The NAVigator: Recent Episodes
Active Investment Company Alliance
The NAVigator, from the Active Investment Company Alliance (AICA), talks all-weather investing and “excellence beyond indexing” through the use of closed-end funds (CEFs) & business-development companies (BDCs). AICA – a new organization that includes a diverse constituency that runs from investors through fund sponsors – aims to help investors & advisors plot a new and different course to financial success, via the tactical use of securities that mix active management within listed & non-listed structures. Subscribe now to get regular updates on everything you need to know to succeed with CEFs & BDCs.
Discount-capture investor Rob Shaker, Portfolio Manager at Shaker Financial Services, says that while closed-end fund discounts have widened through a strong season of earnings and a market returning to flirt with new highs, much of that action has been "good widenings," where a fund's net asset value goes up more than the price of the closed-end fund itself. With the market "snapping around" with heightened volatility, Shaker says that the indexes have been pulling up faster than closed-end funds can move, creating attractive buying opportunities. While liking that potential for gains, Shaker says that closed-end funds generally "have been pretty laid back," without much fear but also without much optimism, even as the market has resumed its climb higher.
Scott Caraher, Head of Senior Loans at Nuveen, says that the higher-for-longer interest rate environment has created "one of the most interesting and dynamic times" he has seen for senior loans in his 25-year career. Caraher, who manages Nuveen Floating Rate Income in both its closed-end and open-end forms, says that because senior loans don't face interest-rate risk, they are a powerful play in a market where Federal Reserve policy on rate direction is uncertain, noting that it's possible to create strong portfolios yielding about 7 percent, which he called "incredibly attractive ... on both an absolute and relative basis."
John Cole Scott, President of CEF Advisors, provides takeaways from the second quarter for closed-end funds and business-development companies, noting that the trend was for investors to make most of their money on net asset values rather than narrowing discounts, which creates potential for a strong second half of 2026 if there is an uptick in investor sentiment. Scott, the chairman of the Active Investment Company Alliance, brought forward data from his firm's quarterly outlook presentation this week, noting that it shows that while headline risks have hurt BDC prices, underlying strength should make for a strong rebound later in the year, particularly as the actions of the Federal Reserve become more clear.
Ray DiBernardo, Portfolio Manager for the XAI Madison Equity Premium Income fund, says he's concerned about the market's valuation levels — noting that it "has been expensive for quite some time" — and while he is not expecting "dark clouds and a horrible environment," there's more downside risk, which could lead to market compression that puts covered-call strategies back into the spotlight as a defensive play. DiBernardo, an analyst at Madison Investments, says the proliferation of options strategies should make investors more diligent about exploring strategies, and he discusses single-stock options versus index options and the risk-reward picture with each. DiBernardo notes that covered-call strategies aren't right for people "who believe the market will keep going straight up from here," but he notes that for nervous investors, the options strategy acts like portfolio insurance and the discount on a closed-end fund can help to make up for the upside potential that the strategy trades for that protection.
Axel Merk, President and Chief Investment Officer at Merk Investments, discusses Saba Capital's activist campaign that got him ousted as portfolio manager and president of ASA Gold and Precious Metals Ltd., a closed-end fund that was up nearly 200% last year but that still was branded with the label of being a "poor performer." Merk, who took over the closed end fund in 2016 and helped to nearly quadruple its assets in the last decade, says new management has no experience running a gold fund, and is only interested in narrowing the discount and generating fees for itself. He filed with the Securities and Exchange Commission and made other efforts to save the fund, but says any form of salvation is unlikely at this point. He also discusses prospects for the gold market, which has cooled significantly this year.
Kevin Dreyer, Co-Chief Investment Officer for value at Gabelli Asset Management, says that there are plenty of values left in a market that has returned to record levels, particularly when valuing stocks based on "what an informed industrialist or buyer would pay to buy the whole business." Dreyer, part of the team running Gabelli Equity Trust and some of the firm's other closed-end funds, says that finding businesses that are "A.I. resilient" and able to withstand and/or benefit from the development of artificial intelligence is important now, and he noted that sports teams are a big draw in that regard because " You can't have an algorithm or chatbot replicate the New York Knicks … but you and I can go out and buy MSGS, which owns the Knicks."
John Cole Scott, President of CEF Advisors, attended the Private Credit Summit hosted this week in New York City by Dechert LLP, and came away with a sense that private-credit markets have not yet gotten to the overheated levels that could turn investor fears of a blow-up into a financial reality. Scott, also the chairman of the Active Investment Company Alliance, discusses "stress tests" that Fitch Ratings did on some large perpetual business development companies to see how they would perform if market conditions changed dramatically, and found that the BDCs did not break under severe conditions. He also discusses how insurance companies putting money into the private credit and BDC industries is changing underwriting standards, adding a measure of safety that he says all private credit investors are likely to benefit from. Plus, he discusses his sense of where the market is in its current cycle, based on what he heard from institutional investors who were in attendance.
