Weekly Closed-End Fund Roundup: 2 Calamos Funds Cut, MSF Reorganization

by: Stanford Chemist

0 CEF sectors out of 31 positive on price and 4 out of 31 sectors positive on NAV.

MSF reorganizes, discount narrows to -3%.

Two Calamos funds cut, causing severe damage to their share price.

RIV offering period is now live.

Please note: This article was first released to CEF/ETF Income Laboratory members 2 weeks ago, so data may be out of date. Please check latest data before making investment decisions.

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, October 5, 2018.

Weekly performance roundup

0 out of 31 sectors were positive on price (down from 14 last week) and the average price return was -2.16% (down from -0.21%). The biggest losers were Asian equity (-4.67%), U.S. tax-advantaged equity (-4.13%) and other non-U.S. equity (-3.69%). MLPs (-0.15%), energy/resources (-0.66%) and mortgage bonds (-0.77%) fared the best, relatively speaking.

(Source: Stanford Chemist, CEFConnect)

4 out of 31 sectors were positive on NAV (down from 18 last week), while the average NAV return was -1.15% (down from -0.21%). The four positive sectors by NAV were MLPs (+2.30%), energy/resources (+0.81%), utilities (+0.23%), and senior loans (+0.02%).

(Source: Stanford Chemist, CEFConnect)

The sector with the highest premium is multisector (0.44%), while the sector with the highest discount is New Jersey munis (-15.65%). The average sector discount is -8.01% (up from -6.66% last week).

(Source: Stanford Chemist, CEFConnect)

Emerging market equity showed the largest premium/discount increase (+1.70%), while U.S. tax-advantaged equity showed the largest premium/discount decline (-3.22%). The average change in premium/discount was -0.97% (down from 0.35% last week).

(Source: Stanford Chemist, CEFConnect)

The sector with the highest average 1-year z-score is emerging market equity (+0.60) while the sector with the lowest z-score is global equity dividend (-2.28). The average z-score is -0.83 (down from -0.34 last week).

(Source: Stanford Chemist, CEFConnect)

The sector with the highest yield is global growth & income (9.76%), followed by emerging market income (9.72%), MLPs (9.72%), global equity dividend (9.66%) and multisector income (8.75%). Discounts and z-scores for the sectors are included for comparison. The average sector yield is 7.05% (up from 6.89% 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.


P/D decrease




Price change

NAV change







































































(Source: Stanford Chemist, CEFConnect)

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.


P/D increase




Price change

NAV change







































































(Source: Stanford Chemist, CEFConnect)

Recent corporate actions

These are from the last month and are quoted from Closed-End Fund Center, Morningstar, or CEFInsight (email alerts); any new news in the past week has a bolded date:


Upcoming corporate actions

These are from the last month and are quoted from Closed-End Fund Center, Morningstar, or CEFInsight (email alerts); any new news in the past week has a bolded date:

October 4, 2018 | Morgan Stanley Emerging Markets Fund, Inc. (NYSE: MSF) (the “Fund”) announced that, after considering the recommendation of the Fund’s investment adviser, the Board of Directors of the Fund determined that it would be in the best interest of stockholders of the Fund to approve an Agreement and Plan of Reorganization by and between the Fund and Morgan Stanley Institutional Fund, Inc., on behalf of its series Emerging Markets Portfolio (“MSIF Emerging Markets”), pursuant to which substantially all of the assets and liabilities of the Fund would be transferred to MSIF Emerging Markets and stockholders of the Fund would become stockholders of MSIF Emerging Markets, receiving shares of common stock of MSIF Emerging Markets equal to the value of their holdings in the Fund (the “Reorganization”). Upon execution of the Reorganization, shares of the Fund would cease to trade on the New York Stock Exchange; however, after the Reorganization, shares of MSIF Emerging Markets may be purchased and redeemed at the option of stockholders at net asset value on a daily basis, subject to the terms described in the registration statement for MSIF Emerging Markets. The Reorganization is subject to certain conditions, including stockholder approval and customary closing conditions. The Reorganization of the Fund will be submitted for stockholder approval at a special meeting of stockholders (the “Meeting”) scheduled to be held on January 7, 2019, and any adjournments or postponements thereof, to stockholders of record on November 6, 2018. Further information about the Reorganization will be included in a proxy statement/prospectus expected to be mailed to stockholders in the fourth quarter of 2018.

