Hi ElLobo........your question is a great one, and it's driven me to conclude that there may be more similarities than differences between loan participation funds - open or closed end - and their high yield/junk bond counterparts.  You have the junk bond experience and relative comfort with the product, so please check/correct any bad assumptions I make about those and their behaviors.

1. I think the funds are similar in that over the long term both have a moderate "wasting asset" character because, over the intermediate-long term, credits tend to deteriorate and we should expect some credit losses because that is part of what we're being compensated for with the higher yields on sub-investment grade paper.

2. Both fund types NAVs/market values will tend to rise as credit conditions improve, companies' earnings grow, the blue sky is filled with puffy clouds, etc. because those nice cash flows reduce or postpone the probability of a default.

3. Here's where I think a difference may lie --- and I think it may be more about distribution return timing than total return - see what you think.  All else equal, as Fed-managed and (usually) other rates trend down, the junk fund will continue to enjoy the high fixed-coupon yield of its assets, while the loan fund will suffer dimished distributions from its floating/periodically downward adjusting loan assets.  And of course the floating rate assets will generate greater distributions as rates rise, while the fixed-rate assets' distributions stay fixed.  Am I missing something important?

4.  So I guess I'd conclude you may have the better investment, the junk fund, for you (and maybe for me too) - given your long term hold preference and the (I think) generally greater stability of the junk fund through credit and rate cycles.  I think I may get a somewhat higher distribution yield over time with the loan funds, but I risk lower long-term total returns if I don't trade these pups at least every few years with the rate and credit cycles, attempting to be out of the positions as the economy and rates have sinking spells.  And although the loans' higher position on the credit pecking order might really mean something very very occasionally, I probably overestimated its real impact on the total returns of the two fund types.

What do you think?

Regards, Dick