Ken Burdon, Partner in the registered fund practice at Simpson Thacher & Bartlett, discusses the Supreme Court's recent ruling against activist investor Saba Capital, a decision that could have a chilling effect on shareholder activism in the future. Burdon says the decision removes a key path based on the Investment Company Act of 1940 that activists took in pursuing cases over fund fees and structure. It doesn't stop the activists from pursuing cases, but makes it harder to do so, forcing them into state courts. Critics of activism have long held that professional arbitrageurs used federal courts to pressure closed-end funds into transactions that benefit activists' short term profit agenda at the expense of the long-term returns and investment objectives that the majority of investors pursued when buying into a specific closed-end fund.
John Cole Scott, President of CEF Advisors, says that index discounts are wide when compared to their three-year history, which makes it important for investors to find names where wide discounts are supported by improving fundamentals. Scott, who also is chairman of the Active Investment Company Alliance, says that both the national muni CEF index and the taxable bond CEF index have seen wider discounts that have "flipped relative values" especially given current economic conditions. Using his firm's "trifecta analysis," Scott examines four funds that he sees as the right kind of opportunities now.
Steve Baffico, Executive Vice President and head of listed products at Bluerock, which runs the Bluerock Private Real Estate fund, expects the real estate market to benefit as money moves from private credit , business-development companies and direct-lending strategies in pursuit of something with "hard assets and low obsolescence." That HALO trade should drive growth moving forward; Baffico discusses what the fund is focused on as it continues its transition from an interval fund to being a closed-end fund. That journey has included four hikes in distributions over the last four months, and Baffico says he explains what the firm is doing to quickly reach its target distribution rate of 8 to 8.5 percent.
Gordon Hamilton, Senior Managing Director for Kayne Anderson, Portfolio Manager for the Kayne Anderson Energy Infrastructure fund, says that there will be a big call on U.S. energy infrastructure companies to meet global demand for propane, butane, crude oil and natural gas as the world gets through the current energy crisis created by war in Iran. Coupled with an energy "supercycle" driven by artificial-intelligence needs, it is creating a positive long-term demand picture where infrastructure should be able to have persistent performance even if current events or A.I. expectations add concerns to the market.
Bryce Doty, Senior Portfolio Manager at Sit Investment Associates, says that "the worst is over as far as yields going up," noting that the next shift could be down, but he calls the conditions "tricky" and emphasizes that investors "need to be in the right part of the curve." Doty's case hinges on oil prices; if oil stays below $110, it's viewed as inflationary, but above that level "we have a problem, and so does the rest of the world." At that point, central banks will have to cut rates to "save economies from disaster." Doty, whose team manages $2.7 billion in closed-end fund-of-funds for separate accounts, likes two-year TIPS, municipal bonds and high-yield corporate bonds. He also discusses the IPO market, closed-end rights offerings and the quality of private credit investments.
John Cole Scott, President of CEF Advisors and the Chairman of the Active Investment Company Alliance, looks at the recent issues in business-development companies, which got hammered in March as the market punished software investments, including lenders who made loans to software firms. While BDCs rebounded in April, they remain significantly down, and Scott discusses how the companies with the biggest troubles have higher yields and bigger discounts, but the top performers are delivering a better return on equity and are the better, safer bet while the industry gets through the current rough patch.
Matt Freund, Co-Chief Investment Officer at Calamos Investments, says that productivity, GDP growth and earnings are "what matters," and that the headline risks that are driving consumer sentiment are "distractions" from a market backdrop that is solid. He says inflation remains the big risk, but notes that the investor sentiment is creating opportunities, particularly in closed-end funds, and especially in senior loans and high-yield bonds, where discounts have widened this year.
Dr. Mark Mobius, widely considered the father of emerging markets investor and a man who helped put the world into everyone's grasp during his long career running funds at Templeton, passed away in mid-April. John Cole Scott, President of CEF Advisors, recounts Mobius' legacy and lasting lessons by digging into interviews conducted by his father, George Cole Scott, Founder of the Closed-End Fund Letter, with Mobius over the decades. Scott, the chairman of the Active Investment Company Alliance, makes sure to include why Mobius felt that the closed-end fund structure was particularly useful for emerging markets investors following his value-oriented strategy.
David Gutierrez, Vice President at Liberty Street Advisors and part of the team running the Private Shares Fund, says that private markets are similar enough to public markets that artificial intelligence is now one of the big sweet spots in both. However, he says the best opportunities involve infrastructure more than AI itself. Gutierrez notes that the Private Shares Fund—an actively managed, continuously offered closed-end interval fund investing in late-stage venture capital and private company opportunities—is focusing heavily on AI infrastructure right now. For instance, he explains how the shift from copper-based to optical-based networking in servers has become an investable trend, and how this trend depends not on AI performance but rather on the demand for more AI technology support. Gutierrez also discusses shifting trends in how long private companies are waiting before going public, and how geopolitics could be impacting private firms.
