Sep. 15, 2014
Balancing CEF Data vs. Portfolio Data when Selecting a Closed-End Fund
We are often asked how we decide to purchase shares in a CEF and at what price point we are comfortable buying into a fund or where we would exit a portfolio position. This reminds us that we find many CEF investors only focus their effort on either the CEF-based data or the fund’s fundamental data when deciding to buy a CEF. A closed-end fund is at its basic sense equity exposure to an active manager’s results. We think you should like the pricing and the investment to own the shares no matter who is the portfolio manager.
Aug. 25, 2014
A High Income 'Sleep Soundly' CEF Portfolio
The Sleep Soundly CEF Portfolio has generated greater return with lower risk than the S&P 500 over the bear-bull cycle beginning in 2007.
The Sleep Soundly CEF Portfolio outperformed the S&P 500 on a risk-adjusted basis for all time frames analyzed since 2007.
The Sleep Soundly Portfolio provides over 7.5% income and still allows me to sleep soundly each night.
Aug. 22, 2014
Prospect Capital: What Comes Next? Part 3
This article provides a side-by-side comparison of the projected NII for fiscal Q4 2014 for Prospect Capital.
I have included my personal NII projections along with other industry analysts.
This article also identifies some of the key items investors should be looking for when the company reports results early next week.
Aug. 19, 2014
Prospect Capital: A Return To Form?
Prospect Capital provides a large $210 million loan to a leading food services company in the H.I.G. Capital portfolio.
This is one of Prospect’s largest deals in months, ending a recent drought and marks a return to form.
Prospect’s stock is well known as a high income vehicle, offering a dividend yield north of 12% while trading near its NAV.
Aug. 19, 2014
CEFL September Dividend Projected To Bring Yield To 18.2%
I have projected a dividend for CEFL of $0.2998 for September 2014, and have included all of the intermediate numbers and calculations I used in arriving at that figure.
I have added some additional refinements to the calculation procedure to adjust the assets upon which the dividend calculation is based for the accrued fees and dividends of the components.
Based on my projections, CEFL will be yielding 18.4% on a monthly compounded basis.
Aug. 18, 2014
MLP Rate Risk Isn't Closed Off
These are anything but dog days for MLPs.
Much-beloved master limited-partnerships stocks have made a stomach-churning round trip over the past month. In the two weeks after July 24, the Alerian MLP index dropped 5.5%. Then, last weekend, Kinder Morgan said it would consolidate its family of MLPs into a single company, boosting those stocks but also kicking off speculation of a wave of deals in the sector. The Alerian is now...
Aug. 15, 2014
The New Frontier for MLPs
Master limited partnerships posted huge gains in the first half of 2014. Aided by the Federal Reserve's low-interest-rate policies, which allow MLPs to borrow cheaply while passing on the lion's share of their earnings to investors, MLPs gained 16.3% by the end of June, according to the benchmark Alerian MLP Index. But when financial markets hit a rough patch this summer amid worries of widespread overvaluation, MLPs got hit hard, with the same index tumbling 5.2% since then.
Aug. 12, 2014
Prospect Capital Corp.'s Upcoming Fiscal Q4 2014 Net Asset Value Projection
I am projecting PSEC will report a modest decrease in net asset value (‘NAV’) during the fiscal fourth quarter of 2014 (NAV per share projection is stated within the article).
Part of the projected modest decrease in NAV during the fiscal fourth quarter of 2014 is due to the Chapter 7 Bankruptcy of New Century Transportation, Inc.
Aug. 08, 2014
Will The High Premiums For The PIMCO High Income Fund Continue To Erode?
Two PIMCO closed end funds with long-term high premium valuations have seen erosion of those premiums over the past week.
PIMCO High Income Fund has lost nearly 12%, all of it to erosion of its premium. The premium for PIMCO Global Stocks Plus has also turned downward.
Other funds provide comparable returns with more sustainable valuations.
Aug. 07, 2014
Double-Digit Yields From This Diversified ETN Of Closed End Funds
This is the second part of a series of three, double-digit yielders. Today's subject is the ETRACS 2x Leveraged Closed-End Fund ETN. The ETN is paying 16.1% annualized yield and presents an opportunity hold an interest in a broadly diversified portfolio of closed end funds.
Aug. 07, 2014
Ares Capital is Oversold
The DividendRank formula at Dividend Channel ranks a coverage universe of thousands of dividend stocks, according to a proprietary formula designed to identify those stocks that combine two important characteristics — strong fundamentals and a valuation that looks inexpensive. Ares Capital Corporation (NASD: ARCC) presently has a stellar rank, in the top 10% of the coverage universe, which suggests it is among the top most “interesting” ideas that merit further research by investors.
Jul. 19, 2014
Comparing Dividend CEFs With ETFs: Which Are Better?
- Dividend CEFs had higher distributions than dividend ETFs but this did not translate into better overall performance.
- Dividend CEFs provided more portfolio diversification than dividend ETFs.
- Among dividend CEFs, AOD booked the best performance over the periods of the analysis.
Jul. 16, 2014
Four Nuveen Closed-End Funds Announce Intent to Conduct Tender Offers
Nuveen Investments, a leading global provider of investment services to institutions as well as individual investors, today announced that the Board of Trustees of each of the closed-end funds listed below approved for each fund to conduct a tender offer to purchase up to 10 percent of its outstanding common shares for cash at a price per share equal to 98 percent of the net asset value per share as of the purchase date.
Jul. 14, 2014
Low Interest Rate Woes? High Yield Closed-End Funds May Be the Cure
NEW YORK (TheStreet
) -- High-yield closed end funds
such as GAMCO Global Gold & Natural Resources
), Kohlberg Capital
) and Guggenheim Enhanced Income Equity Fund
) run counter to the paltry returns of the current low interest environment. The average yield for a member of the Standard & Poor's 500 Index
) is around 1.8%. High-yield closed end funds may be attractive not just to those seeking more income.
Jul. 08, 2014
Leverage In Closed End Funds: Another Look
- My recent analyses of leverage in closed end funds is expanded to emphasize individual fund categories.
- Market and NAV returns for trailing 12 and 36 months are considered for 8 categories of closed end funds.
- Emphasis is on equity funds and how well returns are correlated with increasing leverage.
Jul. 06, 2014
Closed-End Muni Musings; Parsing ISM Data: Best of Kass
NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stockmarket calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.
Last week, Kass wrote about muni funds, naysayers' take on the markets and about the Institute for Supply Management's manufacturing index.
Jul. 06, 2014
Closed-End Funds Offer Solace for 'Cruel, Cruel Summer'
NEW YORK (TheStreet
) -- Craig Johnson, a managing director with Piper Jaffray Companies
), a brokerage firm, warned clients
in late May that "a stealth correction has been unfolding" in the stock market that will result in a "cruel, cruel summer." Johnson's warning emanates from concern that small caps will drag down the Dow Jones Industrial Average
)and the S&P 500 Index
). No matter how the financial markets proceed in a "stealth" or more tangible correction, closed-end funds
offer profitable buys for growth, value and income investors.
Jun. 24, 2014
When you should be wary of that high dividend
(Reuters) - (The opinions expressed here are those of the author, a columnist for Reuters.)
If you are hungry for income, it is hard not to salivate over double-digit dividend yields that some closed-end funds offer, when most stocks only pay around 2 percent.
Jun. 19, 2014
Quality Closed-End Real Estate Fund Now Trading At A Discount
- Cohen & Steers Total Return Real Estate Fund is an unleveraged closed-end fund that now trades at a significant discount to its holdings of quality equity REITs.
- A merger with another fund seems to have temporarily brought down the price even further below their most recent net asset value.
- A dividend increase announced with the merger has brought the annualized yield up to an enticing 7.8%.
Jun. 17, 2014
BlackRock's Move To Monthly Distributions Could Narrow Discounts In These Closed End Funds
- The shareholder friendly move to monthly distributions could increase investor interest and narrow discounts.
- Many BlackRock equity option closed end funds have high yields and large discounts but group performance has disappointed.
- Equity option funds generate income and reduce volatility. These are attractive traits in the current low yield environment.
Jun. 16, 2014
The Asia Pacific Fund: Value-Driven, High Dividends, And A 10% Discount
- The Asia-Pacific Fund possesses a unique equity blend of value and high income in primarily Chinese and S. Korean companies.
- An absolute yield of 4.9% is further boosted by the fund's 10% discount.
