The Weekly CEF Roundup will be put out at the start of each week to summarize recent price movements in CEF sectors in the last week, as well as to highlight recently concluded or upcoming corporate actions, such as tender offers. Most of the information has been sourced from CEFInsight or the Closed-End Fund Center. I will also link to some articles from Seeking Alpha that I have found for useful reading over the past week. The searchable tag for this feature is "cildoc".
Weekly performance roundup
CEFs showed signs of recovery this week, with 21 out of 37 sectors positive (up from only 11 positive sectors last week). The average sector price return was +0.30% (versus -0.32% last week). The leader was energy with +2.23% return, followed by emerging markets equities (+1.47%), Latin American equities (+1.44%), high-yield munis (+1.28%) and Asia-Pacific equities (+1.22%). The top 5 losers were real estate (-0.90%), BAB munis (-0.75%), health & biotech equities (-0.58%), "other state" munis (-0.41%) and natural resources equities (-0.37%).
(Source: Stanford Chemist, CEFInsight)
The top 5 yielding CEF sectors this week were again energy MLPs (10.02%), equity-enhanced (i.e. covered call) (8.45%), convertible securities (8.39%), asset allocation (8.37%), and real estate (8.23%). The discounts* for the 5 top-yielding sectors range from -9.51% (real estate) to -1.87% (energy MLPs). The average sector yield is 6.10% (last week: 6.13%).
(Source: Stanford Chemist, CEFInsight)
The top 5 sector discounts* are: equity-Latin America (-12.05%), debt-specialty (-11.54%), equity-China (-10.06%), real estate (-9.51%) and equity-emerging markets (-9.50%). The top 5 sector premia are debt-mortgage (+4.48%), debt-mortgage (+1.12%), debt-muni (CA) (+0.39%), debt-preferred (-0.04%) and debt-muni (-0.89%). The average sector discount is -4.91%, down from -4.78% last week.
(Source: Stanford Chemist, CEFInsight)
*Note about discounts: I'm aware that some funds do not provide daily NAV updates (whereas price is always updated daily), meaning that some of the discount values of the underlying funds will not be accurately computed, and which will necessarily impact the numbers for the entire sector. Therefore sector discount values should be used for indication only and the discounts of each fund should be manually checked should an investment decision be made.
Recent corporate actions
These are from the last month; any new news in the past week has a bolded date:
- September 7, 2017 | MFS Investment Grade Municipal Trust (the "fund") (NYSE: CXH) announced today that its tender offer for 1,738,004 of its outstanding common shares (the “shares”), representing approximately 15% of its outstanding shares, expired at 5:00 P.M., Eastern Standard Time, on September 6, 2017. Based on current information, approximately 4,304,310.125415 shares were tendered. Based on this preliminary information, the pro-ration for tendering shareholders is estimated to be approximately 40 percent of the shares properly tendered. These numbers are subject to adjustment and should not be regarded as final. The actual number of shares to be purchased is anticipated to be announced on or about September 8, 2017, and payment for such shares will be made on or about September 11, 2017. The purchase price of properly tendered shares is 98 percent of the fund's net asset value (NAV) per share calculated as of the close of regular trading on the New York Stock Exchange on September 6, 2017, which is equal to $10.535 per share.
Upcoming corporate actions
Any new news in the past week has a bolded date:
- August 10, 2017 | Reaves Utility Income Fund (UTG) announced on Aug. 10 the terms of the fund’s rights offering. As the release explained, UTG is issuing transferable subscription rights to its common shareholders of record as of Aug. 30, 2017, who will be allowed to subscribe for new common shares of the fund. Record date shareholders will receive one Right for each common share held. For every three Rights held, a holder of Rights may buy one new common share of the fund. In addition, the fund, in its sole discretion, may elect to issue additional common shares in an amount of up to 25% of the common shares issued in the Primary Subscription. The subscription price per common share will be determined based upon a formula equal to 95% of the reported NAV or market price per common share, whichever is lower on the Expiration Date. The fund anticipates that the offering will expire, on or about, October 4, 2017.