Rob Shaker, Portfolio Manager at Shaker Financial Services, says that while the headlines may have investors on edge, the fear-based selling that gripped the market around the start of war in Iran created a "generic widening" of discounts for closed-end funds. Shaker, who is a "discount-capture investor," says the current widening and recovery was caused mostly by "the irrational effects of excessive selling pressures overall," which means that the bad news is not creating fundamental problems for industries so much as temporary issues affecting share values. He says we could see more generic widening and narrowing until the market gets clarity on the headlines.
With the market kicking business-development companies in the teeth, John Cole Scott , President of CEF Advisors, digs into his firm's data looking at "artificial-intelligence risk scoring" to find BDCs that have been hurt by headlines without holding tainted portfolios. BDCs relied heavily on software companies, due to the tech sector's blend of strong fundamentals, innovation and ability to resist economic fluctuations, but have suffered as investors fear for the future of software in the face of challenges from artificial-intelligence companies. Scott, who also serves as chairman of the Active Investment Company Alliance, went looking for BDC's with "low AI risk, clean credit and sensible leverage and costs," and came away from the analysis convinced that investors should lean into the troubles. Specifically, he mentions funds from Nuveen and Kayne Anderson as worth watching now.
Matt Weyandt, a client Portfolio Manager on the listed real assets team at Nuveen, discusses how buying "location-specific hard assets" in essential industries that deliver to a "Halo theme" — heavy asset, low obsolescence — creates a buffer against a market that is being driven by headlines and geopolitical risks. Weyandt says that real estate, infrastructure, utilities, midstream energy companies, communications and commodities are not immune to the headlines, but they are built to deliver regardless of market conditions, and he discusses Nuveen's wide range of options for accessing those assets through closed-end funds.
Kim Flynn, president at XA Investments, a firm that specializes in alternative investments, says recent private-credit bad news events have widened discounts and raised concerns over business-development companies and interval funds, but have likely created a buy-the-dip moment in the industry. She discusses how fund sponsors and advisers must do a better job educating investors on how these products get through worrisome times, but says she does not think the headlines or their attendant challenges on direct lenders will discourage yield-hungry private-credit investors in the long run.
John Cole Scott, President of CEF Advisors, says that closed-end funds are being buffeted in two directions due to current headlines, with war in Iran impacting net asset values and anchored interest rates impacting levered closed-end funds and discounts shifting to reflect both situations. Scott, who also serves as the Chairman of the Active Investment Company Alliance, says sectors that have benefitted from the chaos have been MPL and energy funds, while business-development companies and CLO equity funds have suffered. Scott also put his firm's "Trifecta analysis" to work, with four funds to consider now: ticker symbols AFB, ARDC, CSQ and MEGI.
Robert Gilhooly, Senior Emerging Markets Economist at Aberdeen Investments, says that the continuing war in Iran has put pressure on oil prices, but he expects them to stabilize short-term while the market determines what happens next. If the outlook becomes one where the Straits of Hormuz are closed off to shipments for a longer stretch of time, he says "If things get really bad, you could be talking $175 for a barrel of oil." Gilhooly discusses the investment adage that the first shots of war signal a time to buy, and says that investors likely will see solid opportunities, but that they might want to wait a little longer for more clarity if they didn't jump in with the very first shots. He also discusses how tensions should be good for income-producing investments like closed-end funds.
Ryan MacDonald, Portfolio Manager for the Bluerock Private Real Estate Fund, says that in a world teeming with market worries and broad geopolitical concerns, private real estate is "uniquely boring, in a good way." He says the market has taken its pain over the last three years through interest rate changes and the market cycle, but now values have receded creating a solid entry point. MacDonald, who also serves as chief investment officer at Bluerock, says that "Entry point is the single biggest driver of future value for private real estate returns," and he notes that on an inflation-adjusted basis, the market is now approaching valuation levels "not seen since the depths of the 2008 financial crisis."
The stock market has been beating up business-development companies, with the sell-off largely being blamed on the artificial intelligence boom and the high number of loans that BDCs make to software firms. Behind the theory that software companies will struggle to pay debts as artificial intelligence renders their products less useful and attractive, there are real loans, and John Cole Scott, President of CEF Advisors, digs into the math that is impacting the lenders and BDCs in general. Scott, who also serves as Chairman of the Active Investment Company Alliance, discusses two BDCs and shows how the headlines could be creating values that make the industry more attractive, not less, for investors who understand and measure the risk.