September 18, 2018 | RiverNorth Opportunities Fund, Inc. (RIV) (the “Fund”) announces that its Board of Directors has authorized and set the terms of an offering to the Fund’s stockholders of rights to purchase additional shares of common stock of the Fund. In this offering, the Fund will issue transferable subscription rights (“Rights”) to its stockholders of record as of October 4, 2018 (the “Record Date” and such stockholders, “Record Date Stockholders”) allowing the holder to subscribe for new shares of common stock of the Fund (the “Primary Subscription”). Record Date Stockholders will receive one Right for each share of common stock held on the Record Date. For every three Rights held, a holder of Rights may buy one new share of common stock of the Fund. Record Date Stockholders who exercise their Rights will not be entitled to distributions payable during October 2018 on shares issued in connection with the Rights Offering. The Rights are expected to be listed and tradable on the New York Stock Exchange (“NYSE”) under the ticker: RIV RT. Record Date Stockholders who fully exercise all Rights initially issued to them in the Primary Subscription will be entitled to buy those shares of common stock that are not purchased by other Record Date Stockholders. The subscription price per share of common stock will be determined based upon a formula equal to 95% of the reported net asset value or 95% of the market price per share of common stock, whichever is higher on the Expiration Date (as defined below). Market price per share of common stock will be determined based on the average of the last reported sales price of a share of common stock on the NYSE for the five trading days preceding (and not including) the Expiration Date. The subscription period will expire on November 1, 2018, unless extended by the Board (the “Expiration Date”).

September 13, 2018 | Franklin Limited Duration Income Trust (FTF) announced today that its Board of Trustees has approved a transferable rights offering (the “Offer”). Each shareholder will receive one transferable right (a “Right”) for each common share held on the record date of September 21, 2018 (the “Record Date”). Three Rights plus the final subscription price per common share (the “Subscription Price”) will be required to purchase one additional common share (the “Primary Subscription”). The Subscription Price will be determined based upon a formula equal to 92.5% of the average of the last reported sales price of the Fund’s common shares on the NYSE American on the Expiration Date (as defined below) and each of the four preceding trading days (the “Formula Price”). If, however, the Formula Price is less than 80% of the net asset value per common share of the Fund’s common shares at the close of trading on the NYSE American on the Expiration Date, then the Subscription Price will be 80% of the Fund’s net asset value per common share at the close of trading on the NYSE American on that day. Record date shareholders who fully exercise their Rights in the Primary Subscription will be eligible for an over-subscription privilege entitling these shareholders to subscribe for any additional common shares not purchased pursuant to the Primary Subscription, subject to certain limitations, allotment and the right of the Board of Trustees to eliminate the over-subscription privilege. Holders of rights acquired in the secondary market may not participate in the over-subscription privilege. The Rights are expected to trade “when issued” on the NYSE American beginning on September 19, 2018, and the Fund’s common shares are expected to trade “ex-rights” on the NYSE American beginning on September 20, 2018. The Rights are expected to begin trading for normal settlement on the NYSE American (NYSE American: FTF RT) on or about September 26, 2018. The Offering expires at 5:00 PM Eastern Time on October 18, 2018, unless extended (the “Expiration Date”).