- August 24, 2017 | The Turkish Investment Fund, Inc. (TKF) announced Aug. 24 that its Board approved the liquidation and dissolution of the Fund, subject to stockholder approval at a meeting of stockholders to be held on November 16, 2017. The record date for the meeting is September 21, 2017. On Aug. 4, TKF announced that a Board proposal to liquidate and dissolve the fund did not receive the required vote to be approved by stockholders at its annual meeting of stockholders. TKF currently trades with a discount of -4.01% and yields 1.21% (as of 8/25).
- August 24, 2017 | RiverNorth Opportunities Fund, Inc. (RIV) announced that it filed a preliminary registration statement with SEC relating to a rights offering. As the fund’s release explained, the fund is issuing transferable subscription rights to common shareholders, on a record date to be set by the Board. Record date shareholders will receive one right for each common share held on the record date. For every three rights held, a holder of rights may buy one new common share of the fund. Record date shareholders who exercise their rights will not be entitled to dividends payable during October 2017 on shares issued in connection with the rights offering. The Rights are expected to be listed and tradable on the NYSE under the ticker: RIV RT. Record date shareholders who fully exercise all rights initially issued to them in the primary subscription will be entitled to buy those common shares that are not purchased by other record date shareholders. In addition, the fund, in its sole discretion, may elect to issue additional common shares in an amount of up to 25% of the common shares issued in the Primary Subscription.
- August 29, 2017 | The First Trust Strategic High Income Fund II (FHY) commenced a cash tender offer for up to 15% of the fund’s outstanding common shares at a price per share equal to 98% of the fund’s NAV per share. The tender offer will expire on September 28, 2017. The release indicated that the tender offer is pursuant to an agreement between the fund and Saba Capital Management, L.P. (in which Saba Capital agreed to be bound by certain standstill covenants until January 20, 2020). FHY is a high-yield leveraged fund that currently trades with a discount of -6.20% and yields 7.93% (as of 8/25).
Recent activist or other CEF news
These are from the last month; any new news in the past week has a bolded date:
- August 10, 2017 | City of London Investment Group PLC (City of London Investment Management Co. Ltd.) filed a 13D/A disclosing that it held 3,919,903 shares (24.9%) of The China Fund, Inc. (CHN), and sent a letter to the fund dated Aug. 10. CHN trades with a discount of -9.81% and yields 2.39%.
- August 14, 2017 | Bulldog Investors, LLC disclosed in a new 13D filing that it held 1,264,571 shares (13.51%) of the Aberdeen Chile Fund, Inc. (CH) following a series of purchases from 7/5-8/11 (+460,829 shares). Item 4 of the filing indicated that the filing persons may communicate with management regarding measures to enhance shareholder value.
- August 17, 2017 | Saba Capital Management LP disclosed in a 13D/A filing that it held 820,026 shares of the First Trust Strategic High Income Fund II (FHY), and, as described in Item 4: On August 17, 2017, certain members of the Saba Entities and Saba Capital (collectively, the “Saba Parties”) entered into a settlement agreement (the “Settlement Agreement”) with the Issuer (together with the Saba Parties, the “Settlement Parties”) whereby the Settlement Parties agreed, among other things, and subject to certain conditions, that the Board of Trustees (the “Board”) of the Issuer will prior to or during the week of August 28, 2017 cause the Issuer to commence a tender offer to purchase for cash 15% of its outstanding Shares subject to certain terms and conditions (the “Tender Offer”). In addition, the Saba Parties agreed to tender 100% of its then-owned Shares of the Issuer in the Tender Offer. The Saba Parties also agreed to abide by certain customary standstill provisions, such provisions to last until the earlier of [A] January 20, 2020 and [B] such date that the Issuer determines, due to certain conditions not fully within the Issuer’s control, not to commence the Tender Offer, which such date shall not occur later than September 30, 2017 (the “Standstill Period”). The standstill provisions provide that the Saba Parties agree to cause all Shares beneficially owned by them to be present for quorum purposes and to be voted in favor of the trustees nominated by the board of trustees of the Issuer for election or other business that may come before any shareholder meeting during the Standstill Period, subject to certain exceptions.
