Weekly Closed-End Fund Roundup: PDT Cuts, FSCO Boosts, Some CEFs Getting Bubbly (July 9, 2023)
Summary
- 6 out of 22 CEF sectors positive on price and 3 out of 22 sectors positive on NAV last week.
- PDT reduces distribution by 15%, FSCO boosts distribution by 15%.
- Some CEFs getting bubbly.
- Looking for a helping hand in the market? Members of CEF/ETF Income Laboratory get exclusive ideas and guidance to navigate any climate. Learn More »
cemagraphics
Author’s note: This article was released to CEF/ETF Income Laboratory members on July 11, 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 July 7th, 2023.
Author
JPMorgan releases a nice Weekly Market Recap every week. These are the key index levels this week for equities:
JPMorgan
Weekly performance roundup
For CEFs, 6 out of 22 sectors were positive on price (down from 18 last week) and the average price return was -0.37% (down from +0.36% last week). The lead gainer was Emerging Market Income (+1.55%) while Convertibles lagged (-2.67%).
3 out of 22 sectors were positive on NAV (down from 11 last week), while the average NAV return was -0.55% (down from -0.48% last week). The top sector by NAV was Commodities (+0.56%) while the weakest sector by NAV was Taxable Munis (-1.74%).
The sector with the highest premium was Limited Duration (+0.59%), while the sector with the widest discount is Asia Equity (-14.67%). The average sector discount is -7.81% (up from -8.02% last week).
The sector with the highest premium/discount increase was Investment Grade (+1.89%), while Convertibles (-1.81%) showed the lowest premium/discount decline. The average change in premium/discount was +0.25% (down from +0.43% last week).
The sector with the highest average 1-year z-score is Multisector Income (+0.61), while the sector with the lowest average 1-year z-score is Taxable Munis (-0.92). The average z-score is -0.37 (up from -0.43 last week).
The sectors with the highest yields are Senior Loans (+12.50%), Emerging Market Income (+11.64%), and Multisector Income (+10.67%). Discounts are included for comparison. The average sector yield is +8.16% (up from +8.14% last week).
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.
| Fund | Ticker | P/D decrease | Yield | P/D | z-score | Price change | NAV change |
| abrdn Global Income Fund, Inc. | (FCO) | -4.41% | 14.61% | 40.59% | 2.2 | -3.52% | -2.46% |
| Calamos Convertible Opp & Inc | (CHI) | -4.25% | 10.65% | 4.80% | -0.7 | -4.46% | 2.44% |
| RiverNorth Flexible Municipal Income Fund II | (RFMZ) | -3.61% | 7.42% | -9.22% | 0.6 | -2.78% | 0.87% |
| Credit Suisse Asset Mgmt Income | (CIK) | -3.52% | 9.15% | 3.90% | 1.8 | 0.34% | -0.45% |
| Sprott Physical Platinum & Palladium Tr | (SPPP) | -3.13% | % | -0.92% | 1.0 | -0.09% | -0.94% |
| JHancock Premium Dividend Fund | (PDT) | -3.07% | 8.68% | -2.48% | -1.5 | -3.23% | 0.00% |
| Calamos Dynamic Convertible and Income | (CCD) | -2.79% | 11.11% | 5.19% | -1.1 | -3.08% | -1.88% |
| John Hancock Hedged Equity & Income Fund | (HEQ) | -2.69% | 9.64% | -8.63% | -1.8 | -3.80% | -1.28% |
| First Trust Spec Finance & Fincl Opp | (FGB) | -2.41% | 10.25% | -15.24% | -1.1 | -1.23% | -0.36% |
| Gabelli Equity | (GAB) | -2.29% | 10.62% | 8.03% | -0.6 | -2.59% | 1.49% |
Income Lab
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.