- There are a couple of cons to be considered.
- Is the fund a buy?
Jun. 02, 2014
5 Cheap Stocks With Great Yields
What I’m telling investors today is to remember a year ago, when Fed Chairman Bernanke first uttered the “tapering” word and it ended up spooking investors to the point where the S&P 500 declined almost 6%. But what we found was that high-dividend-paying stocks
ended up declining almost a full percentage point more.
Jun. 01, 2014
How I Made 7% Retirement Income Investing In CEFs
- A high income portfolio recommended last July has continued to book good performance.
- The portfolio has handily beat the S&P 500 over the long term but has not kept pace over the short term.
- The portfolio has delivered a solid 7% income with reasonable risk.
May. 19, 2014
Dual Momentum ETF Portfolio For May
Scott's Investments provides a free "Dual ETF Momentum" spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum
May. 14, 2014
Where Are Today's Doorbusting CEF Discounts?
- Many CEFs have seen discounts compress this year.
- Discussion of the CEF discount/premium mechanism.
- Rationale for the appearance and disappearance of discounts.
- Some of today's doorbusters.
May. 09, 2014
Cohen & Steers Infrastructure Is Worth A Look
- Cohen & Steers Infrastructure has compelling total returns and is one of the few closed-end funds that has consistently beaten the S&P.
- Its long-term record of excellence has been driven by the same management team since its inception.
- With a healthy distribution rate and solid total returns, this closed-end fund is worth considering for income and total return investors.
May. 06, 2014
ETF Alert: Watch Out For Temporary Effective Creation Of Pseudo-Closed-End Funds
- Eleven ETFs have new unit creation abilities terminated.
- Same eleven have unit redemptions continued.
- Creation terminations are required by regulatory conditions.
- Conditions are temporary, ETFs are to return to former marketability assurances in next few days.
- Bias in market prices possible in the interim, creating subsequent loss possibilities for purchasers in bias period.
May. 05, 2014
Hungry for Yield? Feast on These Funds
Yield-hungry investors should consider closed-end bond funds
According to Closed-End Fund
Advisors, the average tax-free municipal fund yields more than 6%. That is the equivalent of a taxable bond yielding more than 9% for high-income investors. The closed-end yields are tempting at a time when 10-year Treasuries yield 2.6%.
May. 02, 2014
KKR seeks to attract investors at $10,000 minimum
May 1 (Reuters) - Private equity firm KKR & Co LP is working with a money manager to launch a closed-end fund that accepts commitments as small as $10,000 and may make shares available on a platform operated by Nasdaq Private Market, a regulatory filing showed Thursday.
May. 02, 2014
Nuveen To Consolidate Its Equity Option Income Funds: What Does It Mean?
- Nuveen proposes to consolidate its equity option income funds into a new line up.
- The replacement funds are based on the three major equity indexes.
- The option income investment strategies will change in most cases.
- Only one of the new replacement funds currently exists: QQQX which is proposed to absorb JLA only.
- Based on current prices it looks like a favorable conversion for holders of JLA, but many questions remain unanswered.
Apr. 01, 2014
Equity CEFs: 1st Quarter 2014 Review - A Change In Leadership
- Lagging CEFs over the last couple years have stepped up to the forefront so far in 2014 while leaders from 2012 and 2013 have started to fade.
- Though its early to say if this trend will continue, several CEFs still offer excellent entry points as their market prices have yet to catch up to their outperforming NAVs.
Mar. 28, 2014
Why Invest In Aberdeen Chile Fund? Why Not Mexico Fund
- Aberdeen Chile Fund operates under a managed distribution policy that pays “quarterly distributions" and requires a portion of Return of Capital (ROC).
- Chile Fund estimates that it has distributed more than its income and capital gains, therefore requiring that a portion of the distributions may be a “return-of-capital”.
Mar. 13, 2014
Equity CEFs: A Fund Which Probably Should Just Go Open-End
- CEFs use leverage, options and other income strategies to offer much higher yields than what most mutual funds and ETFs can offer.
- CEFs which don't offer a superior yield tend to trade at wide discounts because they then compete with other yield-oriented securities.
Mar. 05, 2014
The Utility And Infrastructure CEF Report: 6%+ Yields And Deep Value
- Risk is real and as such, diversification is key.
- Income investors are recommended to own a basket of utility stocks for gradual income growth and managed risk.
- Utilities are defined to include non-traditional, monopolistic, infrastructure-related sectors such as road & rails, telecom, airports, tower REITs and seaports.
- A new, proprietary utility CEF report grades available funds through a ranking system.
- An in-depth report with analysis to guide investors through the utility closed-end fund options.
Mar. 04, 2014
Hedge Funds Say Time To Buy Closed-End Funds
To anyone watching the closed-end fund ("CEF") market the effects of the retail investor base can be observed in the magnitude of frequent share price discounts to NAV. During the financial crises, epic discounts were seen as retail investors abandon these investments. As the fear subsided discounts narrowed to historical equilibriums. In recent months, fears of fed tapering and rising interest rates have pushed discounts to wider levels.
Mar. 02, 2014
Spice Up Your Retirement Portfolio With Convertibles CEFs
As a retiree, I am continually looking for sources of high income, but I also don't want to court excessive risk. This search led me to consider Convertibles Closed End Funds (CEFs). These funds offer excellent income (some with distributions more than 8%), but what about the associated risk? This article will analyze selected Convertibles CEFs in terms of their risk-to-reward characteristics.
Feb. 26, 2014
Beating The MLP ETF Tax Bite With Closed-End Funds
In a comparison between exchange-traded funds and closed-end funds, the low expenses and low portfolio turnover features of an ETF provides a built-in advantage over a comparable CEF with a typically much higher annual expense and tax consequences from capital gains distributions. You have probably seen the statistics and articles stating that an index stock fund on average outperforms 2/3rds, or 75% or 90% some other one-sided number of actively managed funds.
Feb. 21, 2014
Top 3 Closed-End Funds With Yields Over 8%
Regular readers of Dividends & Income Daily know that I love companies that are increasing their dividend payouts. But there's one problem we face when investing in stocks that have higher dividend growth …
We usually have to sacrifice current yield. So how do we boost the income that our portfolios generate without chasing higher-yielding stocks? Closed-end funds are the answer.
Feb. 21, 2014
CEF Strategies: Forget 1929, Why 2014 Is More Like 2000
This article is going to be a departure from my usual discussion of equity based Closed-End funds (CEFs) and instead, I'm going to step into the general state-of-the markets discussion which seems to getting a lot of headlines lately.
Feb. 12, 2014
A Few Good Yield Ideas
Readers of this Website tend to skew toward the sober and sensible side of the investor spectrum. That may explain why yield-oriented investment stories tend to get the kind of attention that social-media stocks get on other sites.
In that spirit, I submit fresh pieces by Forbes and Seeking Alpha that tout investments that are more about yield than capital appreciation potential.
Feb. 11, 2014
Buybacks For Bonds, Equities And mREITs, But What Of Closed-End Funds?
According to FACTSET as of December 17, 2013, 2013 Buybacks advanced to Pre-Crisis Highs:
"Aggregate share buybacks in the S&P 500 grew 32.0% year-over-year to $123.9 billion in Q3. While this represents a sequential decline of 0.1% from Q2, S&P 500 companies have been more active over the trailing year than in any period since the financial crisis. The trailing twelve-month sum of $448.1 billion is the highest since Q2 2008 ($526.9 billion)."
Feb. 06, 2014
How Municipal Bond Dividend Cuts Impact NAV Performance And Investor Sentiment
Last year, we penned an article about why we thought Municipal bond CEFs were about to suffer numerous and painful distribution cuts. The key data that suggested the cuts to our firm was a downward move in average Relative UNII
(underdistributed net investment income) from +23% to -18% in only seven months. For more detail, you can read the article on our blog under the December 2012
Feb. 05, 2014
The Credit Suisse High Yield Bond Fund Could 'Supercharge' Your Portfolio
The Credit Suisse High Yield Bond Fund (DHY
) is a closed end fund or "CEF" that primarily invests in high yield corporate bonds. As of December 31, 2013, this fund
has about 248 holdings and around $457 million in net assets which indicates it is well diversified. This CEF is an ideal investment to consider, especially for investors who appreciate the income potential that high yield bonds offer.
