ECAT - Weekly Closed-End Fund Roundup: Saba Continues CEF Battles (July 2 2023)
2023-07-14 06:04:57 ET
Summary
- 18 out of 22 CEF sectors positive on price, and 11 out of 22 sectors positive on NAV last week.
- Saba files lawsuits against 16 CEFs, seeking to invalidate share control provisions.
- The battle is heating up.
Author’s note: This article was released to CEF/ETF Income Laboratory members on July 6, 2023. 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 June 30th, 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, 18 out of 22 sectors were positive on price (up from 6 last week) and the average price return was +0.36% (up from -1.24% last week). The lead gainer was U.S. Equity (+1.89%) while Commodities lagged (-4.82%).
11 out of 22 sectors were positive on NAV (up from 4 last week), while the average NAV return was -0.48% (down from -1.25% last week). The top sector by NAV was U.S. Equity (+0.48%) while the weakest sector by NAV was Commodities (-5.60%).
The sector with the highest premium was Limited Duration (-0.58%), while the sector with the widest discount is Single-state Munis (-14.01%). The average sector discount is -8.02% (up from -8.36% last week).
The sector with the highest premium/discount increase was U.S. Equity (+1.04%), while Convertibles (-0.38%) showed the lowest premium/discount decline. The average change in premium/discount was +0.43% (up from +0.09% last week).
The sector with the highest average 1-year z-score is MLPs (+0.62), while the sector with the lowest average 1-year z-score is Real Estate (-1.11). The average z-score is -0.43 (up from -0.64 last week).
The sectors with the highest yields are Senior Loans (+12.47%), Emerging Market Income (+11.88%), and Real Estate (+10.63%). Discounts are included for comparison. The average sector yield is +8.14% (down from +8.18% 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 |
| abrdn Global Income Fund, Inc. |
| ( FCO ) |
| -4.41% |
| 14.61% |
| 40.59% |
| 2.2 |
| -3.52% |
| -2.46% |
| Calamos Convertible Opp Inc |
| ( CHI ) |
| -4.25% |
| 10.65% |
| 4.80% |
| -0.7 |
| -4.46% |
| 2.44% |
| RiverNorth Flexible Municipal Income II |
| ( RFMZ ) |
| -3.61% |
| 7.42% |
| -9.22% |
| 0.6 |
| -2.78% |
| 0.87% |
| Credit Suisse Asset Mgmt Income |
| ( CIK ) |
| -3.52% |
| 9.15% |
| 3.90% |
| 1.8 |
| 0.34% |
| -0.45% |
| Sprott Physical Platinum & Palladium Tr |
| ( SPPP ) |
| -3.13% |
| % |
| -0.92% |
| 1.0 |
| -0.09% |
| -0.94% |
| JHancock Premium Dividend Fund |
| ( PDT ) |
| -3.07% |
| 8.68% |
| -2.48% |
| -1.5 |
| -3.23% |
| 0.00% |
| Calamos Dynamic Convertible and Income |
| ( CCD ) |
| -2.79% |
| 11.11% |
| 5.19% |
| -1.1 |
| -3.08% |
| -1.88% |
| John Hancock Hedged Equity & Income Fund |
| ( HEQ ) |
| -2.69% |
| 9.64% |
| -8.63% |
| -1.8 |
| -3.80% |
| -1.28% |
| First Trust Spec Finance & Fincl Opp |
| ( FGB ) |
| -2.41% |
| 10.25% |
| -15.24% |
| -1.1 |
| -1.23% |
| -0.36% |
| Gabelli Equity |
| ( GAB ) |
| -2.29% |
| 10.62% |
| 8.03% |
| -0.6 |
| -2.59% |
| 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 |
| PIMCO Strategic Income Fund |
| ( RCS ) |
| 11.63% |
| 10.94% |
| 31.34% |
| 2.3 |
| 7.60% |
| -1.69% |
| Gabelli Utility Trust |
| ( GUT ) |
| 6.15% |
| 8.58% |
| 115.74% |
| 2.1 |
| 3.10% |
| -3.84% |
| Virtus Stone Harbor Emerging Markets Inc |
| ( EDF ) |
| 5.86% |
| 15.29% |
| 7.96% |
| 0.3 |
| 4.43% |
| -1.77% |
| PIMCO Corporate & Income Opportunity Fd |
| ( PTY ) |
| 5.40% |
| 9.98% |
| 32.81% |
| 3.4 |
| 2.07% |
| -1.04% |
| PIMCO Corporate & Income Strgy |
| ( PCN ) |
| 4.94% |
| 10.05% |
| 21.87% |
| 2.2 |
| 2.44% |
| -3.81% |
| RENN Fund ord |
| ( RCG ) |
| 4.70% |
| % |
| -13.16% |
| -0.4 |
| 1.65% |
| -1.26% |
| PIMCO High Income |
| ( PHK ) |
| 4.36% |
| 11.36% |
| 13.42% |
| 3.0 |
| 1.40% |
| 0.00% |
| NXG Cushing Midstream Energy Fund |
| ( SRV ) |
| 4.13% |
| 13.90% |
| 4.44% |
| 2.6 |
| 3.88% |
| -0.27% |
| The Central and Eastern Europe Fund |
| ( CEE ) |
| 3.60% |
| 2.58% |
| 11.45% |
| -0.7 |
| 2.10% |
| -0.92% |
| Duff & Phelps Utility and Infra Fund Inc |
| ( DPG ) |
| 3.47% |
| 8.43% |
| -9.69% |
| -2.9 |
| 2.47% |
| -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:
June 22, 2023 | Neuberger Berman High Yield Strategies Fund Announces Preliminary Results of Rights Offering.
