Floating Rates and Insider Moves: Is APDUX Still a Safe Bet?

The Artisan Floating Rate Fund (APDUX) has long been a favorite in the high-yield space, but its recent performance and the moves by its parent company, Artisan Partners (APAM), are raising questions. Let's dissect the numbers to see if this fund is still a solid play for investors navigating rising rates—or if it's time to bail.

APDUX's Q1 2025 Performance: Staying Afloat in Turbulent Waters

APDUX aims to capitalize on rising rates by investing in floating-rate instruments like leveraged loans and high-yield bonds. In Q1 2025, the fund's returns were “in line” with its benchmark, the S&P UBS Leveraged Loan Index. While specific quarterly metrics aren't detailed, May 2025 data shows APDUX returned 2.0%, outperforming the Bank Loan category's 1.6% average. Year-to-date, it's up 2.1%, a 0.5% beat over peers.

But here's the catch: APDUX's expense ratio of 1.12% is 3% higher than its category average, and its portfolio turnover rate of 72%—above the 63% industry norm—could eat into after-tax gains.

Institutional Investors: Betting Big or Bailing?

The parent company, APAM, saw mixed institutional activity in Q1 2025. Major shifts include:
- Vanguard Group reducing its APAM stake by 6.1% ($19.4 million).
- Punch & Associates and Harbor Capital Advisors doubling down, with holdings surging by 3,362% and 67,000%, respectively.
- BlackRock trimming its position by 2.3%, while Federated Hermes cut holdings by 37%.

This divergence suggests institutional confidence isn't unanimous. Some big players are doubling down on APAM's asset management expertise, while others are hedging bets.

Insider Transactions: A Red Flag or a Routine Move?

Three APAM executives sold shares in Q1 2025:
- CFO Charles Daley offloaded 15,448 shares (14% of his holdings).
- Executive VP Samuel Sellers sold 6,801 shares (14% of his stake).
- Executive VP Gregory Ramirez unloaded 5,905 shares (2.6% of his holdings).

No insider purchases were reported, which can spook investors. However, these sales might reflect tax strategies or personal financial moves, not necessarily a lack of confidence. The 75% dividend payout ratio also hints that APAM is prioritizing shareholder returns—a plus for income investors but a potential sign of cautious growth plans.

The Bigger Picture: Why APDUX Matters in Rising Rates

Floating-rate funds like APDUX thrive when the Fed hikes rates, as their holdings reset periodically. With the Fed's rate-hike cycle still in play, APDUX's strategy remains relevant. Its 7.6% dividend yield also edges out short-term bonds in a low-yield world.

But the expense ratio is a sticking point. Over time, high fees can erode returns. Investors should compare APDUX to lower-cost peers like SPDR Bloomberg Barclay Leveraged Loan ETF (BKLN), which charges just 0.35%.

Jim's Bottom Line

APDUX is a hold for existing investors seeking floating-rate exposure, but new buyers should tread carefully. The fund's active management and dividend yield have merit, but the expense ratio and APAM's insider sales create headwinds.

If you're in:
- Stay put, but monitor APAM's dividend policy and institutional flows.
- Diversify: Pair APDUX with lower-cost ETFs to balance costs and risk.

If you're on the sidelines:
- Wait for a pullback. A dip below $10 could make APDUX's premium worth paying.
- Avoid APAM stock: Insider sales and mixed institutional sentiment suggest it's not a buy here.

The Fed's rate hikes aren't over yet—and neither is the case for floating-rate debt. But pick your spots wisely.