- August 21, 2017 | Bulldog Investors, LLC disclosed in a new 13D filing that it held 248,516 shares (5.72%) of The Turkish Investment Fund, Inc. (TKF). Item 4 of the filing indicated that: “The filing persons have had a discussion (and may have additional discussions) with management about the need to provide a liquidity event and about the future of the Fund.
- September 5, 2017 | XA Investments LLC announced Sept. 5 the commencement of an IPO of its first closed-end fund, XAI Octagon Floating Rate & Alternative Income Term Trust (Pending:XFLT). As the release noted, the Trust is registered under the Investment Company Act of 1940, as amended, and will offer its shares on a limited basis from September 5 until September 26, 2017. The Trust’s common shares have been approved for listing on the NYSE under the ticker symbol “XFLT.” Under normal market conditions, the Trust will invest primarily in floating rate credit instruments and other structured credit investments. Octagon Credit Investors, LLC will be responsible for management of the Trust’s portfolio.
- September 12, 2017 | First Trust Dynamic Europe Equity Income Fund (FDEU) announced Sept. 12 that its Board approved a managed distribution policy [MDP]. Under the plan, the fund currently intends to pay a monthly distribution in the amount of $0.121 per share. However, the distribution amount per share could increase or decrease in the future as a result of a change in actual or forecasted earnings. A change in the distribution amount per share must be approved by the fund’s Board. A portion of this monthly distribution may include realized capital gains. The fund anticipates declaring its first regularly scheduled monthly distribution pursuant to the plan in the second half of September 2017. The fund’s release also explained that: in addition to paying regular monthly distributions, in connection with the fund’s initial public offering, the fund had implemented a quarterly special distribution program. The final quarterly special distribution measurement date will be September 15, 2017, and the quarterly special distribution program will expire thereafter.
- September 12, 2017 | First Trust Advisors L.P. announced Sept. 12 that the Boards of First Trust High Income Long/Short Fund (FSD), First Trust/Aberdeen Emerging Opportunity Fund (FEO), First Trust Strategic High Income Fund II (FHY), First Trust/Aberdeen Global Opportunity Income Fund (FAM), and First Trust Enhanced Equity Income Fund (FFA) authorized the continuation of each fund’s share repurchase program. Each fund’s program will continue until the earlier of [i] the repurchase of the amount of shares remaining in each fund’s share repurchase program as noted below or [ii] March 15, 2018. Number of Shares Available for Repurchase through March 15, 2018: FSD (978,598), FEO (105,644), FHY (164,339), FAM (727,422), and FFA (998,658).
- September 12, 2017 | Blackstone / GSO Senior Floating Rate Term Fund (BSL) announced Sept. 12 that the fund’s Board approved a proposal, subject to shareholder approval, to extend the term of the fund by two years -- changing the fund’s scheduled dissolution date from May 31, 2020 to May 31, 2022. The release also note that: If shareholders vote to approve the term extension, the adviser expects, subject to final approval by the Board, the fund to conduct an offering of rights to subscribe for additional shares of the fund. In addition, if shareholders vote to approve the extension, the adviser has agreed to reduce its annual management fee from 1.00% of the fund’s managed assets to 0.90% of the fund’s managed assets, effective from the date the extension is approved by shareholders until the fund’s updated scheduled dissolution date on May 31, 2022. ALPS Fund Services, Inc., the Fund’s administrator, also agreed to reduce the administrative fees payable by the fund to ALPS from 0.10% to 0.09% of the average daily value of the fund’s managed assets (subject to a minimum annual fee), also effective from the date the term extension is approved by shareholders until the fund’s updated scheduled dissolution date on May 31, 2022.
- September 13, 2017 | Ellsworth Growth and Income Fund Ltd. (ECF) announced on Sept. 13 the pricing of an offering of 1.2 million 5.25% Series A Cumulative Preferred Shares (perpetual, non-callable for five years, and a liquidation value of $25 per share) with an aggregate liquidation value of $30 million. Shares are expected to trade on the NYSE American under the symbol “ECF Pr A.” The offering was expected to close on September 18, 2017. The release noted that the fund expects to use the proceeds from the offering for investment purposes.