Upcoming corporate actions
These are from the past month. Any new news in the past week has a bolded date:
June 23, 2023 | Nuveen Senior Loan Closed-End Funds Announce Shareholder Approval of Proposed Mergers.
June 7, 2023 | Goldman Sachs Asset Management Announces Liquidation of Goldman Sachs MLP and Energy Renaissance Fund.
March 30, 2023 | Center Coast Brookfield MLP & Energy Infrastructure Fund Announces Planned Reorganization .
March 27, 2023 | Kayne Anderson Energy Infrastructure Fund and Kayne Anderson NextGen Energy & Infrastructure Announce Proposed Merger.
Recent activist or other CEF news
These are from the past month. Any new news in the past week has a bolded date:
June 29, 2023 | Saba Capital Files Lawsuit Against 16 Closed-End Funds Over Control Share Provisions.
------------------------------------
Distribution changes announced this month
These are sorted in ascending order of distribution change percentage. Funds with distribution changes announced this month are included. Any distribution declarations made this week are in bold. I've also added monthly/quarterly information as well as yield, coverage (after the boost/cut), discount and 1-year z-score information. I've separated the funds into two sub-categories, cutters and boosters.
Cutters
Boosters
-----------------------------------
Commentary
Last week, Saba filed lawsuits against 16 CEFs managed by a number of different fund houses, in an attempt to "invalidate the Funds’ control share provisions as unlawful under the Investment Company Act." Michael D’Angelo, Partner and General Counsel of Saba, commented:
By adopting illegal control share provisions, closed-end fund managers, including BlackRock and its fund trustees, Franklin Resources, Tortoise and its fund trustee, Adams Funds and FS Investments, are depriving shareholders of their voting rights in desperate attempts to entrench trustees and investment advisors and avoid accountability for their own governance failures.
Today, Saba has filed litigation in the United States District Court for the Southern District of New York in an effort to put an end to the practice of vote stripping, which we believe has contributed to significant losses suffered by shareholders across these underperforming funds. We are seeking to hold these managers accountable in court, just as we have successfully done with both Eaton Vance and Nuveen.
The Investment Company Act is unambiguous in stating that ‘every share of stock hereafter issued by a registered management company…shall be a voting stock and have equal voting rights with every other outstanding voting stock.’ We are committed to taking all necessary actions to hold these investment managers accountable in order to protect closed-end fund shareholders and restore their fundamental, equal voting rights.”
The list of the 16 CEFs targeted are here:
- ClearBridge Energy Midstream Opportunity Fund Inc. ( EMO )
- ClearBridge MLP and Midstream Total Return Fund Inc. ( CTR )
- ClearBridge MLP and Midstream Fund Inc. ( CEM )
- Western Asset Intermediate Muni Fund Inc. ( SBI )
- Tortoise Midstream Energy Fund, Inc. ( NTG )
- Tortoise Energy Independence Fund, Inc. ( NDP )
- Tortoise Pipeline & Energy Fund, Inc. ( TTP )
- Tortoise Energy Infrastructure Corp. ( TYG )
- Adams Diversified Equity Fund, Inc. ( ADX )
- Adams Natural Resources Fund ( PEO )
- BlackRock Municipal Income Fund ( MUI )
- FS Credit Opportunities Corp. ( FSCO )
- Royce Global Value Trust, Inc. ( RGT )
- Ecofin Sustainable and Social Impact Term Fund ( TEAF )
- BlackRock ESG Capital Allocation Trust ( ECAT )
- BlackRock Innovation and Growth Term Trust ( BIGZ )
As shown in our Saba Activist Tracker sheet (sample below for our public readers), many of these CEFs are ones that Saba built significant stakes in. By removing control share provisions, it would make it easier for Saba to nominate board members and control the future direction of the funds.
Income Lab
Saba is not only waging battle against the CEFs in the courtroom, but also on social media. The Boaz Weinstein twitter account is worth following for those seeking to keep up to date with the Saba leader's thoughts. His last tweet railed against Glen Hubbard, Dean of Columbia's Business School who sits on 70 BlackRock boards at the same time.
Weinstein also referenced the recommendation of Institutional Shareholder Services Inc. (“ISS”), an independent proxy advisory firm, to support Saba's proposal for board members:
The battle is really heating up!
Strategy Statement
Our goal aims to provide consistent income with enhanced total returns. Our CEF rotation strategy includes trading between CEFs to exploit fluctuations in valuations. This is because CEF prices are inefficient, with investors often overreacting to both the upside or downside, or being unaware of upcoming corporate actions. This could help capture alpha from CEFs for the nimble investor.
We compare our performance against two benchmarks: the fund-of-CEFs ETF (YYY), and the global asset allocation portfolio ETF (GAA).
Income Lab
Remember, it's really easy to put together a high-yielding CEF portfolio, but to do so profitably is another matter! Our experience has been that it is very possible to earn profitable returns in CEFs. While there are numerous opportunities in the closed-end fund sector, it is essential to remain vigilant of the associated risks. Blindly chasing yield is not a prudent strategy.
For further details see:
Weekly Closed-End Fund Roundup: Saba Continues CEF Battles (July 2, 2023)