Alliance Bernstein Income Fund is a closed-end fund traded on the New York Stock Exchange under the symbol ACG. It is a large fund with a well known and respected investment advisor. The goal of ACG is to produce a safe reasonable return. ACG normally invests 65% in U.S. government bonds, notes and agencies and the balance in credit sensitive securities.
This is a large and leveraged income fund with gross assets in excess of $ 3.15 billion, leverage of slightly less than $ 1 billion and net assets of slightly more than $ 2.16 billion. The very size of ACG gives its shares liquidity, which is lacking in most smaller closed-end funds.
The portfolio breakdown is as follows:
United States Treasuries: 58.7%
Investment Grade Corporate Bonds: 11.4%
Non-Investment Grade Bonds: 6.5%
U.S. Government Agency Bonds: 6.3%
Mortgage Pass Thrus: 3.9%
The securities are primarily U.S., as follows:
United States: 84.7%
The major appeal of ACG is that with its leverage and with its investment in credit sensitive bonds, it is able to show a yield of slightly less than 5.3%. This is exceptional, when you consider that ACG holds almost $1.8 billion in U.S. Treasury bonds and notes, with most maturing between 2015 to 2020. Most U.S. Treasury bonds with five-year maturities yield approximately 2%. ACG with the leverage and exposure to credit sensitive debt is able to produce more than twice that yield.
As an additional bonus ACG sells at almost an 11% discount from net asset value. I believe that this discount is primarily caused by the fact that it is a hybrid investment. Most investors prefer a fund which is more focused and has a singular goal, whether it be just U.S. government bonds or just credit sensitive corporate debt. It should be also noted that ACG does maximize its leverage although its substantial investment in U.S. government debt does give it substantial liquidity and stability to do so.
I like ACG and would strongly recommend it to investors seeking a higher rate of return with a cushion of safety. ACG has an excellent investment manager and is sufficient in size to make its shares liquid.
Disclosure: I am long ACG.