BIT - A Sell Signal For CEF BIT: Its Historic High Premium (Downgrade)
2024-03-21 10:50:07 ET
Summary
- BlackRock Multi-Sector Income Trust outperformed its peers during the recent monetary tightening regime by immunizing the fund from duration via interest rate swaps.
- The composition of BIT's portfolio follows a bar-belled approach, with high-yield exposure balanced by AAA assets. However, this methodology has encountered trouble in the current inflationary environment.
- BIT is currently trading at a generational high premium to NAV. Additionally, the fund is a chronic over-distributor, with a high percentage of its distribution coming from the return of capital.
- In the past decade, we have seen BIT usually trade at a -10% discount to NAV, but we expect it to balance at flat to NAV going forward.
Thesis
Even for buy and hold instruments there are times to overweight exposures and there are times to lighten up on them. BlackRock Multi-Sector Income Trust ( BIT ) is a name which we have been covering for a long time and we own it as well. We were very impressed with this CEF during the recent monetary tightening regime when we witnessed the fund management team immunize the fund from duration via interest rate swaps, thus outperforming many of its peers during 2022/2023....
A Sell Signal For CEF BIT: Its Historic High Premium (Downgrade)