LGI: Recent U.S. Dollar Strength Proves Problematic For This CEF (Downgrade)

2025-01-08 14:52:18 ET

Summary

• The Lazard Global Total Return and Income Fund Inc. offers a high 10.98% yield, appealing to income-seeking investors without sacrificing equity exposure.
• The LGI closed-end fund has underperformed the major indices over the past five years, so investors are sacrificing return for income.
• The fund's recent underperformance is attributed to its currency investments, particularly short positions in U.S. dollars, which have suffered due to the dollar's strength.
• Trading at a 9.46% discount to net asset value, the fund remains a potentially valuable long-term holding despite short-term challenges.
• The fund is more expensive than many of its peers, but its long-term performance history is much better.

The Lazard Global Total Return and Income Fund Inc. ( LGI ) is a closed-end fund, or CEF, that income-seeking investors may wish to purchase as a means of achieving a very high level of income from the assets that they already possess. One of the nice things about this fund is that investors do not need to sacrifice their equity exposure in exchange for earning a high yield. This is because this fund invests its assets in a portfolio of common equity securities from issuers located in the United States and internationally. As I explained in a recent article , equities are better at providing protection against the loss of purchasing power that accompanies inflation. As regular readers are well aware, the inflation rate in the United States has been rising ever since the first interest rate cut in September:

In addition, some analysts and economists have made the claim that the implementation of tariffs proposed by the incoming Trump Administration will cause inflation to accelerate. However, a recent article by Barrons quotes Christopher Waller of the St. Louis Federal Reserve Bank, who doubts that narrative:

“If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy,”

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