Robinhood Markets is launching its first closed-end fund, Robinhood Ventures Fund I, with the first IPO the closed-end fund space has seen in about four years and John Cole Scott, President of CEF Advisors, sizes up the prospects for the new issue, which intends to be a concentrated portfolio of private companies. Scott, the chairman of the Active Investment Company Alliance, discusses the role private equities can play in a portfolio, as well as the challenges investors face in sizing up a fund with a net asset value entirely based on the purported market value of shares that don't trade in public markets.
Chris Oberbeck, chairman and chief executive officer at Saratoga Investment Corp., says that increases in default rates are more of a return to normal than a sign of trouble for business-development companies or the economy. While stories like the First Brands bankruptcy and fraud case have market watchers looking for more trouble, the rest of the headlines in the industry are much more routine, which leads Oberbeck to think that recent activity is more a hangover coming from a time of particularly low defaults, rather than a sign of the start of a bad business cycle.
Kyle Brown, Chief Executive Officer at Trinity Capital, gives his outlook for the private credit and lending space, and notes that there could be some challenges for business development companies and private lenders late in the current economic cycle because returns from private credit generally have been declining. That has meant single-digit leveraged returns, Brown says, so "Investors are not happy." That, in turn, has led to redemptions in private funds and falling stock prices. Still, Brown says, that has created some opportunities for lenders and investors who keep digging to find gems; he sees the technology sector and continued capital expenditure spending as being particularly robust in the year ahead.
Nick Robinson, Deputy Head of Global Emerging Market Equities at Aberdeen Investments, says that the artificial intelligence wave that has pushed domestic stock markets to record highs is readily apparent around the world — including in countries that are not necessarily synonymous with technology — and that the capital expenditure wave should continue to power foreign markets if companies can monetize the potential gains created by AI. He also discusses how markets are weathering geopolitical events and why he thinks they will continue to push higher despite nervous headlines.
John Cole Scott, President of CEF Advisors, reviews the key takeaways from his firm's fourth-quarter review of action in the closed-end fund industry, focusing on fund consolidation trends that have occurred in the middle of booming asset growth for the industry, as well as discount levels and whether narrowing discounts set up 2026 for more muted results. Scott, the chairman of the Active Investment Company Alliance, also noted that a number of closed-end fund categories are off to a fast start to the new year, and while areas like international equities and convertible bonds are continuing strong performance from 2025, other areas like managed limited partnership funds and large-cap business-development companies have jumped ahead after struggling in 2025.
Stephen Davis, closed-end fund product specialist at Nuveen, says that while 2025 was a strong year for closed-end fund performance, price returns exceeded net asset value (NAV) gains, reflecting a narrowing of discounts, continuing a trend from 2024. Those narrower discounts will make it harder for that broad trend to continue in 2026, but he noted that municipal bonds and senior loans are two areas that should provide promising opportunities. Davis noted that 2025 saw significant merger and rights offering activity, a trend he expects to continue in the new year.
Kimberly Flynn, President at XA Investments, discussed the just-launched XAI Interval Fund Credit Index, which tracks the performance of non-listed closed-end interval funds and tender offer funds in the alternative-credit space, and how having the benchmark should help investors as they look at adding private credit and other alternatives to their portfolios. Flynn says the new index — which is not currently investable, so it is not the basis for a fund — is a sister to a broad interval fund index the firm introduced last year, both reflecting the growth in interval funds and in advisers' interest in adding them to consumer portfolios.
John Cole Scott, President of CEF Advisors, reviews the forecasts he made a year ago for 2025, grading his wins and losses on everything from inflation levels and Treasury yields to discount levels and the outcome in various sectors of the closed-end fund industry. Scott, the chairman of the Active Investment Company Alliance, also reviews the five funds he identified as buys for 2025 and how they turned out.
John Cole Scott, President of CEF Advisors, climbs his mountain of data to get a great view on the year ahead, and he's forecasting no recession, lower inflation and modest GDP growth for 2026, with less volatility coming from the rate picture but more market tension due to the global macro picture. Scott, who also serves as chairman of the Active Investment Company Alliance, also discusses what he sees happening in the closed-end fund industry, from the growth he expects to see in assets to the activism picture, down to what he foresees in leverage, return of capital and more. Plus, he's got five funds he's expecting big things from in the new year.
Richard Stone, Chief Executive Officer for The Association of Investment Companies (the British equivalent to the Active Investment Company Alliance), discusses differences in the activist investor cultures in the United States and Great Britain, noting that the British model is more about engagement with the board and a collaborative effort to improve the business, while the U.S. model has shifted towards an entrenched fight to make change and capture opportunities. With Saba Capital emerging as the leading activist on both sides of the pond, Stone discusses how he sees activism continuing to change. In addition, he discusses how interval funds are viewed in England, and whether "venture capital trusts" (the country's tax-advantaged alternative to business development companies) could work in private credit markets globally.
