16 out of 22 CEF sectors positive on price and 14 out of 22 sectors positive on NAV last week.
BlackRock Inc. share repurchase update.
Voluntary share repurchases show alignment between managers and shareholders.
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ismagilov
Author's note: This article was released to CEF/ETF Income Laboratory members on May 3rd, 2023. Please check latest data before investing.
The Weekly Closed-End Fund Roundup will be put out at the start of each week to summarize recent price movements in closed-end fund [CEF] sectors in the last week, as well as to highlight recently concluded or upcoming corporate actions on CEFs, such as tender offers. Data is taken from the close of Friday, April 28th, 2023.
JPMorgan Chase & Co. (JPM) releases a nice Weekly Market Recap every week. The chart of the week of the FOMC dot plot shows that rates are expected to top in 2023, before moving lower in subsequent years. Although please do remember before making wholesale portfolio changes based on this expected trend, predictions about rates are hard - especially about the future!
Income Lab
This is a table of key index returns this week:
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Weekly performance roundup
For closed-end funds, or CEFs, 16 out of 22 sectors were positive on price (up from 1 last week) and the average price return was +0.40% (up from -1.00% last week). The lead gainer was Taxable Munis (+2.53%) while Emerging Market Income lagged (-1.29%).
Income Lab
14 out of 22 sectors were positive on NAV (up from 3 last week), while the average NAV return was +0.03% (up from -0.72% last week). The top sector by NAV was Taxable Munis (+1.27%) while the weakest sector by NAV was Commodities (-1.75%).
Income Lab
The sector with the highest premium was Limited Duration (-0.51%), while the sector with the widest discount is Asia Equity (-17.30%). The average sector discount is -8.03% (up from -8.10% last week).
Income Lab
The sector with the highest premium/discount increase was Preferreds (+0.89%), while Emerging Market Income (-2.15%) showed the lowest premium/discount decline. The average change in premium/discount was +0.08% (down from -0.30% last week).
Income Lab
The sector with the highest average 1-year z-score is Commodities (+0.47), while the sector with the lowest average 1-year z-score is Asia Equity (-1.52). The average z-score is -0.61 (up from -0.66 last week).
Income Lab
The sectors with the highest yields are Senior Loans (+12.43%), Emerging Market Income (+11.78%), and Multisector Income (+10.91%). Discounts are included for comparison. The average sector yield is +8.20% (down from +8.22% last week).
Income Lab
Individual CEFs that have undergone a significant decrease in premium/discount value over the past week, coupled optionally with an increasing NAV trend, a negative z-score, and/or are trading at a discount, are potential buy candidates.
Conversely, individual CEFs that have undergone a significant increase in premium/discount value in the past week, coupled optionally with a decreasing NAV trend, a positive z-score, and/or are trading at a premium, are potential sell candidates.
April 17, 2023| Nuveen Municipal Closed-End Funds Announce Completion of Mergers.
April 10, 2023| CBRE Global Real Estate Income Fund (NYSE: IGR) Announces the Preliminary Results of Rights Offering.
April 3, 2023|Nuveen Intermediate Duration Municipal Term Fund Announces Termination and Liquidation with its operation. The liquidating trust is not expected to issue tax reporting on Form 1099 like NID but instead will follow trust reporting tax conventions and is expected to issue tax statements annually. The trust will be treated as a grantor trust for federal income tax purposes.
Upcoming corporate actions
These are from the past month. Any new news in the past week has a bolded date:
April 13, 2023| Nuveen Preferred Closed-End Funds Announce Proposed Mergers.
March 30, 2023| Center Coast Brookfield MLP & Energy Infrastructure Fund Announces Planned Reorganization.
March 27, 2023| Kayne Anderson Energy Infrastructure Fund and Kayne Anderson NextGen Energy & Infrastructure Announce Proposed Merger.
March 22, 2023| Board of First Trust Dynamic Europe Equity Income Fund Approves Conversion into an ETF.
Recent activist or other CEF news
These are from the past month. Any new news in the past week has a bolded date:
April 14, 2023| BlackRock Closed-End Fund Share Repurchase Program Update. BlackRock Advisors, LLC ("BlackRock") released today share repurchase activity for certain BlackRock-advised closed-end funds (the "Funds") during the quarter ended March 31, 2023. The Funds have authorized open market share repurchase programs (the "Repurchase Programs") pursuant to which each Fund may repurchase, through November 30, 2023, up to 5% of its outstanding common shares in open market transactions. The Repurchase Programs seek to enhance shareholder value by purchasing Fund shares trading at a discount from their net asset value ("NAV") per share, which could result in incremental accretion to a Fund's NAV. Below is a summary of share repurchase activity over this past quarter and since the inception of each Fund's Repurchase Program:
Summary of share repurchase activity during the most recent calendar quarter ended March 31, 2023:
Income Lab
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The amount and timing of any repurchases under each Fund's Repurchase Program will be determined either at the discretion of the Fund's management or pursuant to predetermined parameters and instructions subject to market conditions. There is no assurance that any Fund will repurchase shares in any particular amounts. A Fund's repurchase activity will be disclosed in its shareholder report for the relevant fiscal period. Any repurchases made under any Repurchase Program will be made on a national securities exchange at the prevailing market price, subject to exchange requirements and certain volume and timing limitations and other regulations under federal securities laws.
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Distribution changes announced this month
These are sorted in ascending order of distribution change percentage. Funds with distribution changes announced this month are included. Any distribution declarations made this week are in bold. I've also added monthly/quarterly information as well as yield, coverage (after the boost/cut), discount and 1-year z-score information. I've separated the funds into two sub-categories, cutters and boosters.
Cutters
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Boosters
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Commentary
1. BlackRock shares repurchase update
BlackRock Inc. (BLK) has provided an update on their share repurchase activity. BlackRock have share repurchase programs in place for the majority of their CEFs, allowing them to repurchase funds when they are at discounts. This feature is positive and shows alignment between managers and shareholders, because BlackRock is doing this voluntarily rather than being pressured to do so by activists (although I doubt any activist would take on BlackRock!).
They key point to understand is that repurchasing shares reduces AUM and fee income for managers, but boosts the NAV/share for all shareholders via accretion.
It is encouraging to note that a sizable number of CEFs saw share purchases, with dollar amounts running up to the tens of millions. I also remember that in previous years when discounts were narrow, very few shares (if at all) were repurchased. This makes sense because the degree of NAV accretion is lower when the funds are repurchased at narrower discounts. The time to rebuy shares is when they are at wide discounts, such as now.
In their press release, BlackRock has also helpfully calculated the amount of NAV accretion that is provided by those purchases. To make this data even more useful, I've calculated the estimated NAV/share accretion and the percentage of shares repurchased this quarter.
Income Lab
The accretion amounts seem small, but remember that this for only one quarter of activity. For example, the biggest NAV accretion was +0.26% in a quarter for BIGZ, which annualizes to +1.04% per year which is a nice boost.
Among portfolio holdings, BOE saw +0.03% NAV/share accretion this quarter, while BMEZ gained +0.17% and BSTZ gained +0.16%. All three funds are held in the Tactical Income-100 portfolio.
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Analyst’s Disclosure:I/we have a beneficial long position in the shares of XFLT, BMEZ, BSTZ, BOE, PDI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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