| Fund | Ticker | P/D increase | Yield | P/D | z-score | Price change | NAV change |
| PIMCO Strategic Income Fund | (RCS) | 11.63% | 10.94% | 31.34% | 2.3 | 7.60% | -1.69% |
| Gabelli Utility Trust | (GUT) | 6.15% | 8.58% | 115.74% | 2.1 | 3.10% | -3.84% |
| Virtus Stone Harbor Emerging Markets Inc | (EDF) | 5.86% | 15.29% | 7.96% | 0.3 | 4.43% | -1.77% |
| PIMCO Corporate & Income Opportunity Fd | (PTY) | 5.40% | 9.98% | 32.81% | 3.4 | 2.07% | -1.04% |
| PIMCO Corporate & Income Strgy | (PCN) | 4.94% | 10.05% | 21.87% | 2.2 | 2.44% | -3.81% |
| RENN Global Entrepreneurs Fund ord | (RCG) | 4.70% | % | -13.16% | -0.4 | 1.65% | -1.26% |
| PIMCO High Income | (PHK) | 4.36% | 11.36% | 13.42% | 3.0 | 1.40% | 0.00% |
| NXG Cushing Midstream Energy Fund | (SRV) | 4.13% | 13.90% | 4.44% | 2.6 | 3.88% | -0.27% |
| The Central and Eastern Europe Fund | (CEE) | 3.60% | 2.58% | 11.45% | -0.7 | 2.10% | -0.92% |
| Duff & Phelps Utility and Infra Fund Inc | (DPG) | 3.47% | 8.43% | -9.69% | -2.9 | 2.47% | -1.02% |
Income Lab
New!
From our screener, here are the CEFs with the highest yields, widest discounts, and lowest 1-year z-scores:
From our screener, here are the CEFs with the best 1-year performance, highest premiums, and highest 1-year z-scores:
Recent corporate actions
These are from the past month. Any new news in the past week has a bolded date:
June 22, 2023 | Neuberger Berman High Yield Strategies Fund Announces Preliminary Results of Rights Offering.
Upcoming corporate actions
These are from the past month. Any new news in the past week has a bolded date:
June 23, 2023 | Nuveen Senior Loan Closed-End Funds Announce Shareholder Approval of Proposed Mergers.
June 7, 2023 | Goldman Sachs Asset Management Announces Liquidation of Goldman Sachs MLP and Energy Renaissance Fund.
April 24, 2023 | Kayne Anderson Energy Infrastructure Fund and Kayne Anderson NextGen Energy & Infrastructure Announce Updated Terms for Proposed Merger.
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:
June 29, 2023 | Saba Capital Files Lawsuit Against 16 Closed-End Funds Over Control Share Provisions.
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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
Income Lab
Boosters
Income Lab
Not much in the way of CEF news this week. John Hancock Premium Dividend Fund (PDT) cut its distribution by -15.4%, while FS Credit Opportunities Corp (FSCO) boosted by +15.3%.
Some CEFs are getting a bit bubbly here, as seen in our list of top CEF premium/discount gainers for last week. These include several PIMCO funds, namely RCS which gained +11.63% in premium and trades at a +31.34% premium and +2.3 z-score, PTY which gained +5.40% in premium and trades at a +32.81% premium and +3.4 z-score, PCN which gained +4.94% in premium last week and trades at a +21.87% premium and +2.2 z-score, and PHK which gained +4.36% in premium last week and trades at a +11.36% premium and +3.0 z-score. PCM is also expensive here at a +47.24% premium and +2.2 z-score. I would be considering rotating out of some of the more expensive PIMCO funds to cheaper ones (such as PFN, PDI and PDO owned in our Income Generator portfolio) to take advantage of the valuation discrepancy.
Strategy Statement
Our goal aims to provide consistent income with enhanced total returns. Our CEF rotation strategy includes trading between CEFs to exploit fluctuations in valuations. This is because CEF prices are inefficient, with investors often overreacting to both the upside or downside, or being unaware of upcoming corporate actions. This could help capture alpha from CEFs for the nimble investor.
We compare our performance against two benchmarks: the fund-of-CEFs ETF (YYY), and the global asset allocation portfolio ETF (GAA).
Income Lab
Remember, it's really easy to put together a high-yielding CEF portfolio, but to do so profitably is another matter! Our experience has been that it is very possible to earn profitable returns in CEFs. While there are numerous opportunities in the closed-end fund sector, it is essential to remain vigilant of the associated risks. Blindly chasing yield is not a prudent strategy.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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