Bryce Doty, senior portfolio manager at Sit Investment Associates, says that "every time a new Fed chair comes in, they do something dumb," and with Jerome Powell on his way out as the chairman of the Federal Reserve, he expects some chaos that will create opportunities, potentially as soon as the next chairman of the central bank is announced. "The interpretation — and mis-interpretation — of what's going to happen is going to be crazy," Doty says, but that "complete mess" should create opportunity that turns out well for investors who ride it out and who "don't expect logic and reason to rule the day, at least for a quarter or two." Doty also talks about where he is moving money during tax-loss selling season and the changing discount picture as the market has returned to record highs.
Long-time activist investor Phil Goldstein of Bulldog Investors sat down with NAVigator host Chuck Jaffe at the Active Investment Company Alliance Fall Roundtable in New York City on Nov. 19 to discuss the current state of shareholder activism and why there seems to be so much less of it than there was just a few years back. While there have been moves and regulations that have made it harder for activist moves to succeed, Goldstein also says that there has been better fund management, resulting in less opportunity/need for activists to get involved.
John Cole Scott, President of CEF Advisors, looks at tax-loss selling season and whether it has started yet, noting that a few asset classes have largely been able to avoid situations where there will be widespread harvesting this year, while others (most notably business-development companies) may be poised for a lot of tax-driven reshuffling before year's end. Scott, who is the chairman of the Active Investment Company Alliance, also answers some questions on the value of tax-loss harvesting if it means selling a fund you like, and how he recognizes yield traps and spots big discounts that are poor buying opportunities.
The Active Investment Company Alliance held its annual Fall Roundtable in New York City on Nov. 19, and NAVigator host Chuck interviewed Ryan Paylor, Portfolio Manager at Thomas J. Herzfeld Advisors, which recently converted a closed-end fund from a focus on companies located in the Caribbean Basin — ticker Symbol CUBA — to one focused on collateralized loan obligations. Paylor explains the thinking behind the move and how shareholders reacted to the fund's drastic makeover.
Consumers have a tradition of going bargain hunting on Black Friday, but The NAVigator has a day-after-Thanksgiving ritual too, looking for discounts on closed-end funds with John Cole Scott, President of CEF Advisors and The Chairman of the Active Investment Company Alliance. For the fourth straight year, he's looking at market bargains in time for the holiday, and this year he is looking at two municipal-bond funds, two business-development companies and two direct offerings that the market has put on sale and that investors might want to consider wrapping up for their portfolios.
In an interview recorded at the Active Investment Company Alliance Fall Round Table in New York City on Wednesday, Nov. 19, David Tepper of Tepper Capital Management talks about the state of the closed-end fund business, ranging from the classic funds he has held for a many years to his concerns about the boom in private credit, the potential for trouble if the economy turns and what he might be looking to invest in if the market turns away from the large-cap tech companies that have been leading the way for the market.
Josh Duitz, Global Head of Income for Aberdeen — Manager of the Aberdeen Total Dynamic Dividend Fund — talks about where he is finding success in generating elevated income at a time when rate cuts are making it harder for investors to earn easy yields. Duitz discusses international investing and whether the rally overseas can continue in the face of reduced currency impacts, where high-flyers like the Magnificent Seven stocks fit in with his portfolio (or don't), and which sectors he is finding most attractive right now.
Seth Brufsky, Chief Executive Officer for the Ares Dynamic Credit Allocation Fund, talks about how the start of rate cuts and a falling interest rate environment impacts high-yield bonds, leveraged loans and collateralized loan obligations, noting that fixed-rate high-yield investments should get a boost from lower rates, but that the floating-rate paper also can benefit thanks to better arbitrage opportunities and improved credit quality. Brufsky notes that rate-cut environments should give active management an edge over passive funds, at least for a time as the market adjusts to the changes.
Ravi Chintapalli, Client Portfolio Manager covering leveraged finance for the Nuveen Global Fixed Income team, says that he has never seen a high-yield market that has been higher quality than what he is seeing now. That helps to explain tighter spreads, and suggests they should not shy away from high-yield because they're being compensated for "the true level of default risk in the market." On the loan side, Chintapalli says that while the Federal Reserve has entered a rate-cutting cycle, it shouldn't scare investors out of floating-rate loans, because they would be passing up high levels of income as a starting point to minimize default risks that are already quite low and likely to stay that way.
Discount-capture investor Rob Shaker, Portfolio Manager at Shaker Financial Services, says that he's "not seeing anything in the closed-end fund space that would point to any type of bubble conditions." He sees generic, slow widening of discounts happening now, mostly due to a mix of year-end tax-loss moves starting now and some fund-specific actions, rather than because investors have lost faith and courage in current market conditions. Still, Shaker does see potential market storms coming and he says investors should make sure they are comfortable that they can weather those flurries "and readjust to the better things that are on sale and then double-collect on the way up."
