RA - Weekly Closed-End Fund Roundup: Tortoise Tender Offers Announced (August 27 2023)
2023-09-04 10:17:28 ET
Summary
- 9 out of 22 CEF sectors positive on price and 12 out of 22 sectors positive on NAV.
- Tortoise tender offers are announced.
- Tender offers are part of the funds' discount management program.
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 August 25th, 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, 9 out of 22 sectors were positive on price (up from 0 last week) and the average price return was +0.15% (down from -2.30% last week). The lead gainer was Commodities (+3.20%) while Convertibles lagged (-1.08%).
12 out of 22 sectors were positive on NAV (up from 0 last week), while the average NAV return was +0.16% (up from -0.07% last week). The top sector by NAV was Commodities (+3.46%) while the weakest sector by NAV was Single-state Munis (-0.70%).
The sector with the highest premium was Limited Duration (-0.25%), while the sector with the widest discount is Asia Equity (-14.66%). The average sector discount is -7.70% (down from -1.90% last week).
The sector with the highest premium/discount increase was Emerging Market Income (+1.59%), while Taxable Munis (-1.25%) showed the lowest premium/discount decline. The average change in premium/discount was -0.09% (up from -0.44% last week).
The sector with the highest average 1-year z-score is MLPs (+1.15), while the sector with the lowest average 1-year z-score is Taxable Munis (-1.47). The average z-score is -0.18 (down from -0.14 last week).
The sectors with the highest yields are Senior Loans (+12.65%), Emerging Market Income (+11.58%), and Real Estate (+10.84%). Discounts are included for comparison. The average sector yield is +8.30% (down from +8.37% 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 |
| Calamos Convertible Opp Inc |
| ( CHI ) |
| -3.70% |
| 10.94% |
| 7.20% |
| -0.1 |
| -4.23% |
| -2.46% |
| Nuveen Dynamic Municipal Opportunities |
| ( NDMO ) |
| -3.12% |
| 7.32% |
| -3.88% |
| -0.2 |
| -3.69% |
| 2.44% |
| JHancock Preferred Income |
| ( HPI ) |
| -2.82% |
| 9.90% |
| 0.81% |
| -0.4 |
| -2.67% |
| 0.87% |
| Gabelli Conv Inc Secs |
| ( GCV ) |
| -2.64% |
| 12.11% |
| -1.90% |
| -1.8 |
| -2.86% |
| -0.45% |
| Bancroft Fund |
| ( BCV ) |
| -2.61% |
| 7.76% |
| -14.43% |
| -0.7 |
| -2.83% |
| -0.94% |
| BNY Mellon Muni Bond Infrastructure Fund |
| ( DMB ) |
| -2.57% |
| 4.57% |
| -7.81% |
| -0.4 |
| -3.49% |
| 0.00% |
| Eaton Vance Tax-Managed Buy-Write Opp |
| ( ETV ) |
| -2.56% |
| 9.16% |
| -3.27% |
| -1.0 |
| -2.28% |
| -1.88% |
| Credit Suisse Asset Mgmt Income |
| ( CIK ) |
| -2.45% |
| 9.54% |
| -2.45% |
| 0.0 |
| -0.35% |
| -1.28% |
| Advent Convertible & Income Fund |
| ( AVK ) |
| -2.44% |
| 12.61% |
| -8.00% |
| -0.7 |
| -2.28% |
| -0.36% |
| MFS Municipal Income |
| ( MFM ) |
| -2.32% |
| 4.20% |
| -12.89% |
| 0.1 |
| -3.10% |
| 1.49% |
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 |
| Virtus Stone Harbor Emg Mkts Total Inc |
| ( EDI ) |
| 5.49% |
| 14.95% |
| 11.93% |
| 1.4 |
| 6.44% |
| -1.69% |
| NXG Cushing Midstream Energy Fund |
| ( SRV ) |
| 5.28% |
| 12.79% |
| 9.86% |
| 2.5 |
| 4.77% |
| -3.84% |
| Invesco Municipal Inc Opp I |
| ( OIA ) |
| 4.11% |
| 5.05% |
| 3.45% |
| 0.8 |
| 3.62% |
| -1.77% |
| Destra Multi-Alternative |
| ( DMA ) |
| 3.83% |
| 0.90% |
| -43.99% |
| -0.2 |
| 7.31% |
| -1.04% |
| Western Asset Global High Income |
| ( EHI ) |
| 3.04% |
| 11.28% |
| -0.28% |
| 1.4 |
| 1.57% |
| -3.81% |
| Cornerstone Total Return Fund |
| ( CRF ) |
| 2.58% |
| 17.55% |
| 23.57% |
| 0.7 |
| 3.08% |
| -1.26% |
| PIMCO Strategic Income Fund |
| ( RCS ) |
| 2.57% |
| 11.31% |
| 28.81% |
| 1.3 |
| 2.27% |
| 0.00% |
| Invesco Senior Income |
| ( VVR ) |
| 2.46% |
| 11.88% |
| -4.37% |
| 1.3 |
| 3.14% |
| -0.27% |
| abrdn Asia-Pacific Income Fund Inc |
| ( FAX ) |
| 2.23% |
| 12.45% |
| -11.96% |
| 1.5 |
| 1.92% |
| -0.92% |
| Brookfield Real Assets Income Fund Inc. |
| ( RA ) |
| 2.18% |
| 14.19% |
| 15.27% |
| 1.5 |
| 2.12% |
| -1.02% |
