The AGIC Equity & Convertible Income Fund (ticker: NIE) was formed in February 2007. The fund was originally named the Nicholas-Applegate Equity and Convertible Income Fund, but the name was changed in 2010 as part of an Allianz re-branding effort.
NIE seeks total return from current income and capital appreciation. The fund does not use leverage. It normally invests at least 80% of the portfolio in equity securities and income producing convertible bonds. The equity component varies from 40%-80%, while the convertible component varies from 20%-60%. The fund also uses a covered call strategy on the stocks held in the Equity component, hedging about 70% of each position.
The fund uses the following investment processes to manage different components of the portfolio:
- Equity component: Look for stocks with above average earnings growth, high return on invested capital (ROIC), healthy or improving balance sheet, strong competitive advantages, and development of new technologies. Some top equity holdings are Schlumberger (SLB), Joy Global (JOYG), Occidental Petroleum (OXY), IBM and Deere (DE).
- Convertible component: Evaluate underlying security potential for capital appreciation using the same criteria as for equities. Also use traditional credit analysis to evaluate income producing potential.
- Option Strategy: Write individual call options 5%-10% out of the money to retain some upside potential.
The fund's investments are denominated in U.S. currency. This is the investment breakdown as of March 31, 2011:
Overall Investment Breakdown
NIE has a decent longer term NAV performance record, but suffered a big down year in 2008 when the net asset value fell -38.5%. Here is the total return NAV performance record since inception:
NAV Performance by Year
Equities- Top 5 Sectors (as of 3/31/2011)
Convertibles- Top 5 Sectors (as of 3/31/2011)
Option Strategy Statistics
Average Distance to Strike Price
Average Option Duration
% of Equity Covered by Calls
% of Portfolio Covered by Calls
ACG is run by three portfolio managers:
- Doug Forsyth, CFA, Managing Director. Joined AGIC from a predecessor firm in 1994. Earned BBA from the University of Iowa.
- Justin Kass, CFA, Managing Director. Joined AGIC from a predecessor firm in 2000. Earned an MBA in Finance from UCLA Anderson School of Management and a B.S. from UCLA, Davis.
- Michael Yee, Senior Vice President. Joined AGIC from a predecessor firm in 1995. Earned a B.S. from UCLA, San Diego and an MBA from San Diego State University.
Here are some summary statistics for NIE:
AGIC Equity & Convertible Income Fund (NIE)
- Total Assets: 457.2 Million
- Annual Distribution (Market) Rate= 6.03%
- Last Regular Quarterly Distribution= $0.28 (Annual= $1.12)
- Fund Expense ratio: 1.10% Discount to NAV= -9.41%
- Portfolio Turnover rate: 94%
- Convertibles: Average Coupon Rate: 5.50%
- Avg. Convertible Yield: 5.10%
- Effective Leverage: 31.95%
- Standard Deviation of NAV= 20.81
- Average Daily Volume (shares)= 67,000
- Average Dollar Volume = $1.2 Million
NIE is currently selling at a discount to NAV of -9.41% compared to the 6 month average discount of -6.98%. The 1-Year Z-Statistic is -1.34. This means the current discount to net asset value is more than one standard deviation below the mean.
NIE has moderate liquidity and usually trades with a bid-asked spread of one or two cents. But there is often limited size available on the bid and asked of 500 shares or less, so care must be taken for larger purchases.
NIE is attractively priced at current levels with a discount near 10%. The discount generally trades between 5% and 10%.
Disclosure: I am long NIE.
Disclosure: I am long NIE.