John Cole Scott, President of CEF Advisors, discusses the changing landscape of business-development companies and the details he gleaned from attending the recent Eversheds BDC Roundtable, which focused on legislative and other issues that are creating challenges and opportunities for the industry. Scott, the Chairman of the Active Investment Company Alliance, weighs in on the potential for changing quarterly reporting requirements, the impact of easing restrictions of holdings for retirement plans and more.
Drake Hicks, Head of Impact Investing at Variant Investments, discusses the unusual intersection of closed-end funds with impact investing, which goes beyond ESG (environmental, social and government principles) to invest in projects which have a purpose beyond just a profit margin. The firm runs the Variant Impact Fund, a high-yield closed-end interval fund whose assets are aligned with the United Nations' sustainable development goals, and Hicks talks about how shareholders benefit from the interval structure.
Ray DiBernardo, Portfolio Manager of the XAI Madison Equity Premium Income fund, says that covered-call strategies have become increasingly popular of late, as investors want to goose income while reducing market risk. DiBernardo, an analyst at Madison Investments, notes that investors have been intrigued by covered-call strategies for about two decades, but the availability of more options-based strategies through the advent of ETFs has made investors more aware of how to find income-enhancement through covered calls. DiBernardo, notes that covered call strategies did well in 2022, when the overall market was struggling, which also has increased their use as a hedge against market risk with the market trading at record highs.
John Cole Scott, President of CEF Advisors, talks about how current conditions have made for nervous times in the business-development company space, and he looks at history to determine whether the risks are systemic rather than situational. The conversation looks at how the BDC space has gotten extensive scrutiny recently from the Financial Times and on sites like Seeking Alpha, with some observers forecasting trouble ahead; Scott, who is also the chairman of the Active Investment Company Alliance, acknowledges the potential for trouble but also highlights the differences between the top tier companies and the weaker players to conclude that there is less danger than the coverage suggests.
Axel Merk, Chief Investment Officer of the ASA Gold and Precious Metals Fund, says that while gold has been rolling this year, the start of rate cuts along with a weakening dollar and persistent geopolitical risks (including tariffs) make it that there is no end in sight for the precious metals rally to continue. ASA Gold, which invests largely in junior mining companies, is up more than 100 percent year-to-date (compared to roughly 40 percent gains for physical gold ETFs), but still carries a double-digit discount, and Merk explains why that is logical given current market conditions.
John Cole Scott, President of CEF Advisors, acknowledges how many consumers shy away from closed-end funds, fearing complexity or an investment type they don't fully understand. The chairman of the Active Investment Company Alliance would obviously favor closed-end funds, but he sizes up situations where a closed-end fund and an ETF or a fund-of-funds cover the same asset class and why he would choose one over the other or whether he might mix and match for better balance.
In this interview from the "Money Life with Chuck Jaffe" podcast, John Cole Scott, President of CEF Advisors, discusses his "trifecta analysis" of closed-end funds and how he will frequently add or drop funds to take advantage of market conditions and make the most of tax circumstances, capturing incremental gains and minimizing incremental losses to squeeze the client's desired result in their portfolio.
Rob Thummel, Senior Portfolio Manager at Tortoise Capital, says that this is "the best time I have ever seen" in a three-decade career to be investing in energy. Thummel, who manages Tortoise Energy Infrastructure, notes that the U.S. has grown into the largest energy producer and energy exporter in the world, but that it now needs expanded infrastructure to build on that leadership position. Moreover, the energy sector and technology sector have come together with the development of artificial intelligence, which needs high levels of energy and which should drive demand for "decades to come," particularly in the natural gas sector.
Kimberly Flynn, President at XA Investments, discusses the recent executive order signed by President Trump that allows a dramatic expansion of alternative assets to be part of 401(k) and other retirement plans. While the headlines have made it seem like crypto bros will blow up their retirement plans with alternatives, Flynn discusses how many firms running life-cycle and target-date funds may decide to make allocations to more alternative asset classes, which could create opportunities for interval funds or closed-end funds. She also discusses when and if Bitcoin and other cryptocurrencies might be available in some from of closed-end offering.
Mitchel Penn, Managing Director of Equity Research for Oppenheimer & Co., says that business-development companies are now "fairly valued" by the market, which means that their biggest potential gains for the remainder of the year will come from simply capturing dividend payouts. In 2026, with the industry likely facing interest rate cuts, BDCs will see their return on equity shrink in line with rate declines, saying that for every 1% cut in rates, BDC payouts would be expected to shrink in step. In an interview from AICA's BDC Forum in June, Penn noted that he was worried about a spike in credit losses that BDCs experienced in the first quarter of 2025; he said that pressure has passed, dramatically reducing his concerns about the potential for BDCs to disappoint investors.