Feb. 04, 2014
UBS' New Funds Targeting Higher Returns Up To 19%
UBS Investment Bank (UBS
) (investor media page
) expanded their family of funds that focus on high monthly returns. The first is theETRACS Monthly Pay 2x Leveraged Diversified High Income ETN (DVHL)
was introduced in November, 2013. DVHL is linked to the monthly compounded 2x leveraged performance of the NYSE® Diversified High Income Index
, reduced by investor fees. ETRACS Diversified High Income ETN (DVHI)
was introduced in September, 2013 and ETRACS Monthly Pay 2xLeveraged Closed-End Fund ETN (CEFL)
give investors diversified exposure to the closed-end fund space. UBS is attempting to gain traction in the expanding opportunities of Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs).
Feb. 03, 2014
Equity CEFs: Utility CEFs Are Back
Though it's hard to predict any lasting trends after one month, utility sector equity closed-end funds (CEFs) are leading a rebound in equity CEFs so far in 2014. In my last article on January 21st, I took a rather dim view of the overall markets asking how much better it could get, particularly for the broader market stock based Exchange Traded funds (ETFs) in light of the Federal Reserve's
tapering of its Quantitative Easing (QE). It's been pretty much downhill for the equity markets since then, and you can read my article, Will ETFs Beat CEFs Again?
, and see why CEFs may be a better place to invest in 2014 over ETFs.
Jan. 23, 2014
Interview With Brian Mitts, Chief Operating Officer Of NexPoint Advisors
We interviewed Brian Mitts via telephone on November 22, 2013 in order to gain a better understanding of NHF and why it was challenging for our firm to compare it to other closed-end funds that we track for our weekly Universe data service and for client accounts. Brian is not the named portfolio manager, James Dondero, but we think you will see from the interview that Brian is well aware of the Fund's focus and involved in the investment process in a deep and meaningful way.
Jan. 21, 2014
Equity CEFs: Will ETFs Beat CEFs Again In 2014?
For those who follow the Closed-End fund (CEF) universe, this last year has shown how much the industry has matured despite the fact that CEFs overall, did not have nearly as positive a year as their Exchange Traded fund (ETF) cousins. Generally, CEFs fall somewhere in between individual stocks and ETFs in terms of risk but because of their lower market capitalizations (usually $250 million to $1 billion) and lower trading volumes, they can often trade at bizarre valuations and with extreme volatility at times. Offsetting that is their higher yields of 6% to 9% that investors can receive and the fact that they can trade at premium and discount market prices to their actual net worth, commonly called the Net Asset Value (NAV).
Jan. 21, 2014
PIMCO's Strategic Global Government Common Fund Is Now A Buy
The purpose of this article is to highlight the most highly leveraged closed end fund in the closed end fund universe and a potential buying opportunity in PIMCO Strategic Global Government Common Fund (RCS
). Highlighted onMorningstar's website
, PIMCO's Strategic Global Government Common Fund seeks high current income with capital appreciation through investment in global sovereign debt securities.
Dec. 18, 2013
The Templeton Russia And Eastern Europe Fund Offers Exposure To Russia At A 10% Discount
Emerging markets have lagged this year and now look to be among the cheapest stocks available relative to other options but they also look inexpensive relative to themselves. The Russian market looks particularly inexpensive. Using the Market Vectors Russia ETF (RSX
) as a proxy we find that last 12 months Price/Earnings ratio is 6.37 and LTM Price/Book is 0.89. The Russian market has been left for dead likely because of a combination of a bad reputation for corporate governance combined with poor historical stock performance. There are a couple of catalysts that could drive prices higher from depressed levels.
Dec. 17, 2013
Pros And Cons Of MLP Investing Through Closed-End Funds
For income oriented and conservative investors, many of the publicly traded master limited partnership companies offer an attractive combination of high yield, growing distributions and tax-advantaged income. Along with these admirable features, MLP investors get the hassles of K-1 tax reporting, the possible need to file tax returns in a number of states and potential tax problems
if MLP units are held in qualified retirement accounts. One way to get MLP investment exposure and avoid the K-1 tax issues is to invest in one or more MLP focused funds. While there are both MLP focused ETFs and mutual funds, I think that closed-end funds offer the more interesting opportunities for this type of investment.
Dec. 17, 2013
Make 10% in Three Weeks
Conditions are ideal for turning quick year-end profits on closed-end funds. Tax selling could continue to send their share prices lower until Dec. 31. But generous dividend yields should help lure buyers back in January. That gives investors an opportunity to buy low and sell high in the space of about three weeks. Below are some listed funds that make good candidates for such a trade.
Dec. 16, 2013
CEF Strategies: The Sad State Of Municipal Bond CEFs
It happens every December. Like a storm coming in from the north, selling in CEFs tends to pick up this time of year as discounts just get wider and wider. For some CEFs, its tax loss selling season and after the run the equity markets have had this year, some CEF sectors that have seen absolute losses in their market prices (i.e. not including distributions) are just being pummeled as tax-loss selling just adds to the pain and aggravation.
Dec. 12, 2013
A Shopping List Of Doorbusting CEF Discounts
According to CEFconnect.com, of the 595 funds currently tracked by the site, better than 90% of them are trading at a discount to net asset value. Fifty percent of them are trading at a 10% discount or more. I'd be the first to admit that many, perhaps even most, discounts in the CEF universe are justified due to a variety of reasons, including poor management and perpetual underperformance, excessive fees, shareholder unfriendly distribution policies, and other negative attributes.
However, for the shrewd CEF investor able to find quality management & assets and purchase equity and yield for better than 90 cents on the dollar, these discounts present an opportunity in my view.
Dec. 05, 2013
Goldman Sachs Returns To The Closed-End Fund Arena After An 80-Year Hiatus
Late last month, Goldman Sachs Asset Management (e.g. "GSAM")announced the public listing of the Goldman Sachs MLP Income Opportunities Fund (GMZ). This is the first-ever closed-end fund issued by GSAM which was established by Goldman Sachs in 1988.
But this is not the first closed-end fund issued by the parent company Goldman Sachs (GS). They were a major closed-end fund player in 1929. Before looking at the new CEF in more detail, let's review some closed-end fund history.
Nov. 27, 2013
Goldman + MLPs = Big Closed-End Fund Offering
Goldman Sachs Asset Management made some waves in the market for closed-end funds this week with the biggest CEF offering since June.
Goldman’s name and clout plus the lure of yield-rich master-limited partnerships were the likely drivers behind the more than $800 million raised by Goldman Sachs MLP Income Opportunities Fund (GMZ). The capital raise puts the new offering right away in the top 10 MLP CEFs by size, according to CEFConnect.com.
Nov. 26, 2013
Goldman Sachs Asset Management Launches First Closed-End Fund
Goldman Sachs MLP Income Opportunities Fund Raises $826.3 Million in Initial Public Offering With Aim to Deliver Exposure to America's Rapidly Expanding Energy Sector
NEW YORK--(BUSINESS WIRE)--November 26, 2013--
For investors seeking to participate in America's current energy expansion, Goldman Sachs Asset Management, L.P. ("GSAM") is pleased to announce the public listing of the Goldman Sachs MLP Income Opportunities Fund (the "Fund"), now trading on the New York Stock Exchange under the ticker symbol "GMZ." This is the first closed-end fund ever launched by GSAM.
Nov. 23, 2013
What Is The Deal With Premiums In MLP CEFs?
There are currently 25 closed-end funds with a combined $19.6 billion in assets under management that focus on master limited partnership (MLP) investing in a US listed closed-end fund structure. This equals about 8% of the $250 billion in total assets in the CEF structure.
Nov. 21, 2013
Equity CEFs: Which Funds To Buy And Sell Right Now - Part III
This is the third in a series of articles discussing which equity based high yielding Closed-End funds (CEFs) offer investors good value and which equity CEFs investors should avoid based on my analysis. In this part III, I will look at a fund which offers investors a unique investment strategy among CEFs which could provide alpha performance opportunities based on where the markets and interest rates go from here.
What If The Stock Markets And Interest Rates Continue To Go Up?
In my last article, which you can read here Part II, I asked the question,"What If We Are Near A Market Top?" and focused on CEFs which could take advantage of a more difficult market going forward. In this article, I'm going to flip that around and offer a fund to investors based on a more bullish market scenario going forward but also with a play on interest rates.
