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How To Streamline CEF Allocations With Fund Ratings

Feb. 16, 2021 8:00 AM ETBTT, EVN, MVF, NAD
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  • Welcome to another weekday blog post from Systematic Income.
  • We have recently enhanced our CEF rating methodology with ratings for hundreds of funds.
  • Take a 2-week no-obligation trial of Systematic Income to explore our Income Portfolios and Investor Tools.

The CEF space offers hundreds of potential investment options, making it very challenging for income investors to keep fully abreast of attractive funds. The SA platform does offer commentary and recommendations from a number of contributors however it tends to suffer from, what we call, "the only fund in the universe" problem which is where a contributor will throw together some screenshots from the fund's website, make a few comments about the discount and call it a day. The problem with this approach is that it disregards the many other potential investment options in the same sector. 

One way to address this issue is to adopt a quantitative approach that pre-screens for potentially attractive funds that have shown a history of attractive absolute and risk-adjusted returns, are trading at reasonable valuations, don't overcharge investors, don't vastly overdistribute, etc. Once potential candidates are identified, investors can either do more due diligence or select among the top scorers. This vastly reduces the amount of effort for investors and allows them to focus their effort on the top candidates.

One approach that can help investors make this happen are our CEF ratings. We have recently updated our methodology which now covers the vast majority of the CEFs. 

Funds with highest ratings in the tax-exempt muni that we continue to like are:

  • BlackRock Municipal 2030 Target Term Trust (BTT)
  • Eaton Vance Municipal Income Trust (EVN)
  • BlackRock MuniVest Fund (MVF)
  • Nuveen Quality Municipal Income Fund (NAD)

Check out CEF ratings across many other sectors using our CEF Tool. Take a no-obligation 2-week free trial of Systematic Income.

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Explore the best of the CEF/ETF, preferred and baby bond markets with our powerful Interactive Investor Tools.

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Analyst's Disclosure: I am/we are long BTT.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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