ASGI - Weekly Closed-End Fund Roundup: PIMCO Muni CEF Distribution Cuts (January 1 2023)

Summary

• 3 out of 23 CEF sectors positive on price and 6 out of 23 sectors positive on NAV last week.
• PIMCO muni CEFs cut.
• PCQ's fall another reminder of why CEF premium/discount valuation matters.

Author’s note: This article was released to CEF/ETF Income Laboratory members on January 4, 2022. Please check latest data before investing.

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 Friday, December 30th, 2022 .

Weekly performance roundup

3 out of 23 sectors were positive on price (up from 2 last week) and the average price return was -0.66% (up from -1.01% last week). The lead gainer was Emerging Markets Income (+3.46%) while Convertibles lagged (-2.67%).

6 out of 23 sectors were positive on NAV (up from 2 last week), while the average NAV return was -0.30% (up from -0.97% last week). The top sector by NAV was Commodities (+3.03%) while the weakest sector by NAV was Taxable Munis (-1.41%).

The sector with the highest premium was Taxable Munis (-1.35%), while the sector with the widest discount is MLPs (-16.08%). The average sector discount is -7.88% (down from -7.60% last week).

The sector with the highest premium/discount increase was Emerging Market Income (+2.93%), while Real Estate (-1.37%) showed the lowest premium/discount decline. The average change in premium/discount was -0.26% (up from -0.51% last week).

The sector with the highest average 1-year z-score is Taxable Munis (+0.14), while the sector with the lowest average 1-year z-score is Single-state Munis (-1.42). The average z-score is -0.73 (down from -0.71 last week).

The sectors with the highest yields are Real Estate (14.22%), U.S. Equity (+11.81%), and Senior Loans (+11.77%). Discounts are included for comparison. The average sector yield is 9.07% (up from 8.75% 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.

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.

Recent corporate actions

These are from the past month. Any new news in the past week has a bolded date:

December 16, 2022 | Delaware Investments National Municipal Income Fund announces final results of tender offer. Today, Delaware Investments National Municipal Income Fund (the “Fund”), a NYSE American listed closed-end fund trading under the symbol “VFL,” announced the final results of its tender offer for up to 10,478,347 of its common shares (“Common Shares”), representing up to fifty percent of its issued and outstanding Common Shares, with a par value of $0.01 per share. The offer expired at 5:00 p.m., New York City time, on Tuesday, December 13, 2022 . Based on a count by Computershare Trust Company, N.A., the depositary for the tender offer, approximately 8,678,691 Common Shares, or approximately 41.41% of the Fund’s Common Shares outstanding, were tendered. The Fund has accepted 8,678,691 shares (subject to adjustment for fractional shares) for cash payment at a price equal to $11.95 per share. This purchase price is 99% of the Fund’s net asset value per share of $12.07 as of the close of regular trading on the NYSE American on December 14, 2022, the pricing date stated in the Offer to Purchase. Following the purchase of the tendered shares, the Fund will have approximately 12,278,003 Common Shares outstanding. In order to manage its leverage level, the Fund is accordingly reducing its outstanding Muni-MultiMode Preferred Shares (“Preferred Shares”) by redeeming 360 Preferred Shares at the $100,000 liquidation preference per share, plus an additional amount representing the final accumulated dividend amounts owed to be paid to preferred shareholders. The redemption is set to occur on December 20, 2022. Following the redemption, the Fund will have 990 Preferred Shares outstanding. [ Original tender offer press release ]

December 8, 2022 | First Trust/abrdn Emerging Opportunity Fund Announces Termination and Liquidation. First Trust/abrdn Emerging Opportunity Fund ( FEO ) (the “Fund”) completed its termination and liquidation following the close of business on December 7, 2022. The termination and liquidation was performed consistent with the Fund’s plan of liquidation and termination announced on September 20, 2022. Accordingly, on December 7, 2022 , the Fund returned to holders of its common shares of beneficial interest (“Common Shares”) as a liquidating distribution in cash the Fund’s net asset value per Common Share of $9.635572. As previously announced, the Fund had designated the close of business on December 5, 2022 as the record date for determining the shareholders entitled to receive such liquidating distribution.

November 10, 2022 | RiverNorth Opportunities Fund, Inc. Announces Final Results of Rights Offering. RiverNorth Opportunities Fund, Inc. (the “Fund”) ( RIV ) today announced the final results of its transferable rights offering (the “Offering”). The Fund will issue a total of 2,752,078 new shares of common stock as a result of the Offering, which closed on November 8, 2022 (the “Expiration Date”). The subscription price of $11.97 per share in the Offering was established on the Expiration Date based on a formula equal to 95% of the reported net asset value. Gross proceeds received by the Fund, before any expenses of the Offering, are expected to total approximately $32.9 million. This press release shall not constitute an offer to sell or constitute a solicitation of an offer to buy. As the final subscription price was higher than the original estimated price of $11.82 per share, there are no excess payments to be returned to subscribing rights holders. [ Original rights offering press release ]

November 9, 2022 | Macquarie Global Infrastructure Total Return Fund Inc. announces results of the special stockholder meeting relating to the proposed reorganization with abrdn Global Infrastructure Income Fund. Today, Macquarie Global Infrastructure Total Return Fund Inc. (the “Acquired Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol ( MGU ), announced that it held its Special Meeting of Stockholders (the “Meeting”) on November 9, 2022. At the Meeting, stockholders of the Acquired Fund voted to approve the reorganization of the Acquired Fund into abrdn Global Infrastructure Income Fund (the “Acquiring Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol ( ASGI ) (the “Reorganization”). As of the record date, August 11, 2022, the Acquired Fund had outstanding 12,303,293 shares of common stock. 60.79% of outstanding common stock were voted representing quorum.

