The Weekly CEF Roundup will be put out at the start of each week to summarize recent price movements in closed-end fund [CEF] sectors in the last week, as well as to highlight recently concluded or upcoming corporate actions on CEFs, 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." Data are taken from the close of Friday Mar. 23, 2018.
Weekly performance roundup
CEFs had a very difficult week, mirroring the broader markets. 0 out of 31 sectors were positive (down from 2 last week) and the average price return was -2.32% (down from -0.89%). The top 5 sectors were all fixed income CEF sectors, with price returns ranging from -0.35% to -.80%. On the downside, health/biotech equities dropped -6.11%, MLPs slid -4.94% and U.S. real estate declined by -4.35%.
(Source: Stanford Chemist, CEFConnect)
The performance was similar on a NAV basis. 5 out of 31 sectors were positive on NAV (up from 2 last week), while the average NAV return was -2.18% (down from -0.67%). The top 5 sectors were all muni funds, and they squeezed out NAV gains of between 0.01% to 0.15%. Health/biotech was the largest lower at -6.38% NAV return, followed by MLPs at -6.12% and tax-advantaged equity at -4.99%.
(Source: Stanford Chemist, CEFConnect)
The sector with the highest premium is multi-sector income (-0.49%), while the sector with the highest discount is New Jersey munis (-12.83%). The average sector discount is -6.76% (down from -6.64% last week).
(Source: Stanford Chemist, CEFConnect)
U.S. tax-advantage equities showed the largest premium/discount increase (+1.56%), while emerging market income showed the largest premium/discount decline (-1.03%). The average change in premium/discount was -0.11% (up from -0.21% last week).
(Source: Stanford Chemist, CEFConnect)
The sector with the highest average 1-year z-score is MLPs (+0.81) while the sector with the lowest z-score is high-yield (-2.73). The average z-score is -0.70 (down from -0.66 last week).
(Source: Stanford Chemist, CEFConnect)
The sector with the highest yield is MLPs (11.47%), followed by global growth & income (9.60%), non-U.S. global equity dividend (9.07%), U.S. real estate (8.96%), and multi-sector income (8.95%). Discounts and z-scores for the sectors are included for comparison. The average sector yield is 6.94% (up from 6.67% last week).
(Source: Stanford Chemist, CEFConnect)
Individual CEFs that have undergone a significant decrease in premium/discount value over the past week, coupled optionally with an increasing NAV trend, a negative z-score, and/or are trading at a discount, are potential buy candidates.
Conversely, individual CEFs that have undergone a significant increase in premium/discount value in the past week, coupled optionally with a decreasing NAV trend, a positive z-score, and/or are trading at a premium, are potential sell candidates.
March 22, 2018 | The Cushing® Renaissance Fund (NYSE: SZC) (the "Fund") announced the results of its transferable rights offering (the "Offer"). The Offer commenced on February 16, 2018 and expired on March 22, 2018 (the "Expiration Date"). The Offer entitled rights holders to subscribe for up to an aggregate of 1,951,286 of the Fund's common shares of beneficial interest, par value $0.001 per share ("Common Shares"). The subscription price was $14.88 per Common Share and was determined based upon a formula equal to 78% of the Fund's net asset value ("NAV") per Common Share at the close of trading on the New York Stock Exchange ("NYSE") on the Expiration Date. The Offer was over-subscribed. Common Shares will be issued promptly after completion and receipt of all shareholder payments and the pro-rata allocation of Common Shares in respect of the over-subscription privilege. Gross proceeds of the Offer are expected to be approximately $29.3 million. The Fund intends to invest the net proceeds of the Offer in accordance with its investment objective and policies.
March 16, 2018 | BlackRock Debt Strategies Fund, Inc. (the "Fund") (DSU) announced that it has today commenced a tender offer (the "Tender Offer"). As previously announced, the Fund will purchase for cash up to 10% of its outstanding shares of common stock, at a price equal to 98% of the net asset value ("NAV") per share, determined on the first business day after the Tender Offer expires. The Tender Offer will expire on April 17, 2018 at 5:00 p.m. Eastern time, unless otherwise extended. The terms and conditions of the Tender Offer are set forth in the Issuer Tender Offer Statement and related Letter of Transmittal that have been filed with the Securities and Exchange Commission (the "SEC").
March 14, 2018 | Advent Claymore Convertible Securities and Income Fund (AVK), Advent Claymore Convertible Securities and Income Fund II (AGC), and Advent/Claymore Enhanced Growth & Income Fund (LCM), each a closed-end fund (together, the “Funds”) announced today that each Fund’s Board of Trustees has approved the mergers outlined below [AGC and LCM acquired by AVK]. The mergers are intended to provide potential benefits to common shareholders, including lower operating expenses and greater secondary market liquidity, among other things. The Funds have similar (but not identical) investment policies. Following completion of the mergers, AVK will continue to pursue its investment objective to provide total return through a combination of capital appreciation and current income by investing at least 80% of its managed assets in a diversified portfolio of convertible and non-convertible income-producing securities.