Matt Freund, Co-Chief Investment Officer at Calamos Investments, expects the Federal Reserve to make "a couple of cuts this year, followed by two or three cuts next year," and that those moves will be made while inflation stays at current levels or rise slightly. With those cuts, Freund thinks there will be a steepening yield curve, around 3 percent, creating more opportunities. Freund, whose team manages the Calamos Closed End Fund Income & Arbitrage ETF, says that the yield curve changes would bring borrowing costs down and "present a nice springboard" for closed-end funds, particularly among muni funds, the managed limited partnership space and funds with exposure to natural gas and small caps.
Kenneth Burdon, an attorney with Simpson Thacher and Bartlett, discusses the court case between Saba Capital and four closed-end fund sponsors that has wound its way to the U.S. Supreme Court and that is expected to force a change in the tactics of the industry's most prominent activist investor or in the way management companies protect themselves against aggressive shareholder actions. Saba challenged the four companies' actions in adopting a Maryland law that makes it more difficult for outside investors to gain control through a proxy fight. Burdon says Saba is the only company to challenge closed-end fund governance in federal court, and that the company could lose that tactic without significantly reducing its ability to pursue activist actions, just taking more common and traditional tactics used by others. Burdon says, based on precedents, that he expects the decision to come down in favor of the fund sponsors
John Cole Scott, President of CEF Advisors and Chairman of the Active Investment Company Alliance, digs into his firm's data to look at how many categories of closed-end funds are delivering double-digit yields now, in some cases doubling the average payouts in the underlying asset class. He talks about judging how real the big payouts are, and which areas of the market are delivering the best combination of yield and discount.
Jason Akus, Head of Healthcare Investing for Aberdeen Investments, says that current conditions for healthcare and biotech investing are making for "one of the most challenging, difficult and dislocated environments I've seen." While trades in technology, artificial intelligence and the Magnificent Seven stocks have driven the stock market back to record-high levels, Akus notes that healthcare has been flat in 2025 with biotech faring only slightly better; moreover, healthcare has been flat for two years, while the Standard & Poor's 500 was gaining about 40 percent. "It's not to say that healthcare is not growing earnings ... it's just been left behind" more attractive growth sectors. Akus says that creates a lot of opportunities and attractive valuations for healthcare and biotech investors, as he sees market conditions changing and "green shoots" emerging as long-term innovations and developments pay off.
Rob Shaker, Portfolio Manager of Shaker Financial Services, discusses "discount-capture investing," and how the market's wild moves around tariff announcements this year made the strategy particularly sensitive to the emotional changes of investors. Shaker says the overall trend for 2025 has been a "generic narrowing" of discounts — by roughly 2 percent on equities and 1 percent on fixed income — but there was a rapid, fear-based 'generic widening' when tariff policies were announced in April and there was excessive selling. Shaker says that discount fallout was particularly big and fast, though conditions normalized quickly, rewarding his clients for staying patient and opportunistic.
John Cole Scott, President of CEF Advisors, discusses how three areas that lagged during a strong first half of 2025 — municipal bonds, senior loans and master limited partnerships — are poised to be leading categories among closed-end funds for the remainder of the year. Scott, the chairman of the Active Investment Company Alliance, picks out funds that he thinks are poised for a good run in each category, and discusses refining asset allocation plans to deliver more-resilient income.
Kyle Brown, chief executive officer at Trinity Capital, sees the private-credit boom continuing, in part fueled by government efforts to generate business gains in the United States. That has created a new wave of capital expenditures — and a 20 percent year-to-date increase in demand for private credit — that is likely to power the private lenders for the foreseeable future. For Trinity, the company has doubled in size in roughly three years, but the current demand gives it room to grow further, and Brown says he believes business-development companies can handle the heightened demand without a significant increase in the default rate they are facing, adding that rate cuts could be another positive, reducing costs to stay profitable in the next phase of the rate cycle.
Mike Schueller, Co-Manager of the Allspring Income Opportunities fund, says that high-yield bonds are poised to be steady performers through the current wave of headline risks and market uncertainty because the economy is solid enough that there's no reason to expect a spike in defaults. With the potential for recession "having receded into the background," he's expecting a "muddle-through economy," with defaults remaining at current low levels, allowing high-yield to keep delivering "high, consistent income" and total returns at or above historic norms for the high-yield asset class.
John Cole Scott, President of Closed-End Fund Advisors — the Chairman of the Active Investment Company Alliance — answers listener questions about whether premiums and returns of capital are as bad for investors as they are often cracked up to be, on whether interval funds are worth the illiquidity risk and if the reasons why individuals buy closed-end funds means they are better used as short-term investment tools. Plus, our host asks a question that came up for him as he watched the AICA chairman on the stage at the group's recent Business Development Company Forum in New York.