Distribution changes this month and next
These are sorted in ascending order of distribution change percentage. Funds with ex-dates in the current and in the next month are included. Note that changes of less than 5% are not listed as those are considered to be minor. Any distribution declarations made this week are in bold. In this week's edition I've also added monthly/quarterly information as well as yield and discount information for newly added funds. However, note the yield and discount information will not be updated every week. I've separated the funds into two sub-categories, cutters and boosters, arranged in descending order of distribution change magnitude.
- -32.1%: (GIM) Templeton Global Income Fund cuts from $0.0209 to $0.0142 (ex-date Sep. 14; announced Sep. 1). Yields 3.85%, discount -9.70% (as of 9/1).
- -24.1%: (PGZ) Principal Real Estate Income Fund cuts from $0.145 to $0.110 (ex-date Nov. 16, announced Sep. 13). Yields 7.47%, discount -10.44% (as of 9/14).
- -12.9%: (JHD) Nuveen High Income Dec 2019 Target Term fund cuts from $0.0505 to $0.044 (ex-date Sep. 14; announced Sep. 1). Yields 5.16%, discount -0.58% (as of 9/8).
- -12.5%: (JHA) Nuveen High Income Dec 2018 Target Term Fund cuts from $0.04 to $0.035 (ex-date Sep. 14; announced Sep. 1). Yields 4.20%, discount -1.18% (as of 9/8).
- -10.5%: (VMM) Delaware Investments Minnesota Municipal Income Fund II cuts from $0.0475 to $0.0425 (ex-date Sep. 14, announced Sep. 5). Yields 3.53%, discount 1.90% (as of 9/14).
- -9.5%: (JQC) Nuveen Credit Strategies Income Fund cuts from $0.0525 to $0.0475 (ex-date Sep. 14; announced Sep. 1). Yields 6.77%, discount -8.58% (as of 9/8).
- -8.6%: (TSLF) THL Credit Senior Loan Fund cuts from $0.105 to $0.96 (ex-date Sep. 15; announced Sep. 8). Yields 6.61%, discount -6.19% (as of 9/14).
- -8.3%: (VCF) Delaware Investments Colorado Insured Municipal Income Fund cuts from $0.060 to $0.055 (ex-date Sep. 14; announced Sep. 5). Yields 4.35%, discount -1.17% (as of 9/8).
- -8.0%: (NYV) Nuveen New York Municipal Value Fund cuts from $0.05 to $0.046 (ex-date Sep. 14; announced Sep. 1). Yields 3.67%, discount -4.08% (as of 9/8).
- -7.9%: (NHA) Nuveen Municipal 2021 Target Term cuts from $0.0190 to $0.0175 (ex-date Sep. 14; announced Sep. 1). Yields 2.10%, premium +1.63% (as of 9/8).
- -7.2%: (NTC) Nuveen Connecticut Quality Municipal Income Fund cuts from $0.0485 to $0.045 (ex-date Sep. 14; announced Sep. 1). Yields 4.37%, discount -12.84% (as of 9/8).
- -6.5%: (NEA) Nuveen AMT-Free Quality Municipal Income Fund cuts from $0.062 to $0.058 (ex-date Sep. 14; announced Sep. 1). Yields 4.96%, discount -8.12% (as of 9/8).
- -6.4%: (NKG) Nuveen Georgia Quality Municipal Income Fund cuts from $0.047 to $0.044 (ex-date Sep. 14; announced Sep. 1). Yields 4.02%, discount -5.31% (as of 9/8).
- -6.4%: (NCB) Nuveen California Municipal Value Fund 2 cuts from $0.063 to $0.059 (ex-date Sep. 14; announced Sep. 1). Yields 3.93%, premium +7.78% (as of 9/8).
