How To Measure Closed-End Fund Risk

How To Measure Closed-End Fund Risk

Summary

  • Closed-end funds continue to gain in popularity as investors hunt for yield in a yield-less world.

  • The fourth quarter of last year surprised many CEF newbies to the realization that these funds have more risk than thought.

  • Adjusting your mindset to look at widening discounts (especially when accompanied by rising NAVs) as opportunities rather than risk can significantly improve your outcomes.

  • We work hard to "look through" the NAV of the fund to identify the risks that are likely to drive its performance.

  • We give an example with NMZ.


Location, Location, Location: Where You Place Your Assets Matters

Location, Location, Location: Where You Place Your Assets Matters

Summary

  • One of the biggest issues we see with members is where they place certain investments.

  • While it may sound simple (place least tax efficient in qualified accounts), it can be more complex as expected rates of returns need to be considered.

  • By making portfolios more tax efficient, you can potentially improve portfolio's annual returns by up to 50 bps according to some studies

PIMCO UNII Report: April 2019

PIMCO UNII Report: April 2019

Summary

  • Of the nine munis funds, four saw decreasing UNII while the other five were flat on the month.

  • In taxables, PCN, PCI, PDI saw positive and increasing UNII. RCS had negative but increasing UNII.

  • Taxable coverage ratios showed six falling and five increasing for an average ratio of 71.5%.

  • The funds remain a core part of the strategy though they are shifting a bit in composition.  It remains to be seen if this is a permanent shift or a temporary one.

  • We should have more color on this in the next few weeks as we meet with PIMCO management and some other experts in the space.

NexPoint Strategic Opportunities Does Another Rights Offering

NexPoint Strategic Opportunities Does Another Rights Offering

Summary

  • NexPoint has now conducted a rights offering in each of the last three years, significantly increasing the assets within the fund.

  • These rights offerings have been dilutive and have NOT created long-term shareholder value.

  • We recommended to members to wait until after the shares trade ex-rights before potentially purchasing any.

A Look Under The Hood Of PCI And PDI

A Look Under The Hood Of PCI And PDI

Summary

  • PDI and PCI continue to do OK on a NAV basis, but are now close to fully valued on a price basis.

  • The Fed pivot towards a dovish tilt means the shifts in these portfolios away from interest rate swaps was the correct move.

  • Non-agency MBS is also a declining percentage of the total portfolio meaning that the drivers of past returns are changing.

BlackRock Investment Quality Municipal Trust: 9 Reasons To Buy This High-Quality Muni CEF

BlackRock Investment Quality Municipal Trust: 9 Reasons To Buy This High-Quality Muni CEF

Summary

  • Munis continue to have a strong 2019 thanks to lower rates, strong demand, and limited supply.

  • A large overhang in the form of expected higher rates has now been removed from the conversation regarding munis.

  • In our most recent analysis, we have shifted away from large convergence trade opportunities to distribution sustainability.

  • This is the second in a series of write-ups focused on the space.

Why We Bought RiverNorth Opportunistic Municipal Income For Our Portfolio

Why We Bought RiverNorth Opportunistic Municipal Income For Our Portfolio

Summary

  • Municipal bonds have performed well in the last several months, both during the bear market and in the recovery.

  • Muni CEFs have had one of their best quarters ever thanks to starting discounts near their widest levels of the last 20 years.

  • What's left in terms of convergence opportunities?

  • A closer look at an opportunity today in RMI.

Yield Hunting CEF Report April 2019: Distribution Cuts Finally Plague PIMCO

Yield Hunting CEF Report April 2019: Distribution Cuts Finally Plague PIMCO

Summary

  • We didn't see as many distribution cuts in April but the magnitude of the cuts were very significant.

  • The two largest sponsors - Blackrock and Nuveen - both reported no cuts to their funds.

  • PIMCO had eight of their 20 funds cut the distribution.

A Shift To A Capital Return Program Could Boost Putnam Premier Income Trust

A Shift To A Capital Return Program Could Boost Putnam Premier Income Trust

Summary

  • There are many quirks to closed-end funds that investors should look for in order to capitalize on a total return approach.

  • Many CEFs are being attacked by activists and shifting towards a managed distribution policy in order to increase shareholder demand.

  • Putnam shifted one of their flagship funds to a managed distribution policy as part of a capital return program.

  • We analyze the fund and what exactly a managed distribution policy is.

Yield Hunting CEF Report March 2019: Distribution Cuts Pick Up, But So Do Increases

Yield Hunting CEF Report March 2019: Distribution Cuts Pick Up, But So Do Increases

Summary

  • February saw CEF discounts continue to rebound and are now very close to the levels we saw prior to the fourth quarter collapse.

  • The VIX, which we believe is a big driver of CEF discounts, continues to decline.

  • March 1 distribution announcements saw 17 increases and 30 decreases.

Muni Market Update: January 2019

Muni Market Update: January 2019

Summary

  • Munis are suddenly gaining fame because of their durability during the recent downturn.

  • We think the "January effect" is well underway and that having some exposure is better than waiting for entry to the perfect fund.

  • There's a lot of potential discount capture (mean reversion on the discount) available still despite the rally.

  • If the Fed pauses, the rally in muni CEFs could extend beyond January, and we could ("could") move back toward the high valuation levels seen in the summer of 2017.

  • News reports are coming out about lower-than-expected tax refunds mostly due to the withholding not being correct. Once higher earners see this, they will undoubtedly ask their CPAs how they can reduce their taxable income.

LDI Investing Is No Longer Just For Pension Funds: What It Can Do For You

LDI Investing Is No Longer Just For Pension Funds: What It Can Do For You

Summary

  • Most individual investors are not familiar with LDI investing but it is gaining more popularity.

  • We believe that most portfolios in the future will reflect at least some aspect of LDI concepts.

  • Financial advisors are dramatically shifting towards this kind of strategy in order to provide value to clients.