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John Cole Scott

 
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  • Closed-End Fund Advisors: Third-Quarter 2014 CEF/BDC Review And Outlook
    Fri, Oct. 17 FTT, TWN, DHG 7 Comments

    Summary

    • CEF discounts are very attractive at the end of third-quarter 2014.
    • 100% of Municipal Bond CEFs had positive NAV Total Return for the quarter but 39% had negative market price total returns and now trade at an average -8% discount.
    • Debt-based BDCs ended the quarter at a -3% discount to NAV (-8% wider than Q2'14) and an average 9.6% yield.
  • BDC Boot Camp: An Introduction To The 9.7% Yield Animals, Debt-Based Business Development Companies
    Thu, Oct. 2 BDCL, BDCS, BIZD 10 Comments

    Summary

    • The similarities between traditional CEFs and BDCs are what initially drew us to the structure. However, it is important to understand both the similarities and differences for both funds.
    • Forty-two of the fifty-one publicly listed BDCs are debt-based, or have 66.6%+ debt investments according to our definition, and have an average yield of 9.7% as of September 19, 2014.
    • The average BDC has $696M in market cap and trades on average $6.4M a day. When compared to traditional taxable CEFs, the debt-based BDCs are generally 5X more liquid.
    • BDCs handled rising rates well in the past. There was a 4%+ yield increase, for 30-day Libor from March 2004 to September 2007.
    • There was a 4.8% BDC yield increase, on average, for the 5 Debt-based BDCs that existed. The average market price TR was +32%, while The S&P 500 was up 42%.
  • Balancing CEF Data Vs. Portfolio Data When Selecting A Closed-End Fund
    Tue, Sep. 16 9 Comments

    Summary

    • A closed-end fund is at its basic sense equity exposure to an active manager’s results.
    • You should like the pricing and the investment exposure to own shares no matter who is the portfolio manager.
    • A CEF's Fundamental data is part of the fund’s disclosures on a typically quarterly basis. Its CEF Data is based on NAV and Mkt Price.
    • The key for CEF analysis to be very successful is to get in or out of a fund when you find the right level of divergent behavior between these trends.
  • Closed-End Funds: Rising Rates And The Impact On Performance And Yield
    Tue, Aug. 19 8 Comments

    Summary

    • Closed-end funds are known for yield, with the average taxable CEF yielding 7.4% (as of 8/15/14).
    • 60% or 361 current CEFs existed when rates rose from 1% in March, 2004 to over 5% in September, 2007.
    • Of those 361 funds, 97.2% changed their dividend policy on an average of -2.5% and had a 43-month average total return of +28.48%.
    • Only 23 CEFs (6.4%) had a negative total returns during the time period.
    • 97% of national municipal CEFs changed their dividend on average -19% but experienced total returns of +17.1%.
  • Closed-End Fund Advisors: Second Quarter 2014 CEF Review And Outlook
    Thu, Jul. 17 APB, BANX, DDF 20 Comments

    Summary

    • Traditional CEFs Ended The Quarter with 585 Funds Totaling $270B with an average discount of -6.1% and yield of 6.8%.
    • BDC CEFs Ended The Quarter with 50 Funds Totaling $32B with an average discount of -0.17% and yield of 9.4%.
    • There Were 2 Traditional CEF IPOs and 2 BDC CEF IPOs During the Quarter: Raising $810M in Combined Assets.
  • BDC CEFs Poised To Perform Well In A Rising Rate Environment: Potential For Growing Income & Positive Total Return
    Editors' Pick • Tue, Jul. 8 16 Comments

    Summary

    • Historically BDC CEFs offer the potential for both an increase in portfolio cash flow and total return during a period of rising interest rates.
    • We reviewed how loan-based BDCs did when 30 day LIBOR rates rose +4.4% from 1.097% on March 1, 2004 to 5.493% on September 30, 2007.
    • We looked at how high yield and loan traditional CEFs did over the same time period; on average there was a +20% performance relative alpha and +9% yield relative alpha.
  • How To Manage A Closed-End Fund Portfolio Like An Expert, Beyond The 'CEF Trifecta'
    Mon, Jun. 16 PCEF, YYY 8 Comments

