Weekly Closed-End Fund Roundup: BlackRock Repurchase Update (July 16, 2023)
Summary
- 22 out of 22 CEF sectors positive on price and 22 out of 22 sectors positive on NAV last week.
- BlackRock continues repurchasing shares.
- Amount purchased fell from last quarter as discounts narrowed slightly.
- 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
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 14th, 2023.
Author
JPMorgan releases a nice Weekly Market Recap every week. These are the key index levels this week for equities:
JPMorgan
The chart of the week shows that global inflation is going down, good news for long-duration assets.
JPMorgan
Weekly performance roundup
For CEFs, 22 out of 22 sectors were positive on price (up from 6 last week) and the average price return was +1.77% (up from -0.37% last week). The lead gainer was Commodities (+4.06%) while Senior Loans lagged (+0.12%).
Income Lab
22 out of 22 sectors were positive on NAV (up from 3 last week), while the average NAV return was +2.17% (down from -0.55% last week). The top sector by NAV was Commodities (+5.69%) while the weakest sector by NAV was Single-state Munis (+0.33%).
Income Lab
The sector with the highest premium was Limited Duration (+0.61%), while the sector with the widest discount is Asia Equity (-14.36%). The average sector discount is -7.94% (down from -7.81% last week).
Income Lab
The sector with the highest premium/discount increase was California Munis (+0.84%), while Senior Equity (-1.29%) showed the lowest premium/discount decline. The average change in premium/discount was -0.11% (down from +0.25% last week).
Income Lab
The sector with the highest average 1-year z-score is MLPs (+0.42), while the sector with the lowest average 1-year z-score is Taxable Munis (-0.95). The average z-score is -0.41 (down from -0.37 last week).
Income Lab
The sectors with the highest yields are Senior Loans (+12.47%), Emerging Market Income (+11.64%), and Multisector Income (+10.66%). Discounts are included for comparison. The average sector yield is +8.03% (down from +8.16% 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.
| Fund | Ticker | P/D decrease | Yield | P/D | z-score | Price change | NAV change |
| Vertical Capital Income Fund | (VCIF) | -20.69% | 10.24% | -21.03% | -2.3 | -20.61% | -2.46% |
| Foxby Corp. | (OTCPK:FXBY) | -8.57% | 1.64% | -45.47% | -2.5 | -9.77% | 2.44% |
| The Central and Eastern Europe Fund | (CEE) | -7.14% | 2.59% | 4.30% | -1.2 | -0.32% | 0.87% |
| Gabelli Utility Trust | (GUT) | -7.07% | 8.58% | 108.66% | 1.1 | 0.00% | -0.45% |
| RENN Fund ord | (RCG) | -6.17% | % | -19.33% | -1.4 | -1.35% | -0.94% |
| Gabelli Multi-Media | (GGT) | -5.09% | 13.13% | 58.02% | 1.0 | 1.67% | 0.00% |
| Gabelli Global Utility & Income | (GLU) | -3.75% | 8.39% | -10.90% | -0.9 | 0.00% | -1.88% |
| Cohen&Steers Infrastructure | (UTF) | -3.64% | 7.95% | -1.02% | -0.1 | -1.27% | -1.28% |
| Virtus Stone Harbor Emerging Markets Inc | (EDF) | -3.58% | 15.89% | 4.38% | -0.2 | -3.82% | -0.36% |
| DNP Select Income | (DNP) | -3.52% | 7.63% | 18.73% | -0.7 | -0.39% | 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 |
| Oxford Lane Capital Corp | (OXLC) | 6.02% | 17.58% | 18.38% | 0.4 | 5.57% | -1.69% |
| abrdn Global Income Fund, Inc. | (FCO) | 5.70% | 13.77% | 46.28% | 2.7 | 6.09% | -3.84% |
| The India Fund Inc | (IFN) | 4.33% | 9.04% | 2.50% | 2.3 | 5.83% | -1.77% |
| Nuveen Dynamic Municipal Opportunities | (NDMO) | 3.96% | 7.02% | -2.75% | 0.2 | 2.51% | -1.04% |
| Eagle Point Income Co Inc | (EIC) | 3.87% | 14.19% | 9.11% | -0.2 | 2.97% | -3.81% |
| Western Asset Mortgage Opp Fund Inc. | (DMO) | 3.63% | 11.58% | -10.31% | 0.6 | 4.82% | -1.26% |
| High Income Securities | (PCF) | 3.09% | 11.03% | -11.69% | -0.5 | 2.66% | 0.00% |
| BNY Mellon Muni Bond Infrastructure Fund | (DMB) | 2.84% | 4.29% | -5.73% | -0.2 | 3.61% | -0.27% |
| Nuveen AMT-Free Municipal Value Fund | (NUW) | 2.80% | 3.48% | -7.29% | 0.6 | 1.90% | -0.92% |
| Nuveen CA Select Tax Free Income | (NXC) | 2.77% | 3.86% | -2.10% | 0.0 | 3.21% | -1.02% |
Income Lab
New!
From our screener, here are the CEFs with the highest yields, widest discounts, and lowest 1-year z-scores:
Income Lab
From our screener, here are the CEFs with the best 1-year performance, highest premiums, and highest 1-year z-scores:
Income Lab
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.
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
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Commentary
1. BlackRock shares repurchase update
BlackRock has provided another 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.
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.
BlackRock
The accretion amounts seem small, but remember that this for only one quarter of activity. The total amount of shares repurchases was $80.7 million, while the NAV accretion, which represents the amount of money directly returned to shareholders, was $13.0 million. This compares to $112.6 million and $19.0 million last quarter respectively. We would have expected numbers go down this quarter because discounts have come in a bit, making repurchasing shares a relatively less profitable endeavor.
Among portfolio holdings, BOE saw +0.07% NAV/share accretion this quarter, while BMEZ gained +0.04% and BSTZ gained +0.077%. All three funds are held in the Tactical Income-100 portfolio.
Funds with repurchase activity (BGR) (BOE) (BGY) (BMEZ) (BSTZ) (BCX) (BFZ) (MUC) (MUJ) (MIY) (MPA) (BHV) (BNY) (MHN) (MYN) (MVF) (MVT) (MUI) (MQY) (MQT) (BLE) (BYM) (BKN) (MYD) (BFK) (MYI) (MUE) (MHD)
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.
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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Analyst’s Disclosure: I/we have a beneficial long position in the shares of BMEZ, BOE, BSTZ 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.
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