For income-seeking investors, closed-end funds (CEFs) offer relatively high distributions and the potential to buy these shares at a discount to the fund's NAV. But these are lesser known fund structures. So many advisors and investors unfamiliar with CEFs may opt to invest in them through a familiar wrapper like ETFs. The universe of ETFs of CEFs is small. But one ETF - the Invesco CEF Income Composite ETF (PCEF) - has significantly more assets and a longer history than the rest. This is a look at PCEF ove ...

Systematic Income Takeaways With market valuations back to expensive levels, CEF investors may be thinking about other opportunities besides the beta provided by their portfolios to boost returns in their portfolios. We highlight four alpha strategies CEF investors can use in their portfolios. In the current environment, we see most alpha potential in interval funds, leaning against investor flows as well as relative value opportunities. Editor's Note: This article covers one or more microcap stocks. Please ...

Core Insights - The article discusses the recent changes in PIMCO's taxable closed-end fund (CEF) portfolios, highlighting a significant portfolio reshuffle aimed at derisking and adjusting to market conditions [7][9][24]. Coverage Update - Average taxable coverage has rebounded, with PDO showing a notable uplift, while the rest of the taxable suite remains relatively stable, averaging 63% outside of PDO and 73% for the fiscal year to date [2][18]. Portfolio Reshuffle - A $593 million transfer to the PIMCO Short-Term Floating NAV Portfolio III was made for cash management, effectively derisking the fund, which has net assets of $4.9 billion [7]. - The portfolio saw a sizable drop in holdings across loans, asset-backed securities (ABS), and short-term instruments, indicating a strategic shift away from these asset types [5][21]. - The allocation to floating-rate assets was reduced, while the bond allocation slightly increased, reflecting expectations of falling short-term rates [8][9]. Interest Rate Swaps - The interest rate swap position increased significantly, with the market value swinging from -$47 million to +$182 million, achieved by adjusting the coupons on several swaps [9]. - These changes may not immediately impact net income, as many swaps are forward-starting, indicating a potential preparation for a lower-rate environment [9]. Fund Performance - The average PIMCO taxable CEF premium remains elevated at a low double-digit level, with specific funds like PCM experiencing a premium deflation from over 40% to below 25% [10][11]. - The Dynamic Income Strategy Fund (PDX) and the Global ShocksPLUS & Income Fund (PGP) are highlighted as attractive options within the taxable suite, with PDX trading at a 12% discount [31][33].

Welcome to another installment of our CEF Market Weekly Review, where we discuss closed-end fund ("CEF") market activity from both the bottom-up - highlighting individual fund news and events - as well as the top-down - providing an overview of the broader market. We also try to provide some historical context as well as the relevant themes that look to be driving markets or that investors ought to be mindful of. This update covers the period through the first week of June. Be sure to check out our other we ...

Core Insights - The municipal closed-end fund (CEF) sector has experienced significant distribution hikes in response to activist pressures, which is expected to tighten discounts and attract investor capital from taxable sectors [4][12][21] - The current environment shows tight municipal credit spreads, with upgrades outpacing downgrades, indicating a positive outlook for municipal bonds [3][7][24] - High nominal and real yields in the municipal bond market suggest strong potential returns, especially in the context of a possible macroeconomic shock [19][20] Group 1: Market Dynamics - Municipal CEFs have undergone substantial distribution changes, with many funds increasing distributions multiple times recently, particularly by managers like Nuveen [4][12][28] - The average current yield for municipal CEFs is around 7-8%, which is competitive with other sectors, especially on a tax-equivalent basis for higher-rate taxpayers [6][23] - The distribution hikes are not driven by increasing net income but are a strategic response to activist pressures in the sector [27][28] Group 2: Credit Market Conditions - Municipal credit spreads remain near historical lows, similar to trends observed across the broader credit market [3][8] - The median year-on-year tax collection growth is reported at +1.5%, with personal income collections at +2%, reflecting a stable fiscal environment [7] - The risk profile for credit assets is asymmetric, with municipal bonds expected to perform better during credit drawdowns due to their higher quality and longer duration [11][20] Group 3: Tactical Considerations - The period between Memorial Day and Election Day historically shows positive returns for municipal bonds, with a median return of 2.3% since 1993 [23] - The combination of high yields and tight discounts is likely to attract new demand from investors who typically do not invest in municipal CEFs [17][21] - Recent portfolio adjustments have been made to include CEFs with raised distributions that trade at wide discounts, indicating a strategic shift towards stronger performers in the sector [18][29]

