This month’s video takes an in-depth look at the closed-end fund marketplace. Charts include both diversified CEF indexes and single fund names. Overall the trend remains solid, however we are starting to see stretched premiums and tight discounts across the entire spectrum. Risk is high and caution should be warranted at this stage of the cycle. Video recorded after the market close on February 8, 2017.
For many closed-end funds, the realization that borrowing costs could potentially rise in the near future hasn’t been met with a smooth transition. In fact, the majority of funds on my watch list have suffered a great deal as individual investors fret over the unknown, and choose to “de-risk” instead of hanging in there to see what ultimately happens. Read more
The double edged sword of the Federal Reserve’s interest rate policy is rearing its ugly head this morning as investors identify the true psychological meaning of a continuation of the status quo. The persistent dovishness points to a potentially weaker economy than most market participants were hoping for, which doesn’t sound so great, even though low interest rates could continue to spur growth into year-end. Read more
The newer generation of PIMCO closed-end funds (CEFs) have certainly had their share of winning streaks and setbacks. However, these unique strategies have generally added value and used their relatively high portfolio leverage productively.
We have advocated for these products virtually since their inception and subsequent IPO weakness due to their ability to significantly out-earn their stated distribution policies. This is largely the result of the shared manager of both funds; PIMCO CIO Dan Ivascyn, and his experience in the high income space stemming from the PIMCO Income Fund’s (PIMIX) very successful track record. Read more
Exchange-traded funds (ETFs) have become an increasingly popular tool for investing in a diverse portfolio of stocks or bonds. These low-cost index funds offer immediate access, transparency, and liquidity across a variety of market segments. Total assets in ETFs have now surpassed $2.1 trillion and the trend appears to be steadily eating away at stodgy, high-fee mutual funds.
Despite all of their strengths, there are still some areas of the investment universe that ETFs aren’t able to journey into based on their structure and investment mandates.