Proposal :

Votes For

Votes Against

Votes Abstained

6,768,448

559,278

151,378

It is currently expected that the Reorganization will be completed in the first quarter of 2023 subject to [i] approval by Acquiring Fund shareholders of the issuance of shares of the Acquiring Fund and [ii] the satisfaction of customary closing conditions.

November 9, 2022 | Delaware Ivy High Income Opportunities Fund Announces Results of the Special Shareholder Meeting Relating to the Proposed Reorganization With abrdn Income Credit Strategies Fund. Today, Delaware Ivy High Income Opportunities Fund (the “Acquired Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol ( IVH ), announced that it held its Special Meeting of Shareholders (the “Meeting”) on November 9, 2022 . At the Meeting, shareholders of the Acquired Fund voted to approve the reorganization of the Acquired Fund into abrdn Income Credit Strategies Fund (the “Acquiring Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol ( ACP ) (the “Reorganization”). As of the record date, August 11, 2022, the Acquired Fund had outstanding 16,570,234.60 shares of common stock. 61.07% of outstanding common stock were voted representing quorum.

Proposal :

Votes For

Votes Against

Votes Abstained

7,807,734

1,981,200

330,168

The shareholders of the Acquiring Fund approved the issuance of shares of the Acquiring Fund at a special shareholder meeting held on November 9, 2022, subject to the approval of the Reorganization proposal by shareholders of the Acquired Fund. It is currently expected that the Reorganization will be completed in the first quarter of 2023 subject to the satisfaction of customary closing conditions.

November 9, 2022 | abrdn U.S. Closed-End Funds Announce Results of Special Shareholder Meetings Relating to Proposed Reorganizations with Delaware Management Company-Advised Closed-End Funds. abrdn Income Credit Strategies Fund (NYSE: ACP ) and abrdn Global Dynamic Dividend Fund (NYSE: AGD ) (each an "Acquiring Fund") announced that they each held a special meeting of shareholders on November 9, 2022 (each, a "Meeting") at which shareholders of the respective Acquiring Fund voted to approve the issuance of additional shares of such Fund in connection with the proposed reorganization of the applicable Delaware Management Company-advised closed-end fund, as noted below, with and into the Acquiring Fund.

abrdn Income Credit Strategies Fund ("ACP")

Proposal: To approve the issuance of additional shares of beneficial interest of ACP in connection with the reorganization of Delaware Ivy High Income Opportunities Fund ( IVH ), another closed-end fund, with and into ACP.

Votes For

Votes Against

Votes Abstained

11,420,419

1,829,195

775,377

The shareholders of IVH approved the reorganization at a special shareholder meeting also held on November 9, 2022. It is currently expected that the reorganization will be completed in the first quarter of 2023 subject to the satisfaction of customary closing conditions.

abrdn Global Dynamic Dividend Fund ("AGD")

Proposal: To approve the issuance of additional common shares of beneficial interest of AGD in connection with the reorganization of Delaware Enhanced Global Dividend and Income Fund ( DEX ) and Delaware Investments® Dividend and Income Fund ( DDF ), each another closed-end fund, with and into AGD.

Votes For

Votes Against

Votes Abstained

6,515,118

594,880

231,261

It is currently expected that the reorganizations will be completed in the first quarter of 2023 subject to approval of the reorganization by the shareholders of each of DEX and DDF and the satisfaction of customary closing conditions.

Upcoming corporate actions

These are from the past month. Any new news in the past week has a bolded date:

December 12, 2022 | Delaware Enhanced Global Dividend and Income Fund Announces Results of the Special Shareholder Meeting Relating to the Proposed Reorganization With abrdn Global Dynamic Dividend Fund and Self-Tender Offer for up to 30% of Its Shares. Today, Delaware Enhanced Global Dividend and Income Fund (the “Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol ( DEX ), announced that it held its adjourned Special Meeting of Shareholders (the “Meeting”) on December 12, 2022 . At the Meeting, shareholders of the Fund voted to approve the reorganization of the Fund into abrdn Global Dynamic Dividend Fund (the “Acquiring Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol “AGD” (the “Reorganization”). As of the record date, August 11, 2022, the Fund had outstanding 10,620,970.682 common shares. 51.97% of outstanding common shares were voted representing quorum.

Reorganization Proposal :

Votes For

Votes Against

Votes Abstained

4,817,604

268,107

433,887

The shareholders of the Acquiring Fund approved the issuance of shares of the Acquiring Fund in connection with the Reorganization at a special shareholder meeting held on November 9, 2022. It is currently expected that the Reorganization will be completed in the first quarter of 2023 subject to the satisfaction of customary closing conditions. Further details on the Reorganization date will be made available in a future press release.

