Efficient markets? Morningstar's Samuel Lee notes the strategy of the Pimco High Income Fund (PHK +0.4%) is nearly identical to that of the Pimco Corporate Income & Opportunity Fund (PTY +0.6%), yet PHK trades at a 51% premium to NAV vs. PTY at a 23% premium (PTY is slightly less leveraged).
Why? As far as Lee can tell, investors would rather pay $1.51 for $1.00 of assets in PHK than $1.23 for a dollar of assets in PTY simply because PHK offers a higher payout percentage. This payout, however, isn't from greater income, but instead coming from a return of capital.
Of course, this discussion doesn't get into why investors would pay even a 23% premium to NAV in the first place.