Nov. 11, 2013
Equity CEFs: Which Funds To Buy And Sell Right Now - Part I
2013 has been a subpar year for most equity CEFs, both in Net Asset Value (NAV) performance and market price performance. It's not so much that it's been a bad year per se, it's just that most equity CEFs have not been able to keep up with the soaring broader market averages.
Obviously, it's been an incredible year for the broader market averages with the S&P 500 up 24.1% YTD through November 8th, the NASDAQ up 29.8% and the Dow Jones Industrial Average up 20.3%. The small cap indices are up even more though overseas markets haven't been as strong as the U.S. markets, particularly some Asian emerging markets.
Nov. 09, 2013
3 Bond Funds To Spice Up Your Portfolio
As a retiree, I am always looking for opportunities to obtain more income. In May of this year, the Fed hinted that it was considering "tapering" the amount of quantitative easing. This caused interest rates to rise and derailed the price of many bond Closed End Funds (CEFs). Two of the sectors hit hard were global and emerging market bonds, with prices plummeting as much as 20% to 25%. As investors began selling these funds, the prices fell more than the Net Asset Values (NAV) and many of the funds that were selling at a premium reverted to selling at a discount. Now, that the shenanigans in Washington have been resolved, it appears that tapering is (hopefully) off the table for the foreseeable future. The selloff has created some potential opportunities in emerging market and global bond CEFs. This article assesses the risks and rewards associated with these types of bonds and identifies three CEFs that have performed significantly better than their peers.
Nov. 04, 2013
Tax Loss Selling Opportunity In Busted Senior Loan CEF IPOs
We are soon approaching the time of year for one of the best trading opportunities: buying stocks in the last few weeks of the year that are artificially depressed by investors selling them for tax reasons. These stocks often experience a nice bounce in January when the selling pressure eases up.
Some of the best opportunities this year to capitalize on the tax loss selling "bounce" strategy may come from the large number of fixed income CEFs' initial public offerings that occurred over the last year when fixed income was a hot asset class:
1) Every investor who bought at the IPO is holding the fund at a loss, and nearly all investors who bought in later are also sitting on a loss.
Oct. 29, 2013
Mortgage REITs, ETFs Slammed: Time For a Closed-End Fund?
The ugly trading Tuesday in mortgage real-estate investment trusts and the funds tracking them is something of a contrast to what’s happening in closed-end funds, which just underscores the value of being diversified.
The selloff, as Mike Aneiro explains over at Barron’s Income Investing, follows Sterne Agee’s call for American Capital Agency Corp. (AGNC) to cut its quarterly dividend from 80 cents to 50 cents. AGNC’s 8.6% slump is a driver of the 3.5% slide in iShares Mortgage Real Estate Capped ETF (REM) and Market Vectors Mortgage REIT Income ETF (MORT). Both ETFs are at two-week lows, reflecting glum investor opinion.
Oct. 29, 2013
Product review: JP Morgan US senior secured loans fund
JP Morgan is planning to launch a Guernsey-domiciled closed-ended fund focused on US-based senior secured loans.
The asset management firm expects to start an offer period from November with trading opening in December. The sterling-denominated fund will target a dividend yield of 5 per cent.
Oct. 27, 2013
Enhance Retirement Income With CEFs Selling At Bargain Prices
"Be greedy when others are fearful" is sage advice offered by Warren Buffett. This applies today to closed end funds (CEFs) that invest in bonds and preferred stocks. Over the last few years, investors clamoring for yield bid up the price of these CEFs. However, when the Fed began hinting that tapering was on the horizon, interest rates began to rise and the price of fixed income CEFs plummeted. As investors headed toward the exits, the price of these funds fell more than their Net Asset Value (NAV), causing discounts to widen.
Oct. 25, 2013
Legg Mason, in turnaround bid, says profit up despite outflows
(Reuters) - Asset manager Legg Mason Inc (LM.N) on Friday said its quarterly profit rose 7 percent compared with a year ago as assets and performance fees rose, but reported an outflow of investor cash from its equity funds.
The results showed both signs of progress and the challenges facing Legg Mason Chief Executive Joseph Sullivan as he tries to restore the fortunes of one of the largest U.S. fund firms.
Oct. 23, 2013
Bill Gross Sees Value In Depressed Closed-End Funds
According to recent SEC filings, Bill Gross invested over $5.8 million of his personal money in four Pimco closed-end bond funds on Monday.
There is generally a one day delay in SEC filings, and it is quite possible that Mr. Gross is planning additional purchases this week. Instead of reporting each individual trade, Mr. Gross reports a weighted average price for each purchase:
Oct. 22, 2013
Investment Trust Insights: Europe is Cheap
Last week we had the latest instalment in the Best Advice: Closed-end Fund Forum webinar series. This month the focus was on Europe, particularly given the recent elections. David Harris of InvaTrust was the moderator and he was joined by Stephen Macklow-Smith of JPMorgan and Jeremy Thomas of Allianz. The aim of the discussion was to help advisors understand the issues and challenges of a new political and economic landscape that may occur in Europe and how it may impact investment decisions.
Oct. 17, 2013
CEF Investors: Your Window Of Opportunity Is Beginning To Close
Since the May Federal Reserve announcement closed-end fund (CEF) investors have been given a gift. As prices collapsed, investors with cash and a strong understanding of the hedging practices implemented by many popular CEFs portfolios began to make additions. To them it was apparent that this selloff was going to be just a temporary adjustment. Over the last 3 months capital had the opportunity to be put to work for 85-90 cents on the dollar, as many CEFs earning in excess of 8-9% expanded their discounts to 10% or more.
Oct. 16, 2013
Boulder Total Return: Get Berkshire Hathaway At A 20% Discount Through This Closed End Fund
A Delicate Procedure
Investing in Closed End Funds (CEF's) can be difficult for many individuals. Closed End Funds are often obscure and many offer investors exposure to a basket of assets which are more difficult to obtain including commodities and bonds. In spite of these advantages, utilizing investment vehicles often involves fee structures and as such as these also involves outsourcing your thinking to other individuals. Often, CEF investing can be a hazardous proposition.
Oct. 10, 2013
CEF Bond Funds: Value Or Value Trap?
Investor angst with regard to "taper talk" has created a highly erratic pricing environment for bond-related closed-end funds despite the fact that most low duration/limited maturity offerings have exhibited fairly little asset value volatility. Hawkish rate policy commentary earlier this year seems to have scared away yield chasers/momentum players and caused more legitimate bond investors to reconsider their commitment to the space. This pricing/asset disconnect has created substantial discounts across the entire closed-end bond fund universe.
Oct. 06, 2013
Bond Fund Sees Closed-End Bargains
Fearful bond investors have left opportunities in their wake, say managers ofRiverNorth/DoubleLine Strategic Income
The $1.1 billion fund, which had closed to new investors in March, reopened late last month after worries about rising interest rates and the possibility that the Federal Reserve might pare its bond purchases resulted in a rush out of many bondholdings. That included a selloff of closed-end bond funds, creating what the managers of the RiverNorth fund see as bargains.
Sep. 30, 2013
Identifying The Best Utility Funds
Over the years, utility companies have prospered from increasing residential and commercial demand coupled with a low interest rate environment. However, when interest rates began to rise in May of this year, the stock of utility companies nosedived. To get a better feel for the performance of this sector, I analyzed the risk versus rewards over the past several years.
Sep. 29, 2013
Puerto Rico's bond losses hit local investors
(Reuters) - The steep decline in prices of Puerto Rican bonds on the American municipal bond market is taking a heavy toll at home, where local institutions and individuals own an estimated 30 percent of the $70 billion of outstanding bonds.
Heightening worries in recent months about Puerto Rico's shrinkingeconomy, double-digit jobless rate and per capita debts far higher than in any U.S. state touched off a wave of selling and briefly pushed some Puerto Rico yields to over 10 percent.
Sep. 27, 2013
Fitch: Closed-End Funds Rebound as Fed Shows Taper Torpor
(The following statement was released by the rating agency) NEW YORK, September 27 (Fitch) Municipal closed-end funds (CEFs) rebounded in September following the large sell-off in muni bonds
that began in June, according to Fitch Ratings. Investors resumed purchasing bonds that were seen as oversold, as the U.S. Federal Reserve announced it would not taper its $85 billion monthly bond purchase program just yet. Fitch published its special report, "NAV Declines Show Interest Rate Impact on Leveraged Municipal Closed-End Funds" in August.