March 12, 2018 | MFS Investment Grade Municipal Trust (the "fund") (CXH) announced today that it will conduct a cash tender offer to purchase up to 7.5 percent of the fund's outstanding common shares (the “shares”) at a price per share equal to 98 percent of the fund's net asset value (NAV) per share as of the close of regular trading on the New York Stock Exchange (NYSE) on the date the tender offer expires. The tender offer is expected to begin on April 3, 2018 and terminate at 5:00 PM Eastern Standard Time on May 2, 2018, unless extended. The pricing date will also be May 2, 2018, unless the tender offer is extended.
March 2, 2018 | The Board of Trustees of Nuveen Build America Bond Fund (NYSE: NBB) and Nuveen Build America Bond Opportunity Fund (NYSE: NBD) have approved a proposal to merge NBD into NBB (the “Merger”). As part of the proposal, the Board also approved the elimination of NBB’s contingent term policy. Both of these changes require shareholder approval. If each fund obtains the necessary shareholder approvals at its annual shareholder meeting to be held later this year, shareholders of the combined fund who do not wish to maintain their investment in the combined fund will be given an opportunity following completion of the Merger to sell a portion of their investment in the combined fund at net asset value, less a small repurchase fee. In addition, the Board approved the expansion of NBB’s investment policy of investing at least 80% of its Managed Assets in Build America Bonds (“BABs”) to investing at least 80% of its Managed Assets in all types of taxable municipal securities, including BABs. NBB would at the same time change its name to Nuveen Taxable Municipal Income Fund. The proposal is intended to benefit shareholders in a number of ways, including continued ownership through the combined fund of scarce Build America Bonds with above-market purchase yields, the potential for meaningfully higher common net earnings and avoidance of sizeable capital gain distributions that would result upon termination of the funds.
March 1, 2018 | BlackRock Debt Strategies Fund, Inc. (NYSE:DSU) announced on March 1 that the fund's average daily discount to NAV during the "First Measurement Period" was 8.5%, which is wider than the 7.5% threshold for the period from December 1, 2017 through February 28, 2018. Thus, the fund has determined to execute the repurchase required by the previously announced terms of the First Measurement Period of the fund's Discount Management Program by conducting a tender offer for up to 10% of its outstanding common shares at a price equal to 98% of NAV per share (at the close of the regular trading session at the NYSE on the day after the tender offer expires). The fund expects to commence the tender offer on, or about, March 16, 2018, with expiration on April 17, 2018. As the release explained, additional terms and conditions will be set forth in offering materials. If more than 10% of the Fund's outstanding common shares are tendered, the fund will purchase its shares from tendering shareholders on a pro rata basis.
Recent activist or other CEF news
These are from the last month and are quoted from Closed-End Fund Center or CEFInsight (email alerts); any new news in the past week has a bolded date:
March 2, 2018 | Western Asset Income Fund (the “Fund”) (NYSE:PAI) announced today that the Board of Directors of the Fund has approved a change to the Fund’s name. Effective March 29, 2018, the Fund’s name will be Western Asset Investment Grade Income Fund Inc. The Fund’s shares of common stock will continue to trade under its existing New York Stock Exchange symbol “PAI”. The Fund’s CUSIP, 95766T100, will not change. In addition, also effective March 29, 2018, the Fund will invest at least 80% of its net assets in fixed income securities that are rated in the Baa or BBB categories or above at the time of purchase by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”) or unrated securities of comparable quality at the time of purchase (as determined by the adviser).
Distribution changes announced this month
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, coverage (after the boost/cut), discount and 1-year z-score information for newly added funds.
However, note the yield, coverage, discount and z-score 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.
I'm making another change to the section this month. I'm only going to be including the distribution changes announced this month, as I believe that this is what investors would be most interested in, if they are wont to keep track of the distribution changes of their portfolio. Any changes announced in the week are shown in bold.
Here, we provide exclusive commentary and actionable takeaways on specific funds. In this issue, we discussed the performance of our portfolios in the difficult week (excerpt reproduced below, for those that may be interested in what our premium service offers), the impact of Cushing Renaissance Fund (SZC)'s recently completed rights offering on NAV, and a number of possible overvalued CEFs to sell or replace.
So markets had a very difficult week last week, with the S&P 500 falling by -5.95%, the Dow by -5.67% and NASDAQ by -7.29%. CEFs were not immune and we saw all 31 sectors decline by price, although 5 sectors (mainly muni funds) did manage to eke out a nominal NAV gain.
Taking a quick look at the performance of the portfolios last week, we saw that they provided pretty good downside protected compared to SPY. Despite holding leveraged CEFs and ETNs, the portfolios still fell significantly less than the SPY primarily due to their diversification into fixed income instruments.
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(Source: Stanford Chemist, CEFConnect)
(Source: Stanford Chemist, CEFConnect)
(Source: Stanford Chemist, CEFConnect)
(Source: Stanford Chemist, CEFConnect)