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. The mergers of Nuveen Senior Income Fund ( Nuveen Senior Income Fund (NSL) Stock Price Today, Quote & News ), Nuveen Floating Rate Income Opportunity Fund ( Nuveen Floating Rate Income Opportunity Fund (JRO) Stock Price Today, Quote & News ), and Nuveen Short Duration Credit Opportunities Fund ( Nuveen Short Duration Credit Opportunity Fund (JSD) Stock Price Today, Quote & News ) into Nuveen Floating Rate Income Fund ( Nuveen Floating Rate Income Fund ( JFR ) Stock Price Today, Quote & News) Stock Price Today, Quote & News) Stock Price Today, Quote & News) were successfully completed prior to the opening of the New York Stock Exchange on July 31, 2023 . The fund's newly consolidated portfolio contains approximately $2 billion in investments-the largest among listed senior loan closed-end funds. Through the mergers, a wholly-owned subsidiary of JFR acquired approximately all of the assets and liabilities of NSL, JRO, and JSD in tax-free transactions, and common shares of NSL, JRO, and JSD were converted to newly-issued common shares of JFR in an aggregate amount equal to the value of the net assets of NSL, JRO, and JSD. The transactions took place based upon NSL's, JRO's, JSD's, and JFR's closing net asset values on July 28, 2023. The exchange ratios at which common shares of NSL, JRO, and JSD were converted to common shares of JFR are listed below:
Ticker
Fund Name
Exchange
Ratio
NSL
Nuveen Senior Income Fund
0.58066176
JRO
Nuveen Floating Rate Income Opportunity Fund
0.98666856
JSD
Nuveen Short Duration Credit Opportunities Fund
1.45917932
In addition, JFR has declared the following monthly distribution. The distribution represents an increase over the previous month of 14%. [ Initial merger proposal ] [ Shareholder approval announcement ]
Upcoming corporate actions
These are from the past month. Any new news in the past week has a bolded date:
August 16, 2023 | Tortoise Announces Tender Offers for its Closed-End Funds.
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 .
July 10, 2023 | Virtus Stone Harbor Emerging Markets Total Income Fund Announces Distributions; Provides Update on Pending Merger.
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:
July 17, 2023 | Vertical Capital Income Fund Announces Appointment of Carlyle as Investment Manager and Rebrand to Carlyle Credit Income Fund.
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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
1. Tortoise Tender Offers
Tortoise has announced the final set of tender offers as part of its discount management program for their set of CEFs. The funds are:
- Tortoise Energy Infrastructure Corp. ( TYG )
- Tortoise Midstream Energy Fund, Inc. ( NTG )
- Tortoise Pipeline & Energy Fund, Inc. ( TTP )
- Tortoise Energy Independence Fund, Inc. ( NDP )
- Tortoise Power and Energy Infrastructure Fund, Inc. ( TPZ )
Tender offers are beneficial to investors is because they allow cashing out of a CEF close to NAV. With all of these midstream/infrastructure funds trading at deep discounts, this represents an instant profit on part of one's holdings. Moreover, since the shares are being repurchased at a slight discount to NAV, there is a small accretive effect to the NAV/share as well.
The reason that CEF managers usually don't willingly conduct tender offers is because they reduce AUM and hence fee income. Thus, the fact that Tortoise is conducting these offers voluntarily, rather than being strong-armed into doing in reaction to activist pressure, is a sign of management alignment with shareholders, in my opinion. (This is notwithstanding the fact that some of the Tortoise funds are now being targeted by Saba, but the discount management program was established before then).
In the last round of tenders, the pro-ration factors ranged from between -8.98% to -11.45%. We own NTG in our Tactical Income-100 portfolio, and intend to fully tender our shares. The tender offers are for 5% of outstanding shares at 98% of NAV. If more than 5% of shareholders tender their shares, the proportion of shares accepted will be pro-rated. This means that if one elects to tender all of their shares, a minimum of 5% of shares will be accepted, but possibly more depending on how many other shareholders tender. For example, if 50% of shareholders tender, then 10% of an investor's shares will be accepted for repurchase.
The tender offers are expected to commence on or around October 2, 2023 . Our recommendation for anyone holding any of the Tortoise funds is to tender all of your shares. Remember to inform your broker of your decision to tender (preferably a few days in advance of the expiry date as some brokers may have earlier internal deadlines), as the default action is to not tender.
Moreover, in the unlikely event that NTG or the other CEFs trade higher than a -2% discount (i.e., narrower than a -2% discount or at a premium), then one should not tender as you would get a better price by selling on the open market.
For further details see:
Weekly Closed-End Fund Roundup: Tortoise Tender Offers Announced (August 27, 2023)