GDO - GDO: A CEF Aiming To Turn Perpetual

2024-02-22 23:58:02 ET

Summary

• Asset managers are proposing corporate actions to convert term closed-end funds to perpetual ones to maintain a stream of income.
• Western Asset Global Corporate Defined Opportunity Fund is seeking shareholder approval to become a perpetual CEF through a tender offer at NAV.
• Shareholders should consider tendering their shares, as there are no specific incentives for a perpetual conversion, and the fund's discount to NAV may become more volatile.
• GDO has a global bond portfolio composition, with an investment grade tilted collateral pool.

Thesis

We are seeing a developing trend this year in the term CEF market, where asset managers are putting together corporate actions to entice shareholders to vote on converting term CEFs to perpetual ones. We first started covering this trend with Nuveen Preferred & Income Term Fund ( JPI ) which now aims to become perpetual. We are now seeing more corporate actions of the same nature coming to market, with the latest one in relation to Western Asset Global Corporate Defined Opportunity Fund ( GDO )....

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