XAI Taps CLO Giant King Street for Key Funds: A Strategic Shake-Up

CHICAGO, IL – June 19, 2026 – In a significant strategic move, XA Investments (XAI) has announced a proposal to bring in a new sub-adviser, King Street Capital Management, for two of its prominent income-focused funds. The funds in question—the NYSE-listed XAI Floating Rate & Alternative Income Trust (NYSE: XFLT) and the unlisted XAI CLO & Income Opportunities Fund (OCTIX)—are poised for a change in management execution, pending a shareholder vote scheduled for this summer.

The proposal involves replacing the current sub-adviser, Octagon Credit Investors, LLC, with Rockford Tower Asset Management, a wholly owned subsidiary of King Street. The Boards of Trustees for both funds have unanimously approved the change, signaling strong internal confidence that this transition is in the best interest of shareholders. XAI plans to host a webinar on June 30, 2026, to detail the proposed changes and introduce the King Street team, which includes Partner and Portfolio Manager Young Choi. This development isn't just a line-item change on a prospectus; it's a calculated move to partner with one of the most established players in the alternative credit space, signaling a potential new chapter for how these funds navigate the complex world of structured credit.

A Strategic Enhancement, Not a Course Correction

For investors in XFLT and OCTIX, the first question is always why. It’s important to note that this transition appears to be a strategic enhancement rather than a reactionary fix. The outgoing sub-adviser, Octagon Credit Investors, is a formidable force in its own right, managing over $32 billion and bringing decades of experience in credit markets. The decision to shift to King Street, therefore, speaks to a forward-looking strategy by XAI's management and the funds' boards.

The rationale is rooted in leveraging King Street's immense scale and distinct investment approach. King Street is a global alternative asset manager founded in 1995, managing approximately $30 billion. Crucially for these funds, its CLO platform, Rockford Tower, oversees more than $12 billion in assets across 29 U.S. and European Collateralized Loan Obligations (CLOs)—the core asset class for XFLT and OCTIX. XAI executives have indicated they expect King Street's execution to be “dynamic and opportunistic,” leveraging the firm's deep research capabilities and flexible deployment of capital.

Critically for current shareholders, the core investment objectives and principal policies of the funds are set to remain unchanged. Both funds will continue to target a portfolio with at least 80% of assets in floating-rate instruments like senior secured loans and CLO debt and equity. The advisory fee structure also remains intact; the 1.70% management fee paid by the Trust to XAI will not increase. XAI, in turn, will pay King Street's sub-advisory fee from its own allocation, insulating shareholders from any direct fee hike related to this change.

Diving Deep into the New Steward: King Street Capital

To understand the potential impact of this change, one must look closely at the incoming manager. King Street Capital Management is a veteran of the credit world, known for a research-intensive, value-oriented investment philosophy that places a heavy emphasis on capital preservation and downside protection. This approach, honed over nearly three decades, has allowed the firm to navigate multiple market cycles by identifying and acting on market dislocations and mispriced opportunities.

Their expertise in CLOs is particularly noteworthy. The firm has been an active trader in CLO debt and equity since 2008 and formalized this focus with the launch of its Rockford Tower platform in 2017. The platform has since earned significant industry accolades, including being named “Best U.S. CLO Manager” by Creditflux. The team that will manage the XAI funds is led by seasoned professionals. Young Choi, who will be a primary portfolio manager, previously managed a multi-billion dollar leveraged loan and CLO portfolio at Citadel Investment Group and is a member of King Street's Global Investment Committee.

This move also aligns with King Street's own recent strategic realignment. In April 2026, the firm restructured its leadership to concentrate resources on its core credit strategies. As part of this, Young Choi was appointed to head the firm's income-focused opportunistic credit strategy—a mandate that fits perfectly with the objectives of XFLT and OCTIX. This suggests that the XAI funds will not be an ancillary project but a central part of a key strategic initiative for their new sub-adviser, potentially leading to greater focus and resource allocation.

The Road Ahead: What This Means for Investors

With the management framework established, the focus for investors shifts to the practical implications. The primary impact will be in the day-to-day execution of the funds’ strategies. While the 80% allocation to floating-rate credit remains, King Street is expected to bring a more dynamic approach to asset allocation. This could involve tactical shifts between U.S. and European CLOs, bank loans, and other asset-backed securities, all within the funds' existing investment policies. King Street's global platform and research capabilities could unlock opportunities that were previously outside the scope of the funds' execution, potentially enhancing diversification and risk-adjusted returns.

Shareholders will be formally asked to approve the new sub-advisory agreement at a special meeting scheduled for July 30, 2026. Ahead of the vote, they will receive a detailed proxy statement outlining the full terms of the agreement and providing extensive information on King Street. The unanimous recommendation from the boards, which includes the independent trustees, carries significant weight and suggests a thorough due diligence process.

So far, the market reaction has been measured. One closed-end fund analyst was quoted as being “neutral” on the change, highlighting that the consistency in fees and objectives is a positive, while acknowledging King Street's significant scale in the CLO market. There has been no visible, organized shareholder opposition to date, though sentiment could evolve as the proxy materials are reviewed. If approved, the transition will also result in a name change for XFLT, which will become the “XAI Floating Rate & Alternative Income Trust,” formally marking the end of the Octagon era and the beginning of the partnership with King Street.