September 7, 2018 | The Liberty All-Star® Growth Fund, Inc. (ASG) today announced that it has set the record date for its previously announced rights offering. The Fund is issuing non-transferable rights (“Rights”) to its shareholders of record (“Record Date Shareholders”) at the close of business on September 17, 2018 (ex-date of September 14, 2018). Record Date Shareholders will receive one Right for each share held and will be allowed to purchase one additional share of the Fund for each three Rights received (the “Primary Subscription”). Shareholders who fully exercise their Rights may subscribe for additional shares not subscribed for by other shareholders in the Primary Subscription. If such oversubscription requests exceed the number of shares available, the Fund may, in its sole discretion, elect to issue additional shares in an amount of up to 25% of the shares issued in the Primary Subscription. The rights offering is expected to commence on or about September 21, 2018 and to expire on or about October 23, 2018. The subscription price per share will be 95 percent of the reported net asset value or market price per share, whichever is lower on the expiration date. Market price per share will be determined based on the average of last reported sales prices of a share on the New York Stock Exchange on the expiration date and the four trading days preceding the expiration date.

August 9, 2018 | Delaware Enhanced Global Dividend and Income Fund (NYSE: DEX) (the “Fund”) established the dates for the tender offer announced in late May 2018. The Fund’s issuer tender offer will purchase for cash up to 3,165,810 of its shares, representing 20 percent of its issued and outstanding shares of beneficial interest, without par value, will commence on Friday, September 28, 2018, and will expire, unless extended, at 11:59 p.m., New York City time, on Friday, October 26, 2018. Subject to various terms and conditions described in offering materials to be distributed to shareholders: (1) purchases will be made at a price per share equal to 98% of the Fund’s net asset value per share as of the close of trading on the first business day after the expiration of the offer; and (2) if more shares are tendered than the amount the Board has authorized to purchase, the Fund will purchase a number of shares equal to the offer amount on a prorated basis.

Recent activist or other CEF news

These are from the last month and are quoted from Closed-End Fund Center, Morningstar, or CEFInsight (email alerts); any new news in the past week has a bolded date:

September 7, 2018 | BlackRock Advisors, LLC announced today that the Boards of Directors/Trustees of twenty BlackRock taxable fixed-income and equity closed-end funds (the “Funds”) have authorized the renewal of open market share repurchase programs (the “Repurchase Programs”). Under each Fund’s current Repurchase Program, each Fund may repurchase, through November 30, 2018, up to 5% of its outstanding common shares (based on common shares outstanding on November 30, 2017) in open market transactions. Pursuant to the Board’s renewal of the Repurchase Programs, commencing on December 1, 2018, each Fund may repurchase up to 5% of its outstanding common shares (based on common shares outstanding on November 30, 2018) in open market transactions through November 30, 2019. The Repurchase Programs seek to enhance shareholder value by purchasing Fund shares trading at a discount from their net asset value (“NAV”) per share, which could result in incremental accretion to a Fund’s NAV.

The Funds that have authorized the renewal of a Repurchase Program are as follows:

Ticker (NYSE) Fund CUSIP
(BGR) BlackRock Energy and Resources Trust 09250U101
(CII) BlackRock Enhanced Capital and Income Fund, Inc. 09256A109
(BDJ) BlackRock Enhanced Equity Dividend Trust 09251A104
(BOE) BlackRock Enhanced Global Dividend Trust 092501105
(BME) BlackRock Health Sciences Trust 09250W107
(BGY) BlackRock Enhanced International Dividend Trust 092524107
(BCX) BlackRock Resources & Commodities Strategy Trust 09257A108
(BST) BlackRock Science and Technology Trust 09258G104
(BUI) BlackRock Utilities, Infrastructure & Power Opportunities Trust 09248D104
(BBN) BlackRock Taxable Municipal Bond Trust 09248X100
(BHK) BlackRock Core Bond Trust 09249E101
(HYT) BlackRock Corporate High Yield Fund, Inc. 09255P107
(BTZ) BlackRock Credit Allocation Income Trust 092508100
(EGF) BlackRock Enhanced Government Fund, Inc. 09255K108
(FRA) BlackRock Floating Rate Income Strategies Fund, Inc. 09255X100
(BGT) BlackRock Floating Rate Income Trust 091941104
(BKT) BlackRock Income Trust, Inc. 09247F100
(BLW) BlackRock Limited Duration Income Trust 09249W101
(BIT) BlackRock Multi-Sector Income Trust 09258A107
(DSU) BlackRock Debt Strategies Fund, Inc. 09255R202

Distribution changes announced this month

These are sorted in ascending order of distribution change percentage. Funds with distribution changes announced this month are included. Any distribution declarations made this week are in bold. I've also added monthly/quarterly information as well as yield, coverage (after the boost/cut), discount and 1-year z-score information. I've separated the funds into two sub-categories, cutters and boosters.