Bob Marcotte, President at Gladstone Capital Corp., says that government policies which encourage business investment and capital expenditures are creating outstanding conditions for the private credit market. In an interview at the Active Investment Company Alliance BDC Forum in New York City, Marcotte said that Gladstone is "very bullish" on the likely capital-expenditure cycle being spurred by tariff and near-shoring policies, but the veteran money manager also noted that BDCs have never been more competitive with the public markets, thans to rapid expansion in recent years, moving the industry to a point where "there's so much money in the private market today that it's almost as liquid as it would be if it were in the broadly syndicated market."
Mitchel Penn, Managing Director at Oppenheimer & Co. — interviewed at the Active Investment Company Alliance BDC Forum in New York on Wednesday — says that credit losses for business development companies during the first quarter of 2025 were more than double the level they have been at for the last few years. Penn says some of that increase could be attributed to the market's reaction to government policies, but that it also could be that interest rates have stayed higher for so long now that they are starting to create credit-quality issues. He said BDCs can still deliver returns in the range of 9% moving forward, though he warned that an increasing number of business-development companies may struggle to earn their dividends, making it particularly important for investors to check under the hood to make sure the yield is real and not goosed by return of capital.
Tonnie Wybensinger, Head of Government Relations for the Small Business Investors Association — interviewed at the AICA BDC Forum in New York on June 11 — discusses the role that lobbyists play in the legislative process and how current efforts to improve the tax treatment of business-development companies, as well as to level the playing field with mutual funds when calculating expense ratios for fund-of-funds. Those efforts — which have been ongoing for years — could soon be coming to a head, with the BDC tax-parity legislation included in the "One Big Beautiful Bill" currently winding through Congress.
Michael Grant, Co-Chief Investment Officer at Calamos Investments — Co-Manager of the Calamos Long/Short Equity & Dynamic Income Trust — says that current market conditions have made it that bonds are no longer a natural working hedge for equities downturns, and the downside risk in terms of capital return can be greater in the bond market than in stocks. He notes that investors are over-exposed to Magnificent Seven and the biggest of the large-cap stocks — noting that the typical client has about 40 percent of their equity assets there — and they need to diversify away from those positions to be less market-sensitive. He worries that turning to bonds in an inflationary environment will create portfolio pain, so he's looking to non-correlated assets to ride out the rate cycle, tariff problems and more.
John Cole Scott, president of Closed-End Fund Advisors — the chairman of the Active Investment Company Alliance — discusses two mainstream media articles that purported to name "the best closed-end funds" and that were published right around the times when he appeared on The NAVigator and gave out his own investment suggestions; he digs into the data to compare how all of the suggestions turned out and see how one-size-fits-all advice actually suits individual investors. It's a lesson in evaluating funds, but also on sizing up the sources of investment recommendations.
Brian Griggs, head of portfolio strategy and solutions at Nuveen, says that investors have long had too much dependence on large-cap domestic stocks and an over-reliance on duration in fixed-income allocations, and he says that investors should address those pain points today to address macro-sensitivity caused by today's headlines. Using Nuveen's Nsights anaytical tool — a proprietary system that examines how portfolio changes impact future portfolio performance — Griggs says that investors want to address their portfolio problems now, including holding too much cash, to make portfolios better prepared to ride out the bumpy times ahead.
Mark Gatto, co-founder and co-chief executive officer at CION Investment Group, says that private investments have been weathering current storms better than public companies because illiquidity translates to stability in times when the market is volatile. Gatto says these markets have highlighted what private investments do well, which should boost their attractiveness moving forward, with heightened demand leading to better pricing as more investors see how well the private sector's valuations have held up while the stock market dropped into bear market territory and then rebounded.
Andrew Kohl, a Portfolio Manager with Aberdeen Investments — part of the team running the firm's Total Dynamic Dividend and Global Dynamic Dividend funds — says dividend-paying stocks are not immune from tariff concerns, and while investors often pick them for the income and don't want to make too many changes, it's important to to watch how the underlying business will be impacted by current conditions. Kohl says his portfolios have tilted toward international investments this year, noting that foreign markets have outperformed the U.S. since "Liberation Day." He also discusses two of his favorite dividend stocks, offers a guess as to why one of the funds has seen its discount narrow while the other has not, and more.
Danielle Poli, Portfolio Manager at Oaktree Capital Management, says the credit market is delivering returns that are close to the historic gains for equities, noting that the current set-up is reminiscent of times in the early 2000s when credit "smoked" equities. With high-yield bonds earning around 8 percent and private credit showing significant demand, Poli says that credit can be more than just "a great place to hide out," amid rocky conditions and uncertainty surrounding the stock and bond markets. In talking with corporate executives, Poli says she has come to expect a slower economic environment, with the potential for higher inflation from tariffs, creating the kind of environment where "you're going to want to be in credit over equities."
Bryce Doty, Senior Portfolio Manager at Sit Investment Associates, says that current market conditions have changed the opportunity set for investors, who now want to be trading up by unloading closed-end funds that have hardly moved in favor of issues that