Sep. 27, 2013
Fitch: Closed-End Funds Rebound as Fed Shows Taper Torpor
Fitch Ratings-New York-27 September 2013: Municipal closed-end funds (CEFs) rebounded in September following the large sell-off in muni bonds that began in June, according to Fitch Ratings. Investors resumed purchasing bonds that were seen as oversold, as the U.S. Federal Reserve announced it would not taper its $85 billion monthly bond purchase program just yet.
Sep. 27, 2013
Fitch Posts Slides on Market Webcast for Leveraged Closed-End Fund
Fitch Ratings-New York-27 September 2013: Fitch Ratings presented a webcast titled 'Leverage in Closed-End Funds Through Recent Market Developments' hosted by Capital Link Webinars on Sept. 10, 2013. Presentation materials and access to webcast replay can be accessed via the links provided at the end of this press release.
Sep. 26, 2013
Equity CEFs: How To Play The Allianz Funds Right Now
Allianz Global Investors has been busy restructuring its equity Closed-End Funds (CEFs) over the past couple weeks. Just last Wednesday, September 18th, Allianz announced the liquidation of the AGIC International & Premium Strategy fund (NAI)
. NAI jumped 8% on this news overnight as its market price immediately moved up to near its liquidation Net Asset Value (NAV). You can read my article discussing this announcement here
Sep. 26, 2013
Emerging Markets At A Discount And A 9% Yield
In previous articles, I've tried to pinpoint the tipping point for regional Closed End Funds -- the point when discounts or premiums are so stretched they can't go much further. The trick is not just finding a CEF with a huge discount or premium, but finding one that is out of step with its historical trend and close to earlier extremes.
Sep. 23, 2013
Equity CEFs: Terrific Opportunity In A Duff & Phelps Utility Fund
Utility stocks and utility funds have generally not
been the place to be this year in a rising interest rate environment but the Federal Reserve's decision to postpone any tapering of its Quantitative Easing last Wednesday has put interest rate sensitive securities back in focus. Nowhere was this seen more than in the utility sector index, as reflected by the SPDR Utilities Select ETF (XLU)
, which rose 3% last Wednesday, far outdistancing the S&P 500, up 1.2%, or the Dow Jones Industrial Average, up 0.9%.
Sep. 23, 2013
Equity CEFs: From Birth To Liquidation - The Story Of The Allianz International & Premium Strategy Fund
I've written many times about the importance of following a Closed End fund's (CEF) Net Asset Value (NAV) and how much more important it is really than following a fund's market price. You obviously have to keep your eye on both since a fund's market price will give you your market yield as well as whether the fund trades at a premium or discount market price but all too often, investors in CEFs seem to either ignore, minimize or not even know about a fund's NAV, and instead base their investment decisions solely on the market price and market yield.
Sep. 19, 2013
This 10% Yielding CEF Is Undervalued And Trending Higher
Western Asset Global High Income (EHI
) is a closed end fund or "CEF" that invests in high yield, emerging market and other bonds. This fund is managed by Legg Mason Partners Fund Advisors, LLC. which is a wholly-owned subsidiary of Legg Mason, Inc. (LM
). Since this fund has an outstanding yield and a shorter than average duration, it appears to be offering investors a significant buying opportunity thanks to a recent pullback. Here is a closer look at why this fund appears poised to rebound and continue offering shareholders monthly dividends that are well above average:
Sep. 18, 2013
DoubleLine's Gundlach says Fed tacitly increasing stimulus
In an investor webcast, Gundlach said the U.S. central bank's decision not to reduce its bond buying indicates a tacit increase in purchases because the U.S. Treasury is "issuing less debt."
"To a certain extent, they are increasing their stimulus by not reducing bond purchases, which I think is one of the reasons why bond market sentiment, and the dollar sentiment, and gold sentiment changed so much today," Gundlach said.
Sep. 18, 2013
Earn Big Annualized Returns With PDI Between Now And Year's End
For those hungry for yield, there is a great offering by the smart folks at PIMCO, the PIMCO Dynamic Income fund (PDI). This fund has been around for roughly 16 months and in that time it has performed mightily. Since inception, the price of this little pup has risen 10% while the NAV is up over 26%!
This CEF throws off a monthly distribution of $0.177 per share or 7.65% per year. These distributions have been in place since the inception of the fund. However, the best part is that the fund really earns over 9% (and probably over 10%) on its portfolio. Normally, when a CEF significantly outearns their distribution rate, they would increase the distribution. However, in typical PIMCO fashion, they have refused to do so preferring to under distribute earnings.
Sep. 17, 2013
20% Total Return Potential From This High-Yield Bond Fund
Bonds - the asset everyone seemingly loves to hate. Yet through the recent rate volatility and somewhat benign economic environment, there appears opportunity in a somewhat esoteric corner of the fixed income market. Many closed-end high-yield bond funds currently trade at undeserved discounts to their net asset values, presenting a total return opportunity in the neighborhood of 20% over the next year. Western Asset High Yield Defined Opportunity Fund (HYI
) is a fund that has the potential to achieve such results.
Sep. 15, 2013
Equity CEFs: ING Funds Get Axed Again
After the close on Friday, Sept. 13, ING Investments (ING
) declared distributions for their equity closed-end funds (CEFs), which included distribution reductions for several of their funds. This is not a huge surprise, and I had even warned in a May article titled "Top Funds By Fund Family
" that some of the ING funds were not out of the woods with regard to a possible distribution cut. In that article I said that I could not endorse any of the ING funds based on their current valuations, and that, over time, a couple of the funds would be forced to cut distributions again. So the question now is: Are the distribution cuts over and, if so, are any of the ING funds good buys now?
Sep. 11, 2013
This Undervalued $2 CEF Has Significant Rebound Potential And Yields 9.4%
Managed High Yield Plus (HYF
) is a closed end fund or "CEF" that primarily invests in high-yielding bonds. Back in May, this fund
which is professionally managed by UBS (UBS
), was trading for $2.20 but is now trading for around $2. This appears to be a significant buying opportunity because it has a short average duration and a dividend yield that is about 9.4%.
Sep. 06, 2013
Buying Asia At A Discount And An 11% Yield
In previous articles (here
), I've identified country Closed-End Funds (CEFs) that were trading at unusually large premiums to their net asset values. Because these CEFs consist of publicly traded stocks, I argued that premiums are irrational and must eventually go away. In this article, we'll look at an Asia CEF (IAE
) that trades at an irrationally largediscount
Sep. 03, 2013
Multi-Sector Bond Funds For Enhanced Retirement Income
Even with the recent increase in interest rates, the income stream from treasuries is still only a trickle. To increase income, many retail investors would like to diversify their bond holdings but do not have the requisite knowledge of economic factors to make informed allocations. One strategy is to leave the sector selections to professional money managers. In this regard, Closed End Funds (CEFs) that invest in multiple bond sectors could be a potential solution. To assess the performance of these multi-sector CEFs, I analyzed their associated risks versus rewards over the past several years.
Sep. 03, 2013
Equity CEFs: Time To Step Up To The BlackRock Option-Income Funds
It's been a disappointing last few years for many of the high yielding option-income strategy Closed-End funds (CEFs) from BlackRock (BLK
), some of which is deserved and some not. It was back in late May of 2011 that I first gave notice to income investors that many of the BlackRock option-income funds had too high a Net Asset Value (NAV) yield and that BlackRock would either have to cut the distributions or the funds would probably see continued NAV erosion and poor NAV total return performance. You can read that article here, Which Option-Income Funds To Buy
, and I would call your attention to the table in the article which compared the valuations of option-income funds from the four major sponsors, Eaton Vance (EV)
, ING (ING)
Aug. 26, 2013
These 3 'Rebound' Plays Offer Yields Of 10% Or More
The concerns about "tapering" by the Federal Reserve has sparked a significant sell-off in bonds which has spilled over into other "bond-proxies" including dividend stocks, closed-end funds and exchange traded funds. Remember when investors were overly concerned about the "Fiscal Cliff" at the end of the year and more recently, the budget "sequester?" Those pullbacks turned out to be solid buying opportunities. Well, now it seems that "tapering" fears are providing investors with a chance to buy high-yielding stocks on the cheap.
Aug. 26, 2013
High Retirement Income With Floating Rate Loan Funds
As a retiree, I am always searching for sources of high income but lately I have worried about rising interest rates. Floating rate loans Closed End Funds seem to offer the best of both worlds, providing over 6% income plus a hedge against increased rates. To asses this asset class, I analyzed the risk and reward associated with floating rate loan over the past several years.
