DMA - Weekly Closed-End Fund Roundup: NRGX Policy Change (September 24 2023)
2023-10-04 09:34:59 ET
Summary
- 2 out of 22 CEF sectors positive on price and 1 out of 22 sectors positive on NAV.
- PIMCO Energy & Tactical Credit Opps will change its investment policy to a multisector fixed income fund.
- This will likely provide a tailwind to the NRGX fund's premium/discount valuation.
The Weekly Closed-End Fund 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. Data is taken from the close of September 22nd, 2023 .
JPMorgan releases a nice Weekly Market Recap every week. These are the key index levels this week for equities:
Weekly performance roundup
For CEFs, 2 out of 22 sectors were positive on price (down from 4 last week) and the average price return was -1.11% (down from -0.81% last week). The lead gainer was Commodities (+1.17%) while Real Estate lagged (-3.32%).
1 out of 22 sectors were positive on NAV (down from 12 last week), while the average NAV return was -1.11% (up from +0.07% last week). The top sector by NAV was Commodities (+1.58%) while the weakest sector by NAV was Real Estate (-3.21%).
The sector with the highest premium was Limited Duration (+1.60%), while the sector with the widest discount is Single-state Munis (-14.88%). The average sector discount is -8.56% (up from -8.85% last week).
The sector with the highest premium/discount increase was Sector Equity (+1.48%), while Emerging Market Income (-1.37%) showed the lowest premium/discount decline. The average change in premium/discount was +0.29% (down from -0.75% last week).
The sector with the highest average 1-year z-score is Senior Loans (+1.00), while the sector with the lowest average 1-year z-score is Preferreds (-1.48). The average z-score is -0.43 (up from -0.67 last week).
The sectors with the highest yields are Senior Loans (+13.26%), Emerging Market Income (+12.88%), and Real Estate (+11.38%). Discounts are included for comparison. The average sector yield is +8.58% (up from +8.41% last week).
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.
| Fund |
| Ticker |
| P/D decrease |
| Yield |
| P/D |
| z-score |
| Price change |
| NAV change |
| OFS Credit Company Inc |
| ( OCCI ) |
| -14.89% |
| 32.98% |
| -15.17% |
| -1.5 |
| -9.86% |
| -2.46% |
| NXG Cushing Midstream Energy Fund |
| ( SRV ) |
| -10.88% |
| 14.49% |
| -1.55% |
| 0.6 |
| -11.57% |
| 2.44% |
| Eagle Point Income Co Inc |
| ( EIC ) |
| -5.84% |
| 13.45% |
| 5.05% |
| -0.7 |
| -0.35% |
| 0.87% |
| Invesco Municipal Inc Opp I |
| ( OIA ) |
| -4.13% |
| 5.39% |
| -0.84% |
| -0.2 |
| -5.75% |
| -0.45% |
| RiverNorth Opp Muni Income Fund Inc |
| ( RMI ) |
| -3.77% |
| 7.74% |
| -6.79% |
| -1.0 |
| -5.80% |
| -0.94% |
| PIMCO High Income |
| ( PHK ) |
| -3.41% |
| 12.72% |
| 2.95% |
| -1.0 |
| -1.95% |
| 0.00% |
| PCM Fund |
| ( PCM ) |
| -3.24% |
| 10.39% |
| 42.37% |
| 1.1 |
| -2.74% |
| -1.88% |
| RiverNorth Managed Duration Muni Inc Fd |
| ( RMM ) |
| -3.14% |
| 7.47% |
| -4.57% |
| 0.6 |
| -4.38% |
| -1.28% |
| RiverNorth Manage Dur Muni Inc Fd II Inc |
| ( RMM Z) |
| -3.13% |
| 7.98% |
| -9.85% |
| -0.2 |
| -3.47% |
| -0.36% |
| Virtus Stone Harbor Emg Mkts Total Inc |
| ( EDI ) |
| -2.86% |
| 16.31% |
| 2.21% |
| -0.1 |
| -1.62% |
| 1.49% |
Income Lab
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.
