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Fund Spotlight: Finding Hidden Gemstones In Target Term CEFs



  • Finding hidden gemstones in target term CEFs.
  • Target term CEFs with targeted maturity have significantly lower duration (interest rate) risk.
  • Avoid the lumps of coal!

Data from the article are from February 23, 2018

Target term CEFs

As I have explained before, I'm attracted to target term CEFs because of their defined term limits. These are funds that are set to liquidate, or convert to an open-ended structure, at a set date from now.

We appear to be experiencing an uptick in the number of target term CEF IPOs in recent years, with nine being launched last year. There are currently 44 term funds in CEFConnect's database, and the chart below shows the inception dates of each CEFs. Note that technically, this chart does not show the number of CEF IPOs per year because it excludes funds that have launched in the past but since been liquidated.

(Source: Stanford Chemist, CEFConnect)

If we break down the categorization of the 44 target term CEFs, we see that the vast majority (42) are fixed income funds, and there are only two equity or equity/hybrid funds (HIE and EGIF). The leading category is national munis, with nine target term funds.

(Source: Stanford Chemist, CEFConnect)

Individual details of the 44 target term funds are shown in the table below. These are listed in ascending order of termination date (i.e., funds soonest to terminate shown at the top of the table).

Name Ticker Category Assets Inception Termination Term (years) Life (years) Alpha Distribution Rate Discount 1-year z-score Baseline expense Leverage Coverage
Deutsche High Income Oppos (DHG) Taxable Income-High Yield 228.95 11/22/2006 3/30/2018 11.4 0.1 5.53% 5.44% -0.53% 2.6 1.47% 29% 100%
Nuveen High Income Dec 2018 Ta (JHA) Taxable Income-High Yield 293.16 11/12/2015 12/1/2018 3.1 0.8 1.88% 3.96% -1.45% -1 0.97% 25% 104%
BlackRock Muni 2018 Term Trust (BPK) Tax-Free Income-National 239.87 10/26/2001 12/31/2018 17.2 0.9 1.01% 0.40% -0.86% -1.2 0.48% 2% 538%
BlackRock NY Muni

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