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CION Ares Diversified Credit Fund
INVESTOR BROCHURE
Expect more for your portfolio.
This is neither an offer to sell nor a solicitation to purchase the securities described herein. An offering is made only by the prospectus which must precede or accompany this brochure. Please read the prospectus prior to making any investment decision and consider the risks, charges, expenses and other important information described therein. Additional copies of the prospectus may be obtained by contacting CION Securities at 800.435.5697 or by visiting cioninvestments.com.
Risks and limitations include, but are not limited to, the following: investment instruments may be susceptible to economic downturns; most of the underlying credit instruments are rated below investment grade and considered speculative; there is no guarantee all shares can be repurchased; the Fund’s business and operations may be impacted by fluctuations in the capital markets; the Fund is a diversified, closed-end investment company with limited operating history; diversification does not eliminate the risk of investment losses.
Please be aware that the Fund, the Advisers, the Distributor or the Wholesale Marketing Agent and their respective officers, directors, employees and affiliates do not undertake to provide impartial investment advice or to give advice in a Fiduciary capacity in connection with the Fund’s public offering of shares.
CION Securities, LLC (CSL) is the wholesale marketing agent for CION Ares Diversified Credit Fund, advised by CION Ares Management, LLC (CAM) and distributed by ALPS Distributors, Inc (ADI). CSL, member FINRA, and CAM are not affiliated with ADI, member FINRA.
Why Diversifi ed Credit, Why Now?
Some traditional fi xed income investments are producing negative returns when accounting for infl ation.
CADC Investor Brochure • 1
Chart compiled by CION Investments as of April 30, 2019.1 The yields quoted for Investment Grade Bond 10 Year, Investment Grade Municipal Bond 10 Year, Treasury Bond 10 Year, and CDs 1 Year are sourced
from the FINRA-Bloomberg U.S. Corporate Bond Index, Bloomberg - BVAL Muni Benchmark 10Y Index, U.S. Department of Treasury Daily Bond Rate and Bankrate.com “Best 1-year CD Rates” respectively. All yields as of August 8, 2018. Investment Grade ranges from “AAA/Aaa” (Prime) to “BBB-/Baa3” (Lower Medium Grade) as rated by Nationally Recognized Statistical Rating Organizations such as Moody’s, Standard & Poor’s or Fitch. Ratings only pertain to the underlying bonds used for comprising a composite bond rate and not the composite bond rate itself. Infl ation data for the twelve months ending April 30, 2019.
2 Past performance is no guarantee of future results. Although CDs are insured and offer a fi xed rate of return, U.S. Government Bonds and Treasury Bills are only guaranteed as to the timely payment of principal and interest. The amount of interest paid can vary. Corporate Bonds carry higher risk than Government issued debt as their interest payments are not guaranteed and are typically based on the expectation that a company will make timely repayments of its debt.
Traditional fi xed income yields remain depressedInvestors are struggling to fi nd yield with traditional fi xed income vehicles.1,2
3.60%
1.89%
2.51%2.40%
Current Inflation2.0%
Investment Grade Bond 10 Year
Investment Grade Municipal Bond
10 Year
Treasury Bond10 Year
CDs1 Year
0%
1%
2%
3%
4%
5%
Why Diversified Credit, Why Now?
Some traditional fixed income investments are producing negative returns when accounting for inflation.
CADC Investor Brochure • 1
Chart compiled by CION Investments as of December 31, 2019.1 The yields quoted for Investment Grade Bond 10 Year, Investment Grade Municipal Bond 10 Year, Treasury Bond 10 Year, and CDs 1 Year are sourced
from the 10-Year High Quality Market (HQM) Corporate Bond Spot Rate published by the Federal Reserve Bank of St. Louis (as of 12/31/2019) (The HQM yield curve uses data from a set of high quality corporate bonds rated AAA, AA, or A that accurately represent the high quality corporate bond market), Bloomberg - BVAL Muni Benchmark 10Y Index (as of 12/31/2019), U.S. Department of Treasury Daily Bond Rate (as of 12/31/2019) and Bankrate.com “Best 1-year CD Rates” (as of 12/31/2019) (1 Year CD rates are an average of all offered 1-year products taken from bankrate.com) respectively. Inflation data is the actual rate as of December 31, 2019.
2 Past performance is no guarantee of future results. Although CDs are insured and offer a fixed rate of return, U.S. Government Bonds and Treasury Bills are only guaranteed as to the timely payment of principal and interest. The amount of interest paid can vary. Corporate Bonds carry higher risk than Government issued debt as their interest payments are not guaranteed and are typically based on the expectation that a company will make timely repayments of its debt.