Aug. 26, 2013
GoldTrust: The Discount To Spot Price Is A Joke
Central GoldTrust (GTU
) is a closed-end fund holding gold bullion that provides an alternative to SPDR Gold (GLD
) or owning physical gold coins & bars. The fund currently trades at a 4.8% discount
to its net asset value. I have mentioned this fund a couple of times in the past several months and I continue to be baffled why gold investors initiating new positions would buy GLD instead of GTU. Besides the discount, GTU also has a major advantage when it comes to taxation because GTU gains qualify for the long-term capital gains rate of 20%. On the other hand, GLD is considered a collectible and thus gains would be taxed at the collectible rate of 28%. The same collectible rate applies to gold coins and bars. Given the discount and the lower taxation, GTU is clearly the better option.
Aug. 23, 2013
Fitch: Rate Hike Causes Divergence Between Loan and Bond Closed-End Funds
Fitch Ratings-New York-23 August 2013: Closed-end funds (CEFs) investing in longer-term bonds have performed poorly in the face of a rising interest rate environment, according to a new Fitch Ratings report. However, CEFs investing in corporate loans remain stable, with further divergence possible.
Aug. 22, 2013
Wells Fargo Advantage Global Dividend Opportunity Fund Announces Changes to Portfolio Management Team
The Wells Fargo Advantage Global Dividend Opportunity Fund (NYSE: EOD) has announced a portfolio management change.
Effective immediately, Christian L. Chan, CFA, and Kandarp Acharya, CFA, FRM (Financial Risk Manager), of the Wells Capital Management Solutions team are replacing Portfolio Manager Jeffrey P. Mellas as members of the portfolio management team of the Wells Fargo Advantage Global Dividend Opportunity Fund.
Aug. 22, 2013
These Higher-Yielding Investments Could Be Spring-Loaded With Upside
The stock market has dropped for 6 consecutive days in a row. This decline seems fueled by concerns over when the Federal Reserve plans to "taper" its bond buying program. Many believe that the Fed will taper in September, but others believe that is way too soon.
It does seem premature for the Fed to taper because the last thing Bernanke wants to do is further roil the markets. Furthermore, the recent rise in interest rates has already possibly created the slowdown in the housing and auto sectors. If the Fed were to taper in September and create the appearance of a somewhat aggressive stance on policy, it could damage what is already a very weak economic recovery. In addition, Bernanke has already been quoted as calling the recent spike in interest rates as "unwelcome." A recent Bloomberg article notes that "Bond King" Bill Gross believes that the Federal Reserve won't tighten until 2016. The Bloomberg article states:
Aug. 19, 2013
Evaluating Buying Opportunities For MBS Closed-End Funds
After the housing bust, the Fed decided to help homeowners by keeping mortgage rates low. To implement this policy, it embarked on a $40 billion per month purchase of mortgage-backed securities (MBS). This drove the prices of MBS higher, resulting in record low interest rates. However, recently the Fed hinted that it would reduce these purchases, sending waves of fear through the MBS market. The price of mortgage-backed securities cratered. Is this a buying opportunity? To asses this asset class, I analyzed the risk and reward associated with MBS over the past few years.
Aug. 15, 2013
Sizing Up Discounted Muni Closed-End Bond Funds
Some municipal closed-end bond funds, including Michigan-specific funds, are trading at appealing discounts following interest-rate increases and Detroit's bankruptcy filing.
"Municipal closed-end bond funds are on sale," says Cecilia Gondor, executive vice president at Thomas J. Herzfeld Advisors Inc., a Miami investment-advisory firm, which oversees about $167 million.
Aug. 13, 2013
A Good Investment Opportunity For Phil Mickelson
Back in January, Phil Mickelson, who normally earns around $60 million a year, complained about the high tax rates
he had to pay as a California resident:"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent," Mickelson said. "So I've got to make some decisions on what I'm going to do"
Aug. 12, 2013
High Yield CEFs To Spice Up Your Portfolio
High yield bond Closed End Funds (CEFs) delivered excellent performance in 2012 as investors clamored for high income. Many high yield CEFs were selling at substantial premiums to Net Asset Value (NAV) until the Fed crashed the party by discussing plans to taper their Quantitative Easing. The prices for high yield CEFs cratered in the second and third quarter of 2013, suffering their worst loss in over 2 years. Most of the CEFs are recovering but are still selling at a discount. Is this a good time to add high yield bond CEFs to your portfolio? To help you decide, I have analyzed the risk versus reward for this asset class over several time periods.
Aug. 11, 2013
CEF Weekly Review: First Trust Energy Infrastructure
- Highest Positive Spread: BlackRock MuniHoldings Quality II (MUE)
- Focus Stock: First Trust Energy Infrastructure (FIF)
- Last Week's Focus Stock: JH Financial Opportunities (BTO)
Economy Follows: While the stock market leads, the economy follows. The U.S., Europe, Japan and China will lead the industrial nations from this malaise of recession to a smidgen of economic growth. However, how much is the growth?
Aug. 09, 2013
Muni Bonds After Detroit
In the wake of Detroit's bankruptcy filing, some financial advisers are selling their Michigan municipal bonds and reinvesting elsewhere while others are hunting for bargains across the state.
Kerry Mayo, a financial planner at Capital Financial Advisors of New York, says his firm is combing through its clients' portfolios and plans to sell all Michigan general-obligation bonds, no matter what city or other municipality issued them. Such bonds are backed by a municipality's tax revenue.
Aug. 06, 2013
Equity CEFs: The Most Undervalued And Overvalued Funds - 6 Months Later
As I promised in my February 4th article, The Most Under And Overvalued Funds
, I was going to come back 6 months later and see how my undervalued and overvalued high yielding equity based closed-end funds (CEFs) picks had performed. I don't know how many contributors would hand pick funds (not stocks) with no knowledge of how the next six months would unfold for the markets and yet feel pretty confident that their undervalued picks would outperform their overvalued picks, but that's what I did.
Aug. 04, 2013
CEF Weekly Review: JH Financial Opportunities
- Highest Positive Spread: Aberdeen Chile Fund (CH)
- Focus Stock: JH Financial Opportunities (BTO)
- Last Week's Focus Stock: Nuveen Energy MLP Total Return (JMF)
Downgrades: The "Focus Stock" for the week was Nuveen Energy MLP Total Return. JMF had investments in energy MLPs. Oppenheimer's has reduced its energy MLPs from outperformed to the performed on July 31st, 2013. The top 10 holdings of JMF were down 1.4%.
Aug. 02, 2013
Will Detroit Save The Municipal Bond CEF Sector?
If you want to see a sector that has been decimated because of a perfect storm of factors coming together, look no further than the municipal bond Closed-End fund (CEF) sector. Between a spike up in interest rates, the threat of a cap in the tax-free status of interest payments and worries over municipal bond defaults triggered by the ongoing saga in Detroit, this is a sector that has been pummeled all year and keeps getting pummeled from all sides. When investors think that stocks are the safest security in their portfolio and that a bond is a 4-letter word, you know things have gotten very bad for fixed-income.
Jul. 28, 2013
CEF Weekly Review: Nuveen Energy MLP Total Return
- Highest Positive Spread: Gabelli Convertible & Income (GCV)
- Focus Stock: Nuveen Energy MLP Total Return (JMF)
- Last Week's Focus Stock: First Trust Energy Infra Fund (FIF)
U.S. Global Energy: U.S. Energy Department predicts half the production growth of energy will come from China and India. The worldwide use of energy-mostly for transportation and electricity-will surge 56% by 2040 compared with 2010 levels.
Jul. 26, 2013
Trotting Out Our Favorite Bank-Loan Funds
Earlier this week, I wrote an article titled "Should You Consider Floating-Rate Bank Loans Today?" in which I outlined the reasons investors might consider--and why many are flocking to--bank-loan funds in the current environment. Today, I'm going to highlight some of our favorite funds in the sector.
Selecting a Vehicle
There are a number of mutual funds, closed-end funds, and exchange-traded funds that invest in bank loans. There are pros and cons to investing in each fund format that are important to be aware of.
