While the income is modest, he's looking at the total return.
"We're able to buy these securities at a very deep discounted price and you're going to end up with a current yield somewhere south of 3 percent at this point in time but a total return that's been north of 10.5 percent year to date," Kloss noted.
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While the asset class was associated with the last financial crisis, he thinks it's a good investment because of the discounted price.
"We're buying them as close to a recovery rate as you can and that's going to protect you on the downside," he said.
Kloss also noted that the leadership in Europe is working toward a recovery.
"It's going to be a long and slow slog through Europe, but Spain [and] Portugal they have taken the hard steps that you need to take," he said.
"As the economy heals, these markets actually start to recover and house prices start to appreciate and it's a self-fulfilling prophecy."
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To stay profitable, the fund changes its focus as conditions evolve. Kloss said he envisions a shift toward corporate credit in the United States, perhaps even Europe, within the next two years.
"It depends on where the valuations levels are," he said.