Traditional fixed income yields remain depressedInvestors are struggling to find yield with traditional fixed income vehicles.1,2
2.92%
1.48%
1.92%
1.35%
Current Inflation1.8%
Investment Grade Bond 10 Year
Investment Grade Municipal Bond
10 Year
Treasury Bond10 Year
CDs1 Year
0%
1%
2%
3%
4%
5%
Dates Number of Days Change in 10-Year Treasury Yield
Overall Bond Market Return* (%)
Sep 22, 2011 – Oct 27, 2011 35 +70 bps -1.68
Jul 25, 2012 – Mar 11, 2013 229 +64 bps -0.44
May 1, 2013 – Sep 5, 2013 127 +132 bps -4.85
Feb 2, 2015 – Jun 10, 2015 128 +82 bps -2.8
Jul 5, 2016 – Mar 13, 2017 252 +123 bps -3.68
Sep 7, 2017 – Nov 8, 2018 428 +119 bps -2.96
Volatility is wreaking havoc on traditional balanced portfolios
Fixed income instruments struggle in times of rate uncertaintyThe Fed has described lower rates as a “mid-cycle correction”. If the market believes that rate cuts can extend growth and generate inflation, then that can mean lower bond prices and higher bond yields.
In the last five periods in which the 10-year Treasury yield rose by 60 basis points or more, bonds have delivered inconsistent returns.
2 • CADC Investor Brochure
Source: Bloomberg and TIAA Investments.
* Overall bond market returns depicted by Bloomberg Barclays Aggregrate Bond Index values.
0
5
10
15
20
25
Q32018
30
Days
Q42017
Q32016
6
Q42016
4
Q12017
2
Q22017
2
Q32017
4
Q12018
23
Q42018
28
Q22018
13
7
Q2 2019
14
Q3 2019
Q4 2019
6
Q1 2019
11
S&P 500 Single Day Movements of +/- 1%Global financial markets in 2017 featured uncharacteristically low volatility — the lowest level seen since 1963. 2018 represented a reversion to the mean with volatility returning to historical averages.
The S&P 500 experienced 9 days with moves of 1 percent or more in all of 2017. In 2018 there were 64 such days.
Chart compiled by CION Investments as of December 31, 2019.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
7.20%
4.75%
9.60%
High Yield¹ Bank Loans² Private Credit³
Average Annual Returns(2005-2019)
Source: CION Investments as of December 31, 2019
CADC Investor Brochure • 3
1 High Yield represented by Bloomberg Barclays US Corporate High Yield Index.2 Bank Loans represented by S&P/LSTA Leveraged Loan Index.3 Private credit represented by Cliffwater Direct Lending Index.
An investment cannot be made in an index. The indices referenced are used solely for benchmarking purposes. Indices do not account for sales charges or expenses, which would otherwise negatively impact the stated performance of each index. Historical index performance is not reflective of the Fund’s performance nor is it indicative of future results.
There are certain risks associated with private credit, high yield, and bank loan strategies. Credit risk is the risk of nonpayment of scheduled interest or principal payments on a debt investment. Because private credit, high yield, and bank loans can be debt investments in non-investment grade borrowers, the risk of default may be greater. Should a borrower fail to make a payment, or default, this may affect the overall return to the lender. Interest rate risk is another common risk associated with private credit, high yield, and bank loans. Interest rate changes will affect the amount of interest paid by a borrower in a floating rate loan, meaning they move in-step with broader interest rate fluctuations. However, this typically has little to no impact on the underlying value of floating rate debt. Further, private credit, high yield, and bank loan strategies are generally illiquid which require longer investment time horizons than other asset classes. For these and other reasons, these asset classes are considered speculative and not suitable for everyone.
Diversified credit portfolios can include illiquid debtThere exists a significant and growing illiquidity premium for illiquid debt assets compared to their publicly traded counterparts. Diversified credit portfolios are able to take advantage of this premium.
CION Ares Diversified Credit Fund
Features
* Diversification does not eliminate the risk of experiencing investment losses.
Daily NAV
15 Member Investment Allocation Committee
MonthlyDistribution Objective
Global Diversification*
Quarterly Repurchase Offers
4 • CADC Investor Brochure
FUND OBJECTIVE
To provide superior risk-adjusted returns across various market cycles by investing in a diversified portfolio of liquid and illiquid asset classes. The Fund seeks to capitalize on market inefficiencies and relative value opportunities throughout the entire global credit spectrum.
