YH CEF Report September 2019 | Some Surprise Cuts

YH CEF Report September 2019 | Some Surprise Cuts

Summary

  • August saw a return to volatility which curtailed further discount tightening in the CEF market.

  • We saw a slew of cuts- primarily in munis again- as interest rates continue to fall putting pressure on earnings.

  • In the last 30 days, only 35 funds saw NAV performance greater than +1.0% while there were 204 funds that fell by -1.0% or more.

  • Being choosy is extremely important in this environment.  As investors, we tend to get programmed as to which funds are "good" and which are "bad" but those labels can change.

PIMCO Cries For Argentina - August 2019 Update

Summary

  • NAVs across most taxable bond funds managed by PIMCO had an allocation to Argentinian bonds.

  • They also had some exposure to the Argentinian peso which was devalued substantially in early August.

  • Coverage ratios and UNII jumped significantly as the funds realized embedded gains.  But at what expense?

  • The muni funds continue to shed UNII and trade at rich valuations.

YH Fund Spotlight: Guggenheim Taxable Muni

YH Fund Spotlight: Guggenheim Taxable Muni

Summary

  • Taxable munis remain a great place to capture a relatively safe moderate yield.

  • GBAB is one of the safest 6.2% yielding securities in the markets today. Many investors are loathe to pay a premium for a fund, which is understandable.

  • However, superior asset comes at a cost.

  • For now, it is nearly impossible to find a safer and more secure 6%+ yielding fund.

One Of The Best Options In The Muni Space For 4.43% Tax-Free: NAD

One Of The Best Options In The Muni Space For 4.43% Tax-Free: NAD

Summary

  • The muni sector has been on fire since late last year as investors seek both safety and tax efficiency.

  • The technicals of this muni market are probably the most favorable they have ever been, thanks to the SALT cap and lower supply.

  • Interest rates have fallen, making relatively longer-duration munis rise in value, but that presents additional risks that need to be quantified.

  • This is one of our current muni picks.

Vertical Capital Fights Back

Vertical Capital Fights Back

Summary

  • Activists have attacked this orphan fund - and for good reason, given the antics by management.

  • There is nothing special about this fund which simply holds a bunch of individual mortgage loans that it attempts to buy at a discount on the secondary market.

  • Proxies have gone out for the activist proposals which could force a liquidation eventually.

Weekly Closed-End Fund Commentary | August 11, 2019

Weekly Closed-End Fund Commentary | August 11, 2019

Summary

  • Closed-end funds continue to show tightening discounts as investors no longer see rising rates as an overhang to the asset type.

  • We go through some of the corporate actions that are slicing their way through and providing some opportunities.

  • The statistics pages can be useful in identifying opportunities.  We go through this each week with our members.

PIMCO CEF Update | July 2019

PIMCO CEF Update | July 2019

Summary

  • Performance continues to do well despite some recent sluggishness in the NAV growth.

  • The muni funds have seen the greatest appreciation, although it is not likely to stave off pending distribution cuts.

  • The majority taxables are still not back to even compared to ten months ago.

  • We detail why we think the NAV is the best indicator of the performance of the taxable funds.

Closed-End Funds For The Next Recession (Podcast)

Closed-End Funds For The Next Recession (Podcast)

Summary

  • Alpha Gen Capital discusses his closed-end fund allocation strategy and how he is positioning his portfolio in anticipation of the next recession.

  • Mortgage bonds are on area that it is bullish on at present, a contrarian view in light of what happened during the last recession.

  • Investing success depends largely on minimizing mistakes and taking returns where they come. Income can greatly enhance success.

YH CEF Report August | Everything Is (Was) Awesome

YH CEF Report August | Everything Is (Was) Awesome

Summary

  • Yield globally plummeted with the amount of negative-yielding debt reaching a record $15T.

  • Distribution cuts were relatively mild and infrequent this month with just one double-digit cutter.

  • This drop in yields could cause closed-end fund yields to look relatively more attractive and mean valuations could reach levels we saw in 2012.

  • What that means for the CEF investor is no more increases in leverage costs.  In fact, we could see leverage costs very quickly helping support distributions.

  • We discuss one of our newest opportunistic plays, Vertical Capital Income Fund (VCIF).

