AARCCAres Capital Corporation - Closed End Fund

Ares Capital lends directly to mid-sized companies — a listed vehicle living on interest.

The structure is called a business development company and must distribute nearly all its profit, in exchange for which it is exempt from tax on it. The borrowers are businesses banks will not lend to because of regulatory constraints and that are too small for the bond market. The rate exceeds a bank's because the borrower pays for access.

Most of the book carries floating rates, so income rises with the policy rate — while the burden on the borrower rises with it. The key health metric is the share of loans on which interest has stopped. Risks: book quality in a downturn, competition for deals compressing rates, and the vehicle's own leverage. Distributions are high and are the whole point of owning it.