Jul. 26, 2013
Thai Capital Fund Liquidation Special Situation With A Quick Time Line
Thai Capital Fund (TF
) is a fairly obscure closed-end fund restricted to investing in companies in Thailand. The fund has not done too well performance wise and management agrees that there is no justification for the high fees the company charges. Shareholders voted in 2012 to liquidate the fund but broker non-votes became the obstacle that blocked the liquidation of the fund. To work around this, the board suggested and won support for perpetual preferred shares at 1%, however, Bulldog Investment LLC took matters into their own hands and bought a +30% position in the company and majority shareholders voted to liquidate the fund in June 2013.
Jul. 25, 2013
The Fed Won't Tighten Until 2016, So Buy These Cheap High Yielders Now
Investors have dumped bonds and other high-yielding assets in the past few weeks over concerns that interest rates are going to spike even higher. In June, Ben Bernanke discussed the possibility that Federal Reserve policies would be tapered, when, and if, economic conditions warranted. It's been widely reported that this means tapering will begin in September. However, Bernanke and other Fed officials have made dovish comments that seem to suggest the market has a mistaken view on how soon tapering could occur.
Jul. 25, 2013
The CEF Firecracker
Yesterday I read this article about a proposed portfolio of closed end funds (CEFs) that were "high income" and "lower risk" for retirees. It was not clear if the CEFs were intend to be the entire portfolio or just a segment of the portfolio; huge difference between the two. It highlighted eight CEFs and if someone wanted to use that many -- or more -- for some small slice of their portfolio, it might not be simple but could contribute to long-term success. Putting the whole thing into a bunch of CEFs regardless of the number of funds is not something I would do.
Jul. 24, 2013
First Opportunity Fund: A Good Way To Acquire Top-Rated Hedge Funds At A 25% Discount
If you want to invest in hedge funds in the U.S., you have to be an "accredited investor" with a net worth of at least $1 million not including your house, or an annual income over $200,000 a year for the last two years ($300,000 if married). Even if you do qualify, hedge fund management fees are quite steep and there are often lockup restrictions that limit how and when you can sell your shares.
But there is a way for any investor to participate in hedge funds at a discounted price. The First Opportunity Fund, Inc. (FOFI.PK
) is a closed-end fund that trades in the OTC market. FOFI has positions in hedge funds that total about 33% of the fund assets and are managed by Wellington. There were two hedge fund positions held by the fund as of March 31, with about $50 million in each.
Jul. 24, 2013
Protected Principal Retirement Strategy: MLP Closed End Funds - Are Any A Buy?
I have always favored owning individual master limited partnerships [MLPs] as opposed to the closed-end fund [CEF] alternatives. The reasons for this were twofold:
1. I started accumulating MLPs around 2004, when few, if any closed-end [MLP] funds were in existence.
2. Every time I checked the [MLP] closed-end funds, just about all of them were selling at fairly staggering premiums to their net asset value [NAV].
Jul. 21, 2013
CEF Weekly Review: First Trust Energy Infra Fund
Highest Positive Spread: Kayne Anderson Energy (KYE)
Focus Stock: First Trust Energy Infra Fund (FIF)
Last Week's Focus Stock: First Trust Energy Infra Fund
So, Fed Speaks: If you were concerned about Mr. Bernanke's remarks, "we've not changed policy. We are not talking about tightening monetary policy". Mr. Bernanke's main goal is designed to push down long-term rates and push up prices of stocks, homes and other assets. So, there it is.
Jul. 19, 2013
The Forgotten Funds That Are Suddenly Drawing Crowds
While money has been gushing out of U.S. stock funds, unit investment trusts have been raking it in.
These investments — a peculiar cross between mutual funds and exchange-traded funds — have been around for decades. By 2008, they were on their way to oblivion. But total assets of UITs have since nearly tripled, rising last year by 20% to $72 billion, according to the Investment Company Institute, a trade group. New money is pouring in, putting 2013 on pace to be the top-selling year on record.
Jul. 17, 2013
How To Pick High Yield CEFs That Outperform The Market: An Introduction
One of the most popular investment choices for income investors are closed-end funds or CEFs. CEFs are great for individual investors because they offer diversified exposure to a host of different securities. For bonds in particular, CEFs are an excellent investment vehicle because they offer both diversification and liquidity in one low cost trading package; all things are generally problematic when buying individual bonds. Yet despite these advantages, many investors don't really understand how to pick CEFs or what they should look for when buying a CEF. This article will go over the factors that are involved in choosing a CEF and why investors should not look at either yield or discount when buying CEFs
(at least not isolation anyway).
Jul. 15, 2013
Equity CEFs: Top And Bottom Fund Performers Through July 12
I was trying to get these tables out for the 2nd quarter 2013 but was unable due to time constraints, i.e. I was on vacation. These quarterly tables allow income investors to see which funds are outperforming or underperforming so far in 2013 and which funds may be getting ahead of themselves or may be due to catch up. So here are the top and bottom 15 or so Year-to-Date (YTD) performance figures for the equity based, high yielding closed-end fund (CEF
) universe I follow.
Jul. 14, 2013
High Rates? Are You Delirious?
Have today's insanely low interest rates driven investors insane?
Three closed-end funds offered by Cornerstone Advisors of Asheville, N.C., show that some investors have come to believe the impossible: that high yields can persist in a world where central banks have squashed down bond rates to next to nothing.
These people have deluded themselves into believing they are earning fat yields. In reality, they merely are getting their own money back—and you can't turn a fantasy into fact just by wishing it were so.
Jul. 12, 2013
Tapping Your Stock Portfolio for Income
With Federal Reserve Chairman Ben Bernanke signaling again this week that interest rates are likely to stay at rock-bottom for the foreseeable future, where can you turn for even a trickle of investment income?
Just as the removal of oxygen from a room can make you lightheaded, artificially low interest rates could make some income-oriented investors lose their ability to think clearly. Those who want ample income must either wait patiently until rates finally rise—or must violate the rule of thumb that says you never should fund income needs by dipping into capital. Above all, you must be skeptical of anything that purports to offer high current yields.
Jul. 11, 2013
Getting Your High-Yield Debt At A Discount
In two previous articles over the past year I examined valuations in high-yield closed-end funds (CEFs). In July of 2012, I noted
that only 10% of all funds were trading at a discount to NAV. My conclusion at that time was that investors should avoid the space, as pricing was clearly indicative of "yield chasing." Four months ago I offered a follow-up
and pointed out more discounts were appearing, with about 40% of the group trading under NAV. At that time I still urged caution, but was a bit more constructive on the group. In this article, I will take a look at the recent sell off in this space, the macroeconomic outlook, and whether investors should view high-yield CEFs as an investment opportunity or not.
Jul. 11, 2013
Buy Muni Funds After Dividend Cut
NEW YORK (TheStreet
) -- Most bond funds
have suffered lately, but the damage has been particularly severe for closed-end municipal funds. Many of those have declined more than 12% this year, compared to a fall of 3.0% for the Barclays Capital U.S. Aggregate Bond index.
Jul. 09, 2013
Rebound Potential And A 10.6% Yield Make This CEF Very Attractive
Credit Suisse High Yield Bond Fund (DHY
) shares appear to have strong potential for both short-term gains in a rebound as well as high monthly payouts for income investors. This is a closed end fund or "CEF" that is managed by Credit Suisse. It primarily invests in high yield (or junk) bonds. As of July 5th, 2013, the fund holds about 266 positions
, which means it is solidly diversified.
Jul. 08, 2013
2 High Yield Bond CEFs With Recent Intensive Insider Buying
The SPDR Barclays Capital High Yield Bond ETF
) was trading below $20.00 in March 2009. The index is currently trading at $38.99, or more than 100% above the low made in March 2009.
In this article, I will feature two high yield bond funds that have seenintensive insider buying
during the last 30 days. Intensive insider buying can be defined by the following three criteria:
The stock is purchased by three or more insiders within one month.
The stock is sold by no insiders in the month of intensive purchasing.
At least two purchasers increase their holdings by more than 10%.
Jul. 08, 2013
More Income With Less Risk For Retirees
As a retiree, I am continually looking for sources of more income but I also don't want to court excessive risk. Like most retirees, I have accepted the meager returns from bond funds because of their perceived safe haven against loss of capital. However, as interest began to rise in May, bond funds fell off the cliff and recorded significant losses. To insulate my portfolio as much as possible against interest rate risk, I looked at limited duration Closed End Funds (CEFs). This article discusses my analysis of these funds in terms of their risk-to-reward characteristics.