Self-Tender Announcement: Today, the Fund announced that the previously announced potential self-tender offer for up to 30% of its shares will proceed. The Fund’s Board has authorized an issuer tender offer to purchase for cash up to 30% (or 3,186,291) of its issued and outstanding common shares, without par value (the “tender offer”). The tender offer will commence on Thursday, January 12, 2023, and will expire, unless extended, at 5:00pm ET, on Friday, February 10, 2023, and purchases will be made at a price per share equal to 98% of the Fund’s net asset value per share as of the close of trading on the first business day after the expiration of the tender offer. If more shares are tendered than the amount the Board has authorized to purchase, the Fund will purchase a number of shares equal to the tender offer amount on a pro-rated basis.

November 30, 2022 | Delaware Investments® Dividend and Income Fund, Inc. Announces Results of the Special Shareholder Meeting Relating to the Proposed Reorganization With abrdn Global Dynamic Dividend Fund. Today, Delaware Investments Dividend and Income Fund, Inc. (the “Acquired Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol ( DDF ), announced that it held its adjourned Special Meeting of Shareholders (the “Meeting”) on November 30, 2022. At the Meeting, shareholders of the Acquired Fund voted to approve the reorganization of the Acquired Fund into abrdn Global Dynamic Dividend Fund (the “Acquiring Fund”), a New York Stock Exchange-listed closed-end fund trading under the symbol “AGD” (the “Reorganization”). As of the record date, August 11, 2022, the Acquired Fund had outstanding 7,611,158.16 shares of common stock. 62.48% of outstanding common stock were voted representing quorum.

Proposal :

Votes For

Votes Against

Votes Abstained

3,834,389

717,035

203,650

The shareholders of the Acquiring Fund approved the issuance of shares of the Acquiring Fund in connection with the Reorganization at a special shareholder meeting held on November 9, 2022. It is currently expected that the Reorganization will be completed in the first quarter of 2023 subject to the satisfaction of customary closing conditions. Further details on the Reorganization date will be made available in a future press release.

November 9, 2022 | Eaton Vance Closed-End Funds Announce Proposed Merger. The Boards of Trustees of Eaton Vance Tax-Managed Buy-Write Strategy Fund ( EXD ) (the Acquired Fund) and Eaton Vance Tax-Managed Buy-Write Opportunities Fund ( ETV ) (the Acquiring Fund) have approved a proposal for the Acquired Fund to merge with and into the Acquiring Fund. The proposed merger is subject to approval by Acquired Fund shareholders at a Special Meeting of Shareholders scheduled for Thursday, February 2, 2023 . A proxy statement/prospectus containing information about the meeting and the proposed merger will be mailed to the Acquired Fund’s shareholders of record as of November 21, 2022. No action is needed by shareholders of the Acquiring Fund. Each Fund is a diversified closed-end management investment company sponsored and managed by Eaton Vance Management. Each Fund is listed on the New York Stock Exchange. The Acquired Fund has the same investment objectives and substantially the same investment policies and restrictions as the Acquiring Fund. Additional information regarding the proposed merger will be contained in the proxy statement/prospectus. The merger is currently expected to be completed in the first or second quarter of 2023, subject to required shareholder approvals and the satisfaction of applicable regulatory requirements and customary closing conditions. If the merger is approved, each Acquired Fund shareholder will be issued common shares of the Acquiring Fund at an exchange ratio based on the Funds’ respective net asset values per share. Following the merger, the Acquiring Fund will continue to be managed in accordance with its existing investment objectives and strategies.

Recent activist or other CEF news

These are from the past month. Any new news in the past week has a bolded date:

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Commentary

Fresh off the presses are distribution cuts from PIMCO municipal bond CEFs. PIMCO has 9 muni CEFs, including 3 national muni CEFs, 3 California muni CEFs, and 3 New York muni CEFs. These cuts ranged from -20% to PFN to -45% to PCQ.

The market reaction was swift, with most of the funds falling on the day.

One fund, the CA muni fund PCQ, has declined (-14.69%) over twice as much as the second-worst performing CEF. The reason? PCQ closed yesterday at a +47.73% premium, making it by far the most expensive out of the PIMCO muni funds.

It was also puzzling why investors would be bidding up PCQ in the first place. Its market yield of 5.09% (pre-cut) was even lower than those for the other two CA muni CEFs, PCK (+5.16% premium, 5.54% pre-cut yield) and PZC (+8.39% premium, +5.43% pre-cut yield), thanks to its massive premium. Moreover, as PIMCO's latest UNII report shows, PCQ had the most negative UNII and the worst coverage numbers out of the 3 CA muni CEFs. As a result, it is not surprising that PCQ would cut the most out of the three funds.

This is yet again another lesson on why premium/discount valuation matters! When CEFs are at a large premium, they have much greater room to fall should sentiment sour for any reason.

Our Taxable Income portfolio owns PMF, which reduced its payout by -22%.

For further details see: