Accelerate Diversified Credit Income ETF (INCM): A High-Yield Anchor in a Rising Rate World

The Accelerate Diversified Credit Income ETF CAD Hedged (TSX: INCM) is emerging as a compelling option for income-focused investors seeking to navigate a rising rate environment while avoiding the volatility of traditional bonds. With an annualized distribution yield of 11.48% as of June 2025 and a portfolio anchored in secured, floating-rate private credit assets, INCM offers a rare blend of high income and diversification benefits. For investors looking to lock in monthly payouts before its June 30, 2025 ex-dividend date, now is a critical time to consider this ETF's risk-adjusted potential.

The High-Yield Engine: Floating-Rate Loans in a Rising Rate World

INCM's robust yield stems from its focus on secured, floating-rate loans to over 4,000 private U.S. companies. Unlike fixed-rate bonds, which lose value as rates rise, floating-rate instruments reset periodically—typically quarterly—to reflect current interest rates. This structure ensures INCM's income stream can grow in tandem with the Federal Reserve's tightening cycle, a key advantage as central banks globally remain in hawkish mode.

The ETF's portfolio is diversified across top-tier private credit managers such as KKR Capital, Blue Owl Capital, and Ares Capital Corporation, reducing exposure to idiosyncratic risk.

. The use of secured loans further mitigates default risk, as these assets are typically collateralized by company assets.

Diversification Beyond Bonds: Low Correlation to Traditional Fixed Income

INCM's low correlation to government and corporate bonds is a standout feature. While bonds have struggled in 2023–2024 due to rising rates, private credit assets—particularly those in secured loans—have shown resilience. This distinction is critical for investors seeking to reduce portfolio volatility.

. A correlation coefficient below 0.3 would underscore its diversification benefits.

The CAD-Hedged Advantage: Mitigating Currency Risk for Canadian Investors

INCM's CAD-hedged series, introduced in April 2025, addresses a key pain point for Canadian investors. The fund's underlying assets are primarily USD-denominated, and currency fluctuations can erode returns. The hedged series locks in exchange rates, ensuring that investors avoid losses from a strengthening Canadian dollar. This makes INCM a more stable income generator for Canadian portfolios compared to unhedged alternatives.

Timing the Ex-Dividend Date: A Strategic Opportunity

The ETF's next distribution of $0.165 per unit (annualized to 11.48%) will be paid on July 8, 2025, to investors who hold shares before the ex-dividend date of June 30, 2025. For income seekers, this creates a clear entry window: purchasing INCM by June 30 ensures eligibility for the July payout.

. A stable trajectory here reinforces the fund's ability to sustain payouts even in a tightening cycle.

Risks and Considerations

While INCM's yield is enticing, investors must weigh its risks. The fund's medium risk rating reflects exposure to private credit markets, which can experience liquidity constraints during economic downturns. Additionally, the 0.75% management fee, while reasonable for an actively managed ETF, reduces net returns.

. This adjustment helps investors assess the true income benefit after expenses.

Investment Strategy: A Steady Hand in Volatile Markets

INCM is best suited for investors prioritizing monthly income and seeking to diversify beyond traditional fixed income. Its floating-rate structure and low correlation to bonds make it a potential anchor in portfolios exposed to rising rates.

For conservative investors, a 5–10% allocation to INCM could enhance yield without excessive volatility. Aggressive investors might consider larger stakes, provided they monitor liquidity and economic conditions.

Conclusion: An Income Tool for the Current Cycle

In an era where bond yields remain constrained by central bank policies, INCM offers a compelling alternative. Its 11.48% yield, floating-rate exposure, and CAD-hedged flexibility position it as a tool to capitalize on rising rates while diversifying away from traditional debt. Investors aiming to secure this month's distribution should act before June 30, ensuring they qualify for the July payout.

As always, investors should consult INCM's prospectus to understand fees, risks, and the nuances of private credit investments. For those willing to trade some liquidity for income and diversification, INCM may be a timely addition to their strategy.

Disclosure: This article is for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results.