Jul. 07, 2013
CEF Weekly Review: Gabelli Convertible & Income Fund
Highest Positive Spread: PIMCO High Income Fund (PHK)
Focus Stock: Gabelli Convertible & Income Fund (GCV)
Last Week's Focus Stock: Cohen & Steers Infrastructure Fund (UTF)
U.S Jobs Gains: American employers added 195,000 jobs in June. For April and May, it climbed by a combined 70,000. Wages rose and many of the jobs were services. While the unemployment rate is 7.6% (same as last month), the Feds would be happy if the rate was 6.5%.
Jul. 01, 2013
2 More Great Reasons To Invest In Closed-End Funds
Two of the greatest characteristics of closed-end funds has to be their over-reaction to every market move and their ability to sidestep forced redemptions. I recently read that almost $80 billion was removed from bond mutual funds and ETFs in the month of June, and to put that in perspective, roughly $40 billion was removed in October 2008 during the financial crisis.
Jun. 30, 2013
CEF Weekly Review: Cohen & Steers Infrastructure Fund
Highest Positive Spread: Cornerstone Progressive Return Fund (
Jun. 24, 2013
A New Fund at the Right Time
NEW YORK (TheStreet) -- ETF industry veteran Christian Magoon recently hung his own shingle at the eponymous Magoon Capital to get into the fund business. YieldShares High Income(YYY) is the firm's first product.
YYY is a fund of closed-end funds, or CEFs. CEFs are a double-edged sword. Most of the time they offer fantastic yields, but during times of market stress as we've seen in the last few weeks, they can be very volatile.
Jun. 23, 2013
CEF Weekly Review: Cornerstone Progressive Return Fund
- Highest Positive Spread: Gabelli Convertible & Income (GCV)
- Focus Stock: Cornerstone Progressive Return Fund (CFP)
- Last Week's Focus Stock: Virtus Total Return Fund (DCA)
So, Where Do You Go? Bernanke's Wednesday conference call was the Fed's message that QE may not last for forever. While $85 billion was not placed on "hold", there could be a late-2014 trickle of funds from the Fed's coffer
Jun. 20, 2013
Nuveen Has Very Little Exposure To Detroit Muni Meltdown
It appears as if Nuveen's lineup of closed-end municipal bond funds has very little exposure to Detroit's municipal debt. In case you haven't heard, Detroit missed a payment on its pension last week. Some of the city's debt and liabilities will have to be restructured to meet future payments.
Jun. 19, 2013
New ‘High Income’ ETF Targets Closed-End Funds for Yield
Investors will get a new ETF this week that seeks to provide income by investing in a basket of closed-end funds.
Exchange Traded Concepts LLC in conjunction with YieldShares LLC earlier this year filed a registration statement, including a preliminary prospectus, for the YieldShares High Income ETF (NYSEArca: YYY). The fund is expected to list Friday, June 21.
Jun. 17, 2013
Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity?
Closed-end funds ((CEFs)) can be lucrative investments, but have come under pressure as the market has become concerned over rising interest rates. For investors in these funds, several scenarios may occur and should be considered independently in order to determine if the market may be over-discounting the threat to CEFs at the present time.
Jun. 15, 2013
CEF Weekly Review: Virtus Total Return Fund
- Highest Positive Spread: Nuveen Insured New York Tax-Free Advantage Municipal Fund (NRK)
- Focus Stock: Virtus Total Return Fund (DCA)
- Last Week's Focus Stock: Guggenheim Enhanced Equity Strategy (GGE)
Jun. 14, 2013
How to Survive the Bond Fund Crash
NEW YORK (TheStreet
) -- The last few weeks have been rough for equities and fixed income
. The most notable decline has been the 20% decline in the Nikkei 225 Index in just 17 trading days. Interest rates have also moved up in the last few weeks on concerns of a so called tapering by the Fed
which has hurt just about every type of yield oriented fund.
May. 28, 2013
Hey, Where is the Soft Patch?
The current US recovery is probably the most ridiculed and disrespected we have seen in 31 years of economic forecasting. Conventional wisdom calls it a “sugar high,” it has evidently not reached “escape velocity” yet, and every piece of weaker than expected data is supposedly the beginning of the dreaded “double dip recession.”Of course, none of this is true, but it fits a narrative – one that works for both sides of the aisle. Conservatives want to paint Obama as an economic fiasco. Liberals want to argue that “austerity” is killing us and “short-sellers” are spending billions trying to create another panic.
May. 24, 2013
Newest PIMCO Closed-End Funds Provide The Best Value
Over three years ago, I wrote an article about the PIMCO Closed-End Fund "Anomaly". I published an update of this study early last year showing that the average premium expanded even further.
I've taken another look at the PIMCO CEFs and have included two new funds that did not exist in 2010. In March 2010, all 18 PIMCO closed-end funds were trading at a premium over net asset value. (Note: I omitted funds that may be run by Allianz or sub-managed by PIMCO but do not have "PIMCO" in their names since these funds do not seem to benefit from the PIMCO anomaly).
At Thursday's close, the two newest funds were trading at a discount to NAV. Here is a snapshot table comparing the premiums on all three dates.
May. 16, 2013
A Closed-End Fund ETF Yielding Over 7%
ETF Spotlight on the PowerShares CEF Income Composiite Portfolio ETF (NYSEArca: PCEF), part of an ongoing series.
Assets: $502.5 million.
Objective: The PowerShares CEF Income Composite Portfolio tries to reflect the performance of the S-Network Composite Closed-End Fund Index, which is comprised of closed-end funds that invest in taxable investment grade fixed-income securities.
May. 14, 2013
Fund Face-Off: Eaton Vance's Floating-Rate Funds
A few weeks ago, we highlighted the floating-rate loan asset class, specifically those in the closed-end fund, or CEF, universe. This week, we highlight a group of funds (both mutual funds and CEFs) from Eaton Vance. While only two of the six funds have Morningstar Analyst Ratings ( Eaton Vance Floating Rate (EVBLX) earns our highest rating of Gold, and Eaton Vance Floating Rate Income Common (EFT)earns a Bronze rating), the suite of funds is managed by the same team, utilizing the same overall strategy. The biggest differences lie in the use of leverage. The CEFs sport leverage ratios of about 36%, Eaton Vance Floating Rate Advantage (EAFAX)reported a 12% leverage ratio, and the remaining mutual funds do not use leverage. The six funds also hold varying allocations to high-yield corporate bonds: As of March 31, the smallest allocation was 3% and the largest was 14.5%.
Eaton Vance's bank-loan team has a deep bench of knowledgeable and experienced managers and analysts. Overall, the team has been awarded a positive People pillar rating. (For more information about our Morningstar Analyst Rating for Funds and the pillar ratings, click here.)
May. 12, 2013
CEF Weekly Review: Mexico Fund
Bonds: While unemployment is not at its 6.5% range and inflation is not at its 2.0% threshold, bonds may be on their way down.
- Highest Positive Spread: Invesco VK Senior Income (VVR)
- Focus Stock: Mexico Fund (MXF)
- Last Week's Focus Stock: LMP Real Estate Income Fund (RIT)
While bond prices are all down (see Chart 1), from a price perspective, the easing of bonds may be a normal reaction for asset classes to respond. While sequestration is still "on" and Europe is still in a quagmire, maybe equities (with threshold rates above bonds) are the place-to-be.
Apr. 27, 2013
Closed-end funds provide yield, but at a price
CHICAGO (Reuters) - Investors chasing yield in this low-rate environment are jumping into alternative vehicles. That's helping closed-end income funds stage a comeback.
Such funds, which offer a fixed number of shares and are closed to new capital once they start operating, have their attractions, but investors should exercise caution. Expenses for closed-end funds tend to be higher than with exchange-traded funds, they are more complex and they usually carry more risk. Their active managers are free to use leverage and invest in a variety of assets in the hope of delivering higher returns than mutual funds with static bond mixes.
Apr. 26, 2013
DoubleLine's Gundlach seeks more risk in new closed-end fund
NEW YORK (Reuters) - DoubleLine Capital LP, the investment firm run by star bond manager Jeffrey Gundlach, said on Friday it completed an initial public offering for the closed-end DoubleLine Income Solutions Fund (DSL.N).
Gundlach, DoubleLine's chief executive and chief investment officer, will manage the fund with portfolio managers Bonnie Baha and Luz Padilla. Gundlach said on Friday the fund will seek greater risk than the firm's flagship DoubleLine Total Return Bond Fund (DBLTX.O).