Core Viewpoint - Closed-end funds (CEFs) are attractive for income-focused investors but carry heightened risks in the current economic environment due to their leveraged nature and potential market volatility [2][4][6] Advantages of Investing In Closed-End Funds - CEFs offer diversification by holding numerous individual positions, which mitigates risks associated with single companies [3] - They are often actively managed, allowing for strategic adjustments based on macroeconomic changes [3] - CEFs can trade at discounts to their net asset value (NAV), providing opportunities for investors to buy at lower prices compared to ETFs [3] - High distribution yields are a significant advantage for income-focused investors, with many CEFs paying monthly distributions [3] - Leverage is commonly used in CEFs to enhance yields, allowing for potentially higher total returns during rising markets [3] Risks Associated with Closed-End Funds - The leveraged nature of CEFs increases risk, especially in a high-interest rate environment, which can impact long-term compounding [4][5] - Historical examples illustrate the dangers of margin leverage, as significant market downturns can lead to forced selling and permanent losses [4][5] - Current economic indicators suggest a potential slowdown, with manufacturing activity contracting and GDP growth forecasts being revised downwards [5] - Geopolitical tensions and an inverted yield curve further contribute to market risks, making leveraged investments like CEFs particularly vulnerable [5] - Specific CEFs, such as the PIMCO Dynamic Income Fund (PDI), are highlighted as risky due to their premium to NAV and high leverage [5] Investor Takeaway - While CEFs can provide substantial passive income, their risks necessitate careful consideration, especially for retirees relying on these funds [6] - Diversification into more stable positions or high-quality individual stocks is recommended to mitigate risks associated with CEFs [6]

-Oxford-/E+ via Getty Images Thesis The 6.75% Series 2024 Term Preferred Shares (NASDAQ:OXLCM) are exchange traded term preferred shares from the Oxford Lane Capital Corporation (OXLC) closed end fund. We covered these securities last year here, where we assigned them a 'Buy' rating based on their short tenor, reduced risk and high yield. The securities have delivered a steady stream of income since, outperforming treasury funds. With the term redemption date for the securities shortly coming up at the end ...

Seeking Alpha The fund's performance relative to its peers was not the worst, but it is far from being the best. After all, the best-performing fund in this peer group, the Calamos Convertible Opportunities Fund, delivered an 11.49% gain. In fact, every fund in this peer comparison except for the Virtus Convertible & Income Fund outperformed the Bancroft Fund. This is likely to turn off potential investors in this fund. However, as I pointed out in a recent article: Kameleon007 The Bancroft Fund (NYSE:BCV) ...

The Liberty All-Star Equity Fund (NYSE:USA) is truly an "all star" investment. As one of the oldest closed end funds trading today, USA has an extraordinary track record for investors. USA has been a focal point of our coverage for several years. In that initial coverage we outlined the fund's structure, asset allocation, and management approach. The article served as an initiation for covering USA with a broad overview including the distribution history and total return profile. More recently, we took a di ...

The Voya Infrastructure, Industrials, and Materials Fund certainly does not sacrifice any yield despite being an equity fund. At the current share price, the fund boasts an 11.74% yield that is obviously very attractive compared to most assets in the current market environment. It also compares quite well to its peers, as can be seen here: AdShooter The Voya Infrastructure Industrials and Materials Fund (NYSE:IDE) is a little-known closed-end fund, or CEF, that investors can employ as a means of generating ...