The BlackRock Senior High Income Fund, Inc. (ARK) is a leveraged closed-end fund that seeks to provide a high level of current income by investing in a mix of senior loans and high-yield corporate bonds.
Junk bond funds have been in rally mode since October 4. The net asset value of ARK has been up or unchanged for 18 straight days. Since closed-end funds often trade on emotion, the market price has not been as consistent as NAV and has only been up 15 out of the last 18 days. But the market price performance for ARK is still quite impressive with an 11% gain off the October 4 bottom.
ARK has a fairly long track record. It was originally offered back in 1993 and has earned a 5.5% annualized total return since inception.
ARK is currently selling at a discount to NAV of -4.39% compared with the 6-month average discount of -4.11%. The 1-Year Z-Statistic is -0.48. This means the current discount-to-net-asset value is about half a standard deviation below the mean.
The fund pays a regular monthly distribution from $0.025 per month, but paid a small supplement of $0.0265 at year end.
Lipper reported that junk bond funds received record inflows of $4.2 Billion last week. This is the highest weekly total ever, and beat the previous weekly record of $3.3 Billion in August of 2003. Junk bond fund managers will have to put this new money to work, which should provide good short-term support for junk bonds.
ARK is attractive now as a high income play, and is a good holding for a tax deferred retirement account, especially when the discount increases to 5% or higher.
Asset Class Breakdown (as of 6/30/2011)
Bank Loans | 52.2% |
High Yield Bonds | 41.5% |
Asset Backed Securities | 1.4% |
Investment Grade Corporates | 1.2% |
Common Stock | 1.1% |
Convertible Bonds | 1.0% |
Other | 1.6% |
Credit Quality (6/30/2011)
AA | 0.2% |
A | 1.0% |
BBB | 2.2% |
BB | 29.1% |
B | 56.2% |
CCC | 4.1% |
Not Rated | 7.2% |
Ticker: ARK BlackRock Senior High Income Fund, Inc.
- Total Net Assets= 312.5 MM Total Common Assets= 231.5 MM
- Annual Distribution Rate= 7.73%
- Dividend Frequency= Monthly
- Modified Duration= 2.89 years
- Current Monthly Distribution= $0.025 per share ($0.30 per year + year end)
- Baseline Expense ratio= 0.90% (before interest expense)
- Discount to NAV= -4.39% 6 Month Avg Discount= -4.11%
- Portfolio Turnover rate= 83%
- Effective Leverage= 25.9%
- Average 3 Mos Daily Trading Volume= 174,000 shares (about $700K)
Disclosure: I am long ARK.