| Fund |
| Ticker |
| P/D increase |
| Yield |
| P/D |
| z-score |
| Price change |
| NAV change |
| Gabelli Multi-Media |
| ( GGT ) |
| 17.47% |
| 13.79% |
| 81.77% |
| 2.5 |
| 5.80% |
| -1.69% |
| RENN Fund ord |
| ( RCG ) |
| 7.31% |
| % |
| -12.50% |
| 0.0 |
| 1.18% |
| -3.84% |
| Eaton Vance Enhanced Equity Income |
| ( EOI ) |
| 5.05% |
| 8.02% |
| 2.63% |
| 0.6 |
| 1.93% |
| -1.77% |
| NXG NextGen Infrastructure Inc |
| ( NXG ) |
| 4.75% |
| 16.48% |
| -7.53% |
| 4.4 |
| 0.74% |
| -1.04% |
| Destra Multi-Alternative |
| ( DMA ) |
| 3.66% |
| 0.82% |
| -39.18% |
| 0.9 |
| 5.78% |
| -3.81% |
| Gabelli Equity |
| ( GAB ) |
| 3.65% |
| 11.34% |
| 8.62% |
| 0.1 |
| 0.38% |
| -1.26% |
| Virtus Equity & Convertible Inc Fund |
| ( NIE ) |
| 3.28% |
| 9.92% |
| -8.94% |
| 1.5 |
| 0.10% |
| 0.00% |
| Calamos Convertible & High Income Fund |
| ( CHY ) |
| 3.15% |
| 10.62% |
| 11.11% |
| 1.5 |
| 0.44% |
| -0.27% |
| Eaton Vance Short Duration Divers Inc |
| ( EVG ) |
| 3.12% |
| 8.80% |
| -2.71% |
| 0.5 |
| 2.26% |
| -0.92% |
| Eaton Vance National Municipal Opprs Tr |
| ( EOT ) |
| 3.06% |
| 4.47% |
| -3.89% |
| 0.7 |
| 1.57% |
| -1.02% |
Income Lab
New!
From our screener, here are the CEFs with the highest yields, widest discounts, and lowest 1-year z-scores:
From our screener, here are the CEFs with the best 1-year performance, highest premiums, and highest 1-year z-scores:
Recent corporate actions
These are from the past month. Any new news in the past week has a bolded date:
July 31, 2023 | Nuveen Floating Rate Income Fund Announces Completion of Mergers and Distribution Increase.
Upcoming corporate actions
These are from the past month. Any new news in the past week has a bolded date:
September 1, 2023 | Eaton Vance Floating-Rate Income Trust and Eaton Vance Senior Income Trust Announce Tender Offers to Purchase up to 10% of Outstanding Common Shares .
August 16, 2023 | Tortoise Announces Tender Offers for its Closed-End Funds.
August 16, 2023 | Center Coast Brookfield MLP & Energy Infrastructure Fund Announces Shareholder Approval of its Reorganization into Center Coast Brookfield Midstream Focus Fund .
August 14, 2023 | Western Asset Managed Municipals Fund Inc., Western Asset Municipal Partners Fund Inc., Western Asset Intermediate Muni Fund Inc. Announce Results of Stockholder Votes at Special Meeting of Stockholders Relating to Proposed Mergers .
June 20, 2023 | Tekla Capital Management LLC Announces Proposed Transaction.
April 24, 2023 | Kayne Anderson Energy Infrastructure Fund and Kayne Anderson NextGen Energy & Infrastructure Announce Updated Terms for Proposed Merger. April 13, 2023 | Nuveen Preferred Closed-End Funds Announce Proposed Mergers.
March 22, 2023 | Board of First Trust Dynamic Europe Equity Income Fund Approves Conversion into an ETF .