PCI: The Increase In The Distribution Makes This The Best Investment In Your Portfolio

PCI: The Increase In The Distribution Makes This The Best Investment In Your Portfolio

Summary

  • Each month, the EPS and UNII values comes on like clockwork on the 15th.  We pour over it to decipher if a distribution cut is in the cards.

  • On July 1st, PIMCO, as usual, released its monthly distribution announcement showing that PCI increased the distribution by 6%.

  • The increase removes the largest overhang to the fund - a distribution cut.

  • We have adjusted our buy under and sell over prices on our marketplace service.

Income Investing And The Changing Yield Curve

Income Investing And The Changing Yield Curve

Summary

  • We conclude our midyear Marketplace roundtable series with a look at dividend and income investing.

  • In theory, this is the area most directly impacted by a rate environment that has shifted dramatically in the past 6-12 months.

  • Our authors talk about how they are dealing with that shift and what they're finding interesting in today's market.

Alternatives To An Annuity For The (Moderately) Hand's Off Investor: Part II

Alternatives To An Annuity For The (Moderately) Hand's Off Investor: Part II

Summary

  • The Core Income Portfolio is born creating a high income stream to provide monthly cash flow- i.e. a synthetic annuity.

  • We look at using a one-fund solution vs. a diversified portfolio of funds to dampen volatility.

  • This kind of portfolio can be a great compliment to a dividend equity strategy or individual bond sleeve.

Alternatives To An Annuity For The (Moderately) Hands-Off Investor: Part I

Alternatives To An Annuity For The (Moderately) Hands-Off Investor: Part I

Summary

  • An annuity can provide safety and be a great way to generate base income in your retirement plan.

  • Annuities get a bad rap but there's really no difference between it and a traditional defined benefit pension which tends to be loved.

  • For those wanting to avoid the loss of principal but still creating an income stream, closed-end funds can be a great tool.

  • For the right investor who can handle volatility, a diversified portfolio of CEFs complimenting other portfolios pieces can provide an annuity-like income stream.

  • While there is volatility in this strategy, even if your principal falls, it's still an improvement to the annuity which provides similar income at a loss of principal.

YH CEF Report July | BlackRock Cuts Nearly Everything

YH CEF Report July | BlackRock Cuts Nearly Everything

Summary

  • CEFs continue to trade tight to their historical discount averages, thanks to lower equity volatility and a shift in the interest rate environment.

  • Investors in CEFs today need to understand that they are basically short a lot of volatility given the current valuations.

  • BlackRock cut across most of their muni fund complex, some of which were very strange given the strong coverage and positive UNII balances.

New Policy Raises Blackstone/GSO Funds' Distribution, A Positive For Floating Rate Funds

New Policy Raises Blackstone/GSO Funds' Distribution, A Positive For Floating Rate Funds

Summary

  • Blackstone/GSO runs a suite of three high-quality funds that need to be on every CEF investor's radar.

  • One fund now trades close to par while the other is at a nice discount, though the market has equalized the yields.

  • The funds utilize a dynamic distribution policy and issue their announcement every three months. They recently raised that distribution mid single digits.

  • If rates do eventually head back up, they will be a good hedge against those headwinds.

May Stock Swoon, Munis Rally: An Update On Why Muni CEFs Are In Your Portfolio

May Stock Swoon, Munis Rally: An Update On Why Muni CEFs Are In Your Portfolio

Summary

  • Munis have been one of the best-performing asset classes this year while providing that downside protection that we expect from one of the safest asset classes.

  • Portfolio construction is very important to us, so understanding the risks of each position and how it relates to the portfolio as a whole is extremely critical.

  • Our analysis goes well beyond looking for negative z-scores or the highest yielding funds which most retail investors in the space use as deciding factors.

  • We have a muni-only Core Income Portfolio that shows our Top Conviction funds - those that have the characteristics mentioned in this report that are most favorable.

A Fresh Look At Option CEFs From Eaton Vance

A Fresh Look At Option CEFs From Eaton Vance

Summary

  • Many investors are avoiding equities for fear that the bull market is ending or because of their focus on yield/income.

  • Eaton Vance has a half dozen equity-option CEFs that offer fixed income CEF yields but some growth optionality from equities.

  • The best investor for the option-income strategy of funds is one who wants to maintain equity exposure (preferably for the long term) while generating a higher income.

  • Overall, the Eaton Vance option-income funds have solid long-term track records and quality management.