Name Ticker Change Previous Current Yield Discount z-score Coverage Announced
Templeton Global Income (GIM) -19.2% 0.0355 0.0287 6.00% -13.20% -1 105% 10/1/2018
Calamos Convertible Opps & Inc (CHI) -15.8% 0.095 0.08 8.83% -1.63% -1.3 58% 10/1/2018
Calamos Convertible & High (CHY) -15.0% 0.1 0.085 8.87% -1.37% -1.2 57% 10/1/2018
BlackRock Enhanced Intl Div (BGY) -11.1% 0.038 0.0338 7.41% -12.06% -2.2 61% 10/1/2018
Templeton Emerging Mkts Income (TEI) -8.7% 0.0745 0.068 8.18% -11.52% -1.2 104% 10/1/2018
MFS California Municipal Fund (CCA) -7.9% 0.038 0.035 4.18% -15.08% -0.8 125% 10/1/2018
MFS High Yield Municipal Trust (CMU) -4.7% 0.0215 0.0205 5.58% -6.77% -0.7 110% 10/1/2018
MFS High Income Municipal (CXE) -4.2% 0.024 0.023 5.79% -9.14% -1.3 110% 10/1/2018
EV Short Duration Diversified (EVG) -2.3% 0.0665 0.065 6.08% -13.54% -1.4 89% 10/1/2018
MFS Government Markets Income (MGF) -0.9% 0.02886 0.02861 7.79% -5.57% 0.2 37% 10/1/2018
Delaware Enhanced Gbl Div&Inc (DEX) -0.8% 0.1002 0.0994 10.84% -5.50% 0.7 39% 10/2/2018
MFS Intermediate Income (MIN) -0.7% 0.02921 0.029 9.33% -8.13% -1.1 27% 10/1/2018
MFS Multi-Market Income (MMT) -0.4% 0.0416 0.04144 9.21% -12.34% -2.6 50% 10/1/2018
MFS Charter Income (MCR) -0.3% 0.05838 0.0582 9.19% -12.11% -2.8 49% 10/1/2018


Name Ticker Change Previous Current Yield Discount z-score Coverage Announced Ex-date
Delaware Inv Div & Inc (DDF) 0.9% 0.0968 0.0977 8.78% 13.03% 2.2 26% 10/2/2018 10/11/2018

CEF analysis from around Seeking Alpha...

Recommended reads are in bold.

ADS Analytics presents Weekly Fund Wrap: Bang, Zoom, Straight To The Moon (Oct. 8)

Alpha Gen Capital presents PIMCO Closed-End Fund Update - August (Oct. 4)

Arbitrage Trader presents Weekly Review: High-Yield CEFs - The Fund With The Biggest Discount Deserves Attention (Oct. 3), Weekly Review: Municipal Bond CEFs - The Prices In The Sector Bounced From Their Bottoms (Oct. 3), Weekly Review: Senior Loan CEFs - This Blackrock Fund Seems Statistically Undervalued (Oct. 3), Weekly Review: Real Estate CEFs - The Principal Real Estate Income Fund Approaching Buy Territory (Oct. 3), Weekly Municipal Bond CEF Trades: This Fund Is Undervalued Compared To Its Peers (Oct. 4) and Weekly Review: Master Limited Partnership CEFs - First Signs Of 'Life' In The Sector (Oct. 4)

Left Banker presents Distribution Cut Opens A Buying Opportunity In Convertible Bond CEF (Oct. 3)

*Stanford Chemist presents Why Aren't These Closed-End Funds Getting More Love? Part 1: Aberdeen Total Dynamic Dividend Fund (Oct. 3) and Weekly Closed-End Fund Roundup: RIV And FTF Rights Offerings (Oct. 7)

Steven Bavaria presents AMZA And MLP Funds: Still Clipping Coupons And Waiting (Oct. 4)

*To subscribers: these link to the public version of the article, which you will already have seen in the members section.

