First Trust Strategic High Income II is traded on the New York Stock Exchange under the symbol FHY. First Trust Advisors is the investment advisor with the sub-advisor being Brookfield Investment Management. The fund was launched on March 28, 2006. During its last fiscal year, ending October 31, 2011, it did very well and as a result the discount has narrowed to 5.90% as of January 10, 2012.
Previously, the discount had been in excess of 10% and even hitting 15%. It is a typical fund for high yield investing and has decent management. I simply believe that the discount has narrowed too much because of its performance last year. I would wait for the discount to again increase.
Performance statistics for last fiscal year, 3 years and inception, are as follows:
| Net Asset Value | 13.60% | (10.80%) | (8.14%) |
| Market value | 11.64% | (13.32%) | (10.64%) |
| Barclays B A High Yield Index | 5.36% | 8.79% | 8.79% |
As of October 31, 2011, the fund's capital structure was as follows:
| Total Investments (136.70%) | $179,242,571 |
| Outstanding Loans (41.50%) | ($54,400,000) |
| Net Assets | $131,109,446 |
Last fiscal year's ratios were as follows:
| Expenses to net Assets | 2.35% |
| Expenses, less interest expense | 1.93% |
| Net investment income | 9.65% |
| Turnover | 49% |
Asset classification was as follows:
| Corporate bonds | 73.4% |
| Commercial mortgage backed securities | 10.2% |
| Residential mortgage backed securities | 9.2% |
| Foreign corporate bonds | 3.6% |
| Manufactured housing loans | 3.3% |
Credit quality was disbursed but primarily running from BB to B-, roughly as follows:
| AAA | 7.3% |
| BB+ | 6.9% |
| BB | 7.7% |
| BB- | 15.0% |
| B+ | 12.5% |
| B | 15.0% |
| B- | 14.2% |
| CCC+ | 7.9% |
Its tax position reflects years of poor performance and there is a substantial tax loss carry forward, as follows:
| Accumulated net investment income | $1,890,330 |
| Accumulated net losses | ($79,567,755) |
| Net unrealized appreciation | $2,228,744 |
The portfolio is well diversified and is typical of most high yield funds. I would only invest when the discount increased to the 15% level. There is ample time to sit and wait.
Disclosure: I am long FHY.
