Stock Analysis & Valuation BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

• Previous Close: $11.76
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	25.09	113
Intrinsic value (DCF)	5.29	-55
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

BlackRock Floating Rate Income Strategies Fund, Inc. (NYSE: FRA) is a closed-end fixed income mutual fund managed by BlackRock Advisors, LLC, a subsidiary of BlackRock, Inc. (NYSE: BLK). Launched in 2003, FRA specializes in below-investment-grade floating rate debt securities, primarily investing in secured or unsecured senior floating rate loans across diversified U.S. sectors. The fund targets income-seeking investors by capitalizing on floating rate instruments, which offer protection against rising interest rates. As part of BlackRock’s extensive asset management platform, FRA benefits from institutional-grade credit research and risk management. With a market cap of ~$444M, the fund operates in the Financial Services sector, specifically within Asset Management - Income, providing exposure to high-yield corporate debt while mitigating interest rate risk. Its strategy aligns with market demand for yield in a low-rate environment, making it a relevant option for fixed-income portfolios.

Investment Summary

FRA presents an attractive option for income-focused investors seeking floating rate exposure to mitigate interest rate risk. The fund’s below-investment-grade focus offers higher yields, supported by BlackRock’s robust credit analysis. However, its reliance on leveraged loans exposes investors to credit risk, particularly during economic downturns. The fund’s low beta (0.44) suggests relative stability, but its narrow diversification (floating rate loans only) may limit upside. With a solid dividend yield (~1.49/share) and no debt, FRA is financially stable, though its small cash position (~$43.7K) could constrain liquidity. Investors should weigh the trade-off between yield and credit risk, especially in volatile markets.

Competitive Analysis

FRA’s competitive advantage lies in its affiliation with BlackRock, which provides institutional resources, including deep credit research and scalable infrastructure. The fund’s focus on floating rate loans differentiates it from traditional fixed-rate bond funds, offering a hedge against rising rates. However, its niche strategy limits diversification compared to broader high-yield or multi-sector bond funds. Competitors like Invesco Senior Income Trust (VVR) and Eaton Vance Floating-Rate Advantage Fund (EAFAX) offer similar products but may differ in fee structures or sector allocations. FRA’s performance is closely tied to the leveraged loan market, which is sensitive to economic cycles. While its BlackRock backing enhances credibility, the fund’s small size (~$444M AUM) may reduce economies of scale versus larger peers. Its zero-debt profile is a strength, but the lack of a significant cash buffer could be a drawback during market stress.

Major Competitors

• Invesco Senior Income Trust (VVR): VVR is a closed-end fund investing in floating rate senior loans, similar to FRA. It offers a diversified portfolio but carries higher expense ratios, potentially eroding returns. Its larger AUM provides scale advantages, but performance is similarly tied to leveraged loan markets.
• Eaton Vance Floating-Rate Advantage Fund (EAFAX): EAFAX (open-end mutual fund) focuses on floating rate loans with active management. It benefits from Eaton Vance’s credit expertise but lacks the closed-end structure of FRA, which can trade at discounts/premiums to NAV. Its liquidity profile differs due to open-end nature.
• BlackRock Floating Rate Income Trust (BGT): Another BlackRock-managed fund, BGT overlaps with FRA in strategy but has a larger AUM (~$700M). Both share BlackRock’s resources, but BGT’s size may offer marginally better liquidity. Performance differences are minimal, making fee comparisons critical.