Macro/market section

Fear & Greed Trader presents S&P 500 Weekly Update: An Opportunity; The Pullback That Everyone Was Looking For Is Here (Oct. 6)

Jeff Miller presents Weighing The Week Ahead: Do Rising Interest Rates Signal The Beginning Of The End? (Oct. 7)

Lance Roberts presents Did Something Just Break? (Oct. 7)

Commentary and actionable takeaway

(This is normally exclusive to members of the CEF/ETF Income Laboratory, but has been released to the public as part of my Back to School Free Trial and -20% Discount Promotion)

This past week saw indiscriminate selling of CEF sectors. All 31 CEF sectors that we keep track of registered negative returns on price, while only 4 sectors mustered up a gain in NAV. The average sector loss of premium/discount was -0.97%, suggesting that CEFs became cheaper across the board.

We authored a three-part series especially for this week's events, since I had been receiving many member questions about what to do for their CEFs in their portfolio. In case you missed it, here are the links.

For this Roundup, I wanted to take a look at six of the most important fixed income CEF sectors. They are ranked in terms of decreasing NAV change last week.

We can see from the data below that senior loans held up best last week, with +0.02% NAV return. Indeed, this sector has performed best over the year, with an average rise of +6.56% in NAV.

On the other hand, preferreds CEFs fared the worst with -1.28% NAV change last week. It has also been the worst-performing sector over the past year, with only +0.13% NAV return.

The price returns for all 6 CEF sectors exceeded their NAV returns last week, indicative of a widening discount. The greatest differential was for the multisector funds, where the 5-day price return of -3.00% eclipsed the 5-day NAV return of -0.93% by -207 bps.

The same is true for 1-year returns. Here, we see significant differentials between price and NAV returns for four of these sectors, with NAV lagging price by -5.16% for high-yield, -5.05% for senior loans, -4.72% for limited duration, and -4.57% for preferreds.

As a result, all of the above sectors have become more attractively valued than they were one week ago. The senior loan funds still look fairly cheap with their -8.34% average discount and -1.74 average 1-year z-score, and their natural built-in hedge against rising rates. Besides owning the CLO fund Eagle Point Credit Corp (ECC) in our two portfolios, we also recently purchased Ares Dynamic Credit Allocation Fund (ARDC) in our Tactical Income-100 portfolio last week.

A senior loan fund that we've previously owned, Invesco Dynamic Credit Opportunities Fund (VTA) (6.64% yield, -15.17% discount, -2.8 z-score) also looks very attractively valued at this juncture, although investors should note that its coverage is only 93% with a UNII of about negative -9 cents.

I also think that preferreds CEFs (especially those containing a high fixed-to-floating component like the Flaherty & Crumrine funds) and high-yield funds in general remain attractively valued, and members could consider initiating or adding to the "buy" rated preferreds or high-yield funds that we own in our portfolios should they desire.

As noted above, multisector funds saw their price returns lag NAV returns by the most (207 bps) last week. However, given that the average premium of multisector funds is +0.44%, this sector doesn't look extremely attractive just yet.

Limited duration funds are a sector that I haven't found the need to look into in detail yet. The reason being, if one wanted to protect against rate rises, wouldn't the senior loan category be more appropriate? However, they do look very cheap now with their -12.25% average discount and -2.12 average z-score.

Morgan Stanley Emerging Markets Fund, Inc. (NYSE: MSF) (the “Fund”) announced that the Board of Directors of the Fund approved merger of the CEF into its mutual fund, MSIF Emerging Markets. As mutual funds always trade at NAV, this effectively values the CEF's assets at par rather than -14% discount that they were trading at before the announcement. As expected, MSF popped after the announcement, and after gaining ~11% last Friday its discount has narrowed to only -3.52%.