- -6.3%: (NAD) Nuveen Quality Municipal Income Fund cuts from $0.064 to $0.06 (ex-date Sep. 14; announced Sep. 1). Yields 5.00%, discount -7.87% (as of 9/8).
- -6.0%: (NIQ) Nuveen Intermediate Duration Quality Municipal Term Fund cuts from $0.0415 to $0.039 (ex-date Sep. 14; announced Sep. 1). Yields 3.52%, discount -5.81% (as of 9/8).
- -5.7%: (EAD) Wells Fargo Advantage Income Opportunities Fund cuts from $0.05893 to $0.05641 (ex-date Sep. 11; announced Aug. 16). Yields 7.84%, discount -6.50% (as of 18/8).
- -5.5%: (NMS) Nuveen Minnesota Quality Municipal Income Fund cuts from $0.0635 to $0.06 (ex-date Sep. 14; announced Sep. 1). Yields 3.13%, premium +4.59% (as of 9/8).
- -5.4%: (NOM) Nuveen Missouri Quality Municipal Income Fund cuts from $0.056 to $0.053 (ex-date Sep. 14; announced Sep. 1). Yields 4.18%, premium +8.57% (as of 9/8).
- -5.3%: (NAC) Nuveen California Quality Municipal Income Fund cuts from $0.0655 to $0.062 (ex-date Sep. 14; announced Sep. 1). Yields 4.86%, discount -3.59% (as of 9/8).
- -5.3%: (NKX) Nuveen California AMT-Free Quality Municipal Income Fund cuts from $0.0655 to $0.062 (ex-date Sep. 14; announced Sep. 1). Yields 4.65%, premium +0.06% (as of 9/8).
- -5.1%: (NUO) Nuveen Ohio Quality Municipal Income Fund cuts from $0.0585 to $0.0555 (ex-date Sep. 14; announced Sep. 1). Yields 4.37%, discount -9.60% (as of 9/8).
- -5.0%: (NPN) Nuveen Pennsylvania Municipal Value Fund cuts from $0.0495 to $0.0470 (ex-date Sep. 14; announced Sep. 1). Yields 3.70%, discount -1.36% (as of 9/8).
- -4.3%*: (DMO) Western Asset Mortgage Defined Opportunity Fund cuts from $0.235 to $0.225 (ex-date Sep. 21; announced Aug. 14).
- +7.6%: (DIAX) Nuveen Dow 30 Dynamic Overwrite boosts from $0.2555 to $0.275 (ex-date Sep. 14; announced Sep. 1). Yields 6.61%, discount -6.10% (as of 9/8).
- +6.3%: (RMT) Royce Micro Cap Trust boosts from $0.16 to $0.17 (ex-date Sep. 12; announced Sep. 1). Yields 7.85%, discount -11.63% (as of 9/1).
- +5.7%: (QQQX) Nuveen NASDAQ 100 Dynamic Overwrite Fund boosts from $0.35 to $0.37 (ex-date Sep. 14; announced Sep. 1). Yields 6.76%, discount -1.35% (as of 9/8).
- +5.2%: (SPXX) Nuveen S&P 500 Dynamic Overwrite Fund boosts from $0.24 to $0.2525 (ex-date Sep. 14; announced Sep. 1). Yields 6.54%, discount -3.32% (as of 9/8).
*I know -4.3% is under the -5% threshold, but I wanted to highlight DMO because it is a very popular CEF, and also because CEFConnect is currently incorrectly reporting the November distribution as $0.3734 but this should be $0.2250 (same as October) as per their press release.
CEF analysis from around Seeking Alpha...
ADS Analytics discusses recession risk and CEF sector performance in Weekly Fund Wrap: The R Word (Sep. 16)
Left Banker presents further thoughts on UTG's rights offering in Further Thoughts On UTG's Rights Offering (Sep. 11) and Reaves Utility Income Fund: What Do The 2012 And 2015 Rights Offerings Tell Us? (Sep. 15)
Michael Foster Financial Services looks at What CEF Prices Tell Us About Volatility: CEF Weekly Update (Sep. 11) and Dividend Coverage And Closed-End Funds (Sep. 11)
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