Recent activist or other CEF news
These are from the past month. Any new news in the past week has a bolded date:
September 22, 2023 | The Fund will be renamed PIMCO Dynamic Income Strategy Fund (new ticker: PDX) and will make investment objective and guideline changes as well as additions to its portfolio management team line-up to reflect its increased focus on multi-sector credit.
September 8, 2023 | BlackRock Science and Technology Term Trust ( BSTZ ), BlackRock Health Sciences Term Trust ( BMEZ ) and BlackRock Innovation and Growth Term Trust ( BIGZ ) Announce Changes to Distribution Rates Under Managed Distribution Plans.
August 25, 2023 | Templeton Global Income Fund's Board of Trustees Selects Saba Capital as New Investment Adviser.
July 17, 2023 | Vertical Capital Income Fund Announces Appointment of Carlyle as Investment Manager and Rebrand to Carlyle Credit Income Fund.
------------------------------------
Distribution changes this month
These are sorted in ascending order of distribution change percentage. Funds with distribution changes with ex-dates this month are included. Other statistics such as yield, distribution coverage (post distribution boost/cut), discount and z-score information. The funds are separated into cutters and boosters.
Cutters
Commentary
1. NRGX pivots to a multisector income fund
We have big news from PIMCO Energy and Tactical Credit Opportunities Fund ( NRGX ), a holding of our Tactical Income-100 portfolio, where it is currently rated as a Buy. Effective November 21, 2023, NRGX will be renamed as " PIMCO Dynamic Income Strategy Fund " with a new ticker symbol "PDX." This will be accompanied by a change in its investment mandate from an energy-linked equities and fixed income fund to a multisector credit fund. However, the new NRGX will retain 25% of its investments in the energy sector, which will make it rather unique among PIMCO's existing lineup of multisector credit CEFs.
Joining NRGX's management team will be PIMCO head honcho Dan Ivascyn, as well as Alfred Murata and Giang Bui. Ivascyn and Murata already co-manage PGP, PDI, PDO, PAXS and PCM. In addition, Murata co-manages PTY, PCN, PHK, PFL, and PFN while Ivascyn co-manages RCS. In other words, the entire PIMCO suite has either Ivascyn or Murata (or both) as one of the managers, meaning that the new NRGX is likely to be contain the usual mix of U.S. high-yield bonds, mortgage-backed securities, developed and emerging market credit, and investment-grade credit that are owned by the other funds. I'd also expect the fund to increase its leverage from its currently low levels of 12.31% to match the higher leverage levels of the other fixed income funds.
The mandate change was likely to preempt activist pressure from Saba Capital. As seen in our handy Activist Tracker tool, Saba now owns over 6.6 million shares of NRGX, good for around 15% of all outstanding shares and representing a $117 million stake. It should be noted that Saba's filing is a 13G rather than 13D, indicating passive rather than active intent. This is why I think this move from PIMCO is a prophylactic measure to shore up the discount of NRGX, rather than a result of any direct discussion between PIMCO and Saba.
Boaz Weinstein, founder of Saba Capital, was not surprisingly delighted with the move:
The rationale behind this mandate change that it is likely to narrow the discount gap between NRGX and PIMCO's other multisector CEFs. NRGX's 1-year average discount is -15.85%, which is far wider than the premium/discount valuations of PIMCO's taxable fixed income funds. At present, NRGX's -11.81% discount is still nearly 8 points wider than the discount of PAXS, which is currently the cheapest taxable CEF from PIMCO right now. As seen from our handy CEF Watchlist tool, the average of the entire group is +10.79%, so there's room for considerable upside if NRGX manages to gain ground on its peers.
As expected, the market responded favorably to the announcement and NRGX is up over 4% on the week. However, I think it still has further room to run so we may add more to NRGX in the coming days to take advantage of the anticipated repricing.
YCharts
Finally, there will also be a reduction of the fund's expense ratio from 1.35% to 1.25%, which is definitely beneficial to shareholders.
For further details see:
Weekly Closed-End Fund Roundup: NRGX Policy Change (September 24, 2023)