BlackRock has a series of nearly identical closed end funds, investing in corporate debt and offering exceptional yields. They are all leveraged and presently offering yields of approximately 6.5%. They are all traded on the New York Stock Exchange. In purchasing these funds, I simply look to which fund offers the highest discount from net asset value. These discounts fluctuate and sometimes one fund offers a much more substantial discount than another.
On, July 22, 2011, the discounts on the four funds range from 10.20% to 12.65% which is not much of a spread. All the funds have the majority of their assets in corproate bonds with the balance in preferred shares. I will now talk about each fund individually.
BlackRock Credit Allocation Income Fund I (PSW) was launched on August 1, 2003 and as of April 30, 2011 had a yield of 6.4% with 25% leverage. 77% of assets were in corporate bonds and 20% in preferred securities. 40% of its portfolio was rated BBB/Baa, and 22% was rated A. It had total assets slightly in excess of $146 million dollars with total expenses of 1.05%. As of July 22, 2011, the discount from net assets was 11.81%.
BlackRock Credit Allocation Income Fund II (PSY) was launched on March 28, 2003 and as of April 30, 2011 had a yield of 6.37% with 25% leverage. 76% of assets were in corporate bonds and 21% in preferred securities. 41% of its portfolio was rated BBB/Baa and 23% was rated A. It had total assets of almost $ 619 million dollars with total expenses of 1.01%. As of July 22, 2011 the discount from net assets was 10.20%.
BlackRock Credit Allocation Income Fund III (BPP) was launched on February 28, 2003 and as of April 30, 2011 had a yield of 6.03% with 19% leverage. 78% of the portfolio was in corporate bonds and 20% in preferred securities. 43% of its portfolio was rated BBB/Baa and 18% was rated A. It had total assets of slightly more than $ 278 million dollars and total expenses of .99%. As of July 22, 2011 the discount from net assets was 12.65%.
BlackRock Credit Allocation Income Fund IV (BTZ) was launched on December 27, 2011 and as of April 30, 2011 had a yield of 6.70% with 21% leverage. 73% of its portfolio was in corproate bonds and 22% in preferred securities. 40% of its portfolio was rated BBB/Baa and 26% was rated A. It had gross assets in excess of $924 million dollars and total expenses of .97%. As of July 22, 2011 the discount from net assets was 12.16%.
It must be stressed that each portfolio is extremely diversified over many industries and many securities. BlackRock, the advisor to these funds, is well respected and well regarded as a manager of credit related debt. In a universe of miniscule yields, these funds deserve attention as well as recognition. Needless to say, diversification does count and little harm can come to investors buying a package of all four funds.
Disclosure: I am long PSW, PSY, BPP, BTZ.