MSF Price

data by YCharts

Thus, there is ~3.5% alpha remaining to be gained from MSF, assuming that the merger goes through (possibly paired with a short position such as iShares MSCI Emerging Markets ETF (EEM) for arbitrage). Given that MSF has 67% institutional ownership (including activist investors such as City of London (24%), Lazard (13%), 1607 Capital (7%), and RiverNorth (3%), the deal seems likely to go through. Score another win for City of London Investment Management, the likely instigators of the reorganization, who probably profit to the tune of about $8 million from the move.

The turn of the month typically brings news of distribution changes from the major fund houses, but this time its one of the smaller shops, Calamos, that has had to make cuts. Calamos Convertible Opportunities and Income Fund (CHI) cut from $0.095 to $0.08 (-15.8%) per month, while Calamos Convertible and High Income Fund (CHY) reduced from $0.1 to $0.0850 per month (-15.0%).

The market reaction these two cuts were quite vicious (about -10% initially), and together with the sell-off over last week, CHI and CHY have now knocked off -14.3% and -16.0% off their shares prices in the span of only 5 trading days.


CHI Price

data by YCharts

This is why I warned members about the potential for mean reversion in the Calamos funds ("Beware Reversion In Calamos Funds"). Is the allure of steady distributions ("Why CEF Distribution Stability Is Overvalued") worth the potential capital loss of the equivalent of 2 years of distributions when the premium comes crashing down?

In the Calamos article above, I closed with the suggestion:

The above asset allocation charts suggests that CHY, CHI and CCD could be swapped with a combination of a pure convertibles fund, such as Bancroft Fund (BCV) (-14.12% discount, -1.1 1-year z-score) or Ellsworth Growth and Income Fund (ECF) (-12.60% discount, -1.2 z-score), and a high-yield fund, such as Pioneer High Income Trust (PHT) (-10.91% discount, -1.2 z-score) or BlackRock Corporate High Yield Fund (HYT) (-11.15%, -0.7 z-score). This way, investors can transform capital gains into more income, or as I like to call it, "Compounding Income On Steroids".

About three months later, here are the results. CHY, CHI and CCD have declined by -12.2%, -12.2% and -8.45% in total return respectively, while the other funds that I suggested switching to have performances ranging from -1.22% to +1.74%. Valuation matters when buying CEFs! (Note that I was also a bit early with my call, as CHY and CHI continued to move higher after my first article. However, the Calamos funds then gave it all back and some last week).


CHY Total Return Price

data by YCharts

Finally, let's take a look at RiverNorth Opportunities Fund (RIV)'s rights offering, which went ex-rights last week. As I had predicted, the ex-rights drop for RIV would not be very severe due to the shareholder-friendly subscription formula that minimizes dilution (which makes the rights less attractive).

I don't think the ex-rights day drop for RIV next Wednesday will be as large as for some of the rights offerings we've seen recently, meaning that it might be okay to hold through the offering period. Still, the safer course of action is to sell now and buy back later, in my opinion.

Indeed, the fund only dropped by -21 cents (or -1.14%) on the ex-rights day. However, it turns out that in light of what happened to all CEFs last week, selling would still have been the safer option!

RIV is currently trading at a discount of -2.5%, while the rights are trading at about 20 cents apiece. If the offer were to expire today, the subscription price would be 95% of NAV, or $17.50. Since the fund is currently trading at a share price of $17.95, this should value each right at ($17.95 - $17.50)/3 = 15 cents. Thus, we have a rare case of the rights trading at above their intrinsic value. If anyone owns RIV rights, I would suggest selling them now! You can always buy back later, or alternatively, buy more RIV shares on the open market (which is a better deal than subscribing assuming you can sell your rights for more than 15 cents).

One final reminder that if RIV is trading at a wider than -5% discount close to expiration of the offering period, it actually makes more sense to buy RIV on the open market than to subscribe using the rights (regardless of whether you already own rights or not). Effectively the rights should become worthless in such a scenario.

Disclosure: I am/we are long THE PORTFOLIO SECURITIES. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.