    Summary

    • What's next once you learn how to tell if a CEF is 1. a good value, 2. has a sustainable dividend and 3. the manager is performing well?.
    • How many CEFs in a portfolio give the ability for alpha, but avoid being too concentrated?.
    • When does relative value swapping of a CEF (even a munis) make sense on an after tax basis?.
  • Closed-End Fund Discounts: A Master-Class In Nuance
    Tue, May. 20 3 Comments

    Summary

    • Closed-end funds, as a whole, have historically traded at discounts to NAV.
    • Selling a CEF at a lower discount to NAV than purchased, is a common goal, but does not guarantee investment success.
    • CEF volatility, correlations and discount trends are far more important, in our experience, than pure discounts.
  • First Quarter 2014 CEF Review And Outlook: Discounts, Yield, IPOs And Activist Activity
    Tue, Apr. 15 PCK, MUB, ACG 11 Comments

    Summary

    • Equity CEFs ended the quarter with -8% discounts to NAV and an average 7.8% market yield.
    • Bond CEFs ended The quarter with -5.7% discounts to NAV and an average 7.4% market yield (taxable) and 6.3% market yield (municipal).
    • IPO and activist activity was light during the quarter with all meaningful activity during March: 2 IPOs and 3 activist updates of note in VBF DCA, and APB.
  • What Does A Closed-End Fund's Leverage Actually Cost? Achilles' Heel Or An Investor's Salvation?
    Tue, Mar. 25 8 Comments

    Summary

    • The ability to use permanent leverage is an advantage to the CEF Structure.
    • The cost of leverage reduces the net investment income available to pass on to shareholders.
    • We think investors should understand their fund's leverage cost and what cost of leverage is normal for a CEF grouping.
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan
    Fri, Feb. 14 NHF 19 Comments
  • How Municipal Bond Dividend Cuts Impact NAV Performance And Investor Sentiment
    Thu, Feb. 6 3 Comments
  • Interview With Brian Mitts, Chief Operating Officer Of NexPoint Advisors
    Thu, Jan. 23 NHF 2 Comments
  • What Is The Deal With Premiums In MLP CEFs?
    Nov. 23, 2013 22 Comments
  • How To Analyze Destructive Return Of Capital For Closed-End Funds
    Oct. 7, 2013 CFP, CLM, FOF 29 Comments
  • Never Buy A Closed-End Fund On The IPO? Patience Proves A Better Outcome For Investors
    Apr. 11, 2013 DBL 8 Comments
  • UNII And Earnings Trends: 95% Predictive For Closed-End Bond Fund Dividend Cuts
    Editors' Pick • Mar. 12, 2013 8 Comments
  • Top 1% Muni Bond CEF: Searching For Above Average Quality And Below Average Pricing
    Feb. 13, 2013 NMO 3 Comments
  • The Closed-End Fund Trifecta: How To Analyze A CEF
    Jan. 16, 2013 35 Comments
  • CEF Q4 2012 Review/2013 Outlook: Dividend Cuts, Solid IPO Results And Discounts Resurfaced
    Jan. 12, 2013 Comment!
  • Contrarian Investing In Closed-End Funds: Is Anything Still Cheap?
    Jan. 3, 2013 BDJ, BGY 12 Comments
  • CEF Dividend Increases And Decreases: 38% Of Municipal Bond Funds Cut Distributions By 6% On Average
    Dec. 13, 2012 8 Comments
  • Will Closed-End Muni Investors See Dividend Cuts Or Raises In 2013?
    Editors' Pick • Dec. 3, 2012 MUA, NEV, MYI 12 Comments
  • Keating Capital: Late Stage Pre-IPO Investing With Permanent Capital, Investor Liquidity
    Feb. 22, 2012 BDCV 5 Comments