earnings rate. A decline in income could affect the common shares’ market price, level of distributions or the overall return
of the Fund.
|
| Second Lien Loan Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Second
Lien Loan Risk. A second lien loan may have a claim on the same collateral pool as the first lien or
it may be secured by a separate set of assets. Second lien loans are typically secured by a second priority security interest or lien
on specified collateral securing the borrower’s obligation under the interest. Because second lien loans are second to first lien
loans, they present a greater degree of investment risk. Specifically, these loans are subject to the additional risk that the cash flow
of the borrower and property securing the loan may be insufficient to meet scheduled payments after giving effect to those loans with
a higher priority. In addition, loans that have a lower than first lien priority on collateral of the borrower generally have greater
price volatility than those loans with a higher priority and may be less liquid.
|
| Senior Loan Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Senior
Loan Risk. The Fund invests in senior loans and therefore is subject to the risks associated therewith.
Investments in senior loans are subject to the same risks as investments in other types of debt securities, including credit risk,
interest rate risk, liquidity risk and valuation risk (which may be heightened because of the limited public information available regarding
senior loans and because loan borrowers may be leveraged and tend to be more adversely affected by changes in market or economic conditions).
Further, no active trading market may exist for certain senior loans, which may impair the ability of the Fund to realize full value
in the event of the need to sell a senior loan and which may make it difficult to value senior loans. Senior loans may not be considered
“securities” and the Fund may not be entitled to rely on the anti-fraud protections of the federal securities laws.
In
the event a borrower fails to pay scheduled interest or principal payments on a senior loan held by the Fund, the Fund will experience
a reduction in its income and a decline in the value of the senior loan, which will likely reduce dividends and lead to a decline in the
net asset value of the Fund’s common shares. If the Fund acquires a senior loan from another lender, for example, by acquiring a
participation, the Fund may also be subject to credit risks with respect to that lender. Although senior loans may be secured by specific
collateral, the value of the collateral may not equal the Fund’s investment when the senior loan is acquired or may decline below
the principal amount of the senior loan subsequent to the Fund’s investment. Also, to the extent that collateral consists of stock
of the borrower or its subsidiaries or affiliates, the Fund bears the risk that the stock may decline in value, be relatively illiquid,
and/or may lose all or substantially all of its value, causing the senior loan to be under collateralized. Therefore, the liquidation
of the collateral underlying a senior loan may not satisfy the issuer’s obligation to the Fund in the event of non-payment of scheduled
interest or principal, and the collateral may not be readily liquidated. The senior loan market has seen a significant increase in loans
with weaker lender protections including, but not limited to, limited financial maintenance covenants or, in some cases, no financial
maintenance covenants (i.e., “covenant-lite loans”) that would typically be included in a traditional loan agreement and general
weakening of other restrictive covenants applicable to the borrower such as limitations on incurrence of additional debt, restrictions
on payments of junior debt or restrictions on dividends and distributions. Weaker lender protections such as the absence of financial
maintenance covenants in a loan agreement and the inclusion of “borrower-favorable” terms may impact recovery values and/or
trading levels of senior loans in the future. The absence of financial maintenance covenants in a loan agreement generally means that
the lender may not be able to declare a default if financial performance deteriorates. This may hinder the Fund’s ability to reprice
credit risk associated with a particular borrower and reduce the Fund’s ability to restructure a problematic loan and mitigate potential
loss. As a result, the Fund’s exposure to losses on investments in senior loans may be increased, especially during a downturn in
the credit cycle or changes in market or economic conditions.
|
| Valuation Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Valuation
Risk. The valuation of senior loans may carry more risk than that of common stock. Market quotations
may not be readily available for some senior loans and securities in which the Fund invests and valuation may require more research than
for liquid securities. In addition, elements of judgment may play a greater role in the valuation of senior loans and certain other securities
than for securities with a secondary market, because there is less reliable objective data available. These difficulties may lead
to inaccurate asset pricing.
|
| Interest Rate Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Interest
Rate Risk. The yield on the Fund’s common shares may rise or fall as market interest rates rise
and fall, as senior loans pay interest at rates which float in response to changes in market rates. Changes in prevailing interest rates
can be expected to cause some fluctuation in the Fund’s net asset value. Similarly, a sudden and significant increase in market
interest rates may cause a decline in the Fund’s net asset value.
Many
financial instruments use or may use a floating rate based upon the London Interbank Offered Rate (“LIBOR”). The United Kingdom’s
Financial Conduct Authority (the “FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate
over a phase-out period that began in early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators
indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. The unavailability or replacement of LIBOR
may affect the value, liquidity or return on certain Fund investments and may result in costs incurred in connection with closing out
positions and entering into new trades. Any potential effects of the transition away from LIBOR on the Fund or on certain instruments
in which the Fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. In the United States,
it is anticipated that in many instances the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the reference
rate for many of the floating rate instruments held by the Fund. There is no assurance that the composition or characteristics of SOFR,
or any alternative reference rate, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using
an alternative rate will have the same volume or liquidity. As a result, the transition process might lead to increased volatility and
reduced liquidity in markets that currently rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based investments;
increased difficulty in borrowing or refinancing and diminished effectiveness of any applicable hedging strategies against instruments
whose terms currently include LIBOR; and/or costs incurred in connection with temporary borrowings and closing out positions and entering
into new agreements. Any such effects (as well as other unforeseen effects) of the transition away from LIBOR and the adoption of
alternative reference rates could result in losses to the Fund.
In
addition, for the Fund’s fixed rate investments, when market interest rates rise, the market value of such securities generally
will fall. Market value generally falls further for fixed rate securities with longer duration. During periods of rising interest rates,
the average life of certain types of securities may be extended because of slower than expected prepayments. This may lock in a below-market
yield, increase the security’s duration and further reduce the value of the security. Investments in fixed rate securities with
long-term maturities may experience significant price declines if long-term interest rates increase.
|