INVESTMENT STRATEGY
The Fund will invest primarily in a portfolio of directly originated loans, secured floating and fixed rate syndicated loans, corporate bonds, asset-backed securities, commercial real estate loans and other types of credit instruments which, under normal circumstances, will represent at least 80% of the Fund’s assets.
Offering Profile
SYMBOL
Class A: CADEX Class C: CADCX Class I: CADUX Class L: CADWX
STRUCTURE
1940 Act continuously offered closed-end interval fund
MINIMUM INVESTMENT
Class A, C & L Class I Non-Qualified Accounts: $2,500 Initial: $1,000,000 Qualified Accounts: $1,000 Subsequent: No Minimum
DIVIDEND REINVESTMENT PLAN
Automatic participation, unless otherwise elected
LIMITED LIQUIDITY/REPURCHASE OFFER
Quarterly at NAV. No less than 5% of the outstanding shares.
TAX REPORTING
1099-DIV
CADC Investor Brochure • 5
Why CION Ares Diversified Credit Fund?
Access to a world class asset manager with deep credit investing expertiseAffiliates of CION Investments and Ares Management have joined forces to form CION Ares Management, LLC (CAM). As the advisor to CION Ares Diversified Credit Fund (CADC), CAM brings together two alternative asset managers to level the playing field for individual investors by providing access to a global, institutionally managed credit strategy.
• Fully integrated sponsor and manager of differentiated alternative credit strategies
• Currently manages approximately $2 billion in credit assets
• Approximately $2 billion in capital raised since 2008
A leading participant in the non-investment grade corporate credit markets
Key Strategies: Liquid Credit, Alternative Credit, Direct Lending
One of the most consistent private equity managers in the U.S. with a growing international presence
Key Strategies: Corporate Private Equity, Special Opportunities, Energy Opportunities, Infrastructure & Power
A leading participant in the real estate private equity markets and a growing direct lender
Key Strategies: Real Estate Equity, Real Estate Debt
• Global alternative asset manager with approximately $149 billion in assets under management*
• Publicly traded on New York Stock Exchange under the ticker: ARES
MANAGES 3 DISTINCT BUT COMPLEMENTARY INVESTMENT GROUPS
Credit ~$110.5B
Private Equity~$25.2B
Real Estate~$13.2B
6 • CADC Investor Brochure
* As of December 31, 2019, AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investment advisor.
CADC’s flexible investment mandate was constructed to leverage the breadth of the Ares credit platform. By having the flexibility to invest across various liquid and illiquid asset classes within the global credit spectrum, CADC is able to tactically deploy investor capital as value opportunities present themselves in the market.
Access to a robust, global investment platformCADC offers individual investors direct access to one of the largest, established alternative credit platforms across the United States and Europe. The size, scale and successful operating history of the Ares platform allows CADC to partake in potential investment opportunities that are typically not available to smaller alternative lenders — in terms of both size and global footprint.
Access to a dynamically managed, best ideas investment strategy
ARES LOCAL MARKET PRESENCE ACROSS 20 OFFICES
HYPOTHETICAL PORTFOLIO ALLOCATION**Dynamic portfolio allocation targeting attractive risk-adjusted returns
Dallas Atlanta
New York
Chicago
San Franciso
Los Angeles
LondonParis Luxembourg
Frankfurt
Stockholm
Amsterdam
Washington, DC
Boston
Sydney
MumbaiDubai
Shanghai
Hong Kong
Madrid
• Ares credit platform manages approximately $110.5 billion in assets*
• Highly experienced management team: 32 partners averaging 25 years’ experience oversee the platform’s operations
• ~300 dedicated investment professionals
25%U.S.
25%Euro
15%
5%
10%Opportunistic Credit
Alternative Credit
Real Estate Debt
Bonds/Loans
Direct Lending
20%
CADC Investor Brochure • 7
* As of December 31, 2019, AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investment advisor.
** The hypothetical portfolio allocation is intended to provide a visual representation of a particular allocation strategy. There is no guarantee that the final portfolio allocation will be identical to this hypothetical representation.
6 • CADC INVESTOR BROCHURE
For more information about CION Ares Diversified Credit Fund visit:
cioninvestments.com/cadc
© 2020 CION Securities, LLC.
CADC-BR-0220 | CAD000150-1220
CION Investments3 Park Avenue, 36th FloorNew York, NY 10016
cioninvestments.com