A Trifecta of High-Yield Strategies

Market volatility is back. Not since the Deep Seek correction of April 2025 has the CBOE Volatility Index (VIX) been this high, closing at 29.0 on Friday. The fear gauge is spiking out of rising uncertainty surrounding Iran, Russia, China, inflation and the midterm elections. There is just some straightforward concern about the near-term future of market conditions, and it was fully reflected in last week’s price action.

Within every market landscape there are always sweet spots that are victims of being thrown out with the bathwater or are direct beneficiaries of the current circumstances. I see the market offering a few special opportunities for investors seeking to take advantage of the sell first, ask questions later backdrop in private credit, the rally in the dollar that I believe will not hold and the secular buildout of the U.S. energy grid.

With traditional banks remaining conservative in their lending due to 2024-2025 regulatory tightening, Private Credit continues to offer yields significantly higher than public high-yield bonds (often in the 9-13% range). The maturation of the AI infrastructure buildout offers strong visibility for future revenues and profits.

Hence, funds that are buying into data center debt at current discounts stand to benefit greatly when the market stabilizes. With a market cap of $13.5 billion and a dividend yield of 10.25%, Ares Capital (ARCC) is the largest publicly traded Business Development Company (BDC) in the United States. It is widely considered the bellwether of the private credit space due to its scale and long track record.

Investors seeking to time the bottom in the private credit scare should monitor the price action of Ares. It will be the “tell” as to when it is safe to shop for private credit on sale.

I will add that regardless of yield, insiders have bought $46 million in stock in private equity firm KKR & Co. (KKR) over the past two months at prices from $88 to $102. This is huge statement of confidence in that the majority of private credit the company owns is invested in data center infrastructure. These guys are brilliant, and with the stock down from $150 to $90, there is blood on the street.

2026 revenue is forecast to spike by 38% to $10.6 billion and earnings are forecast to jump by 44% to $7.00 per share, meaning the stock trades at a forward P/E of just 13X. There are multiple reasons why C-suite officers sell stock, but there is only one reason they buy stock — because they believe the shares are on sale and will soar higher in the months to come. Follow the money. This is not a recommendation, but simply an observation of market dislocation.

Moving on, energy infrastructure and grid modernization require increasing loads of natural gas as the go-to fuel source to ramp power in a “right now” environment. The massive power demands of AI data centers have created a bottleneck in the electrical grid. This has shifted high-yield interest toward energy infrastructure.

Master Limited Partnerships (MLPs) or specialized infrastructure ETFs focus on grid-edge technology and nuclear energy re-commissioning.

These often provide tax-advantaged distributions and yields between 7% and 10%, backed by long-term, inflation-indexed contracts. The energy sector has come back into sudden fashion defined by phenomenal demand to expand the capacity of the U.S. grid to meet the data center boom, onshoring of manufacturing and the electrification of the broader economy, coupled with geopolitical conflict that threatens supplies.

The NEOS MLP & Energy Infrastructure High Income ETF (MLPI) is a relatively new, actively managed exchange-traded fund designed to provide high monthly income by combining the tax-advantaged nature of MLPs with an options-overlay strategy.

Launched in late December 2025, it has quickly gained traction among income-seekers looking for a tax-aware way to play the midstream energy sector that generates 1099 dividend income where all the K-1 income is converted internally. No tax headaches.

MLPI seeks to generate yield from two primary sources. It invests in a portfolio of North American energy infrastructure Master Limited Partnerships (MLPs) and corporations. These companies (like pipelines and storage facilities) typically pay out high dividends and distributions.

The fund uses a data-driven covered call strategy. By selling call options on MLP-related ETFs, the fund collects option premiums, which it adds to the monthly distribution to boost the total yield. The expense ratio of 0.68% is competitive for an actively managed options-based ETF. The annual distribution rate is forecast at approximately 14.92%. The recent February 2026 distribution was $0.6739 per share that assumes an annual payout of $8.08.

Total Assets of roughly $340 million show rapid growth since its inception where professional fund managers are buying into the fund with confidence. The NEOS managers have demonstrated stability of capital while generating exceptional yields.

Top Holdings

Unlike many high-yield instruments, MLPI is built for tax efficiency. Technically speaking, Section 1256 Contracts reduces taxes. This strategy uses index options, which are generally taxed at a blended rate (60% long-term / 40% short-term capital gains), often more favorable than ordinary income.

Bear in mind that because MLPI holds MLPs, a portion of the distribution is often classified as return of capital, which defers taxes until you sell the position (by lowering your cost basis), rather than taxing it as a dividend immediately. Ideally, this is an excellent holding in retirement accounts. Again, not a recommendation.

If you believe the U.S. dollar has peaked, as I do, then local currency emerging market debt offers some of the highest real yields globally. Sovereign debt in countries like Brazil, Mexico or Indonesia is of particular interest, where real interest rates (nominal rate minus inflation) are significantly higher than in G7 nations.

You aren’t just playing the yield; you are playing the currency appreciation against a potentially softening dollar. Yields can exceed 8-11% plus the currency kicker. The Virtus Emerging Market Income Funds (EDF) is attractively priced following the rally in the dollar and an ex-dividend date. The fund yields 14.40% and pays monthly. Once again, not a recommendation, but an observation of what’s out there.

To gain more insight on these investments and a host of other high-yield strategies, visit my Cash Machine and become a member of what I consider the best high-yield advisory available. Currently, the blended yield for the 28 holdings in the model portfolio is 10.2%, with 27 of those holdings paying monthly dividends and distributions. For income investors, Cash Machine is a wonderful opportunity!

There are always some places where money is best served in volatile times, and I enjoy spotlighting those areas where the market is not giving due credit to because of widespread risk-off sentiment. Smart money takes advantage of periods of short-term fear and exploits dislocation in share prices. So, there you have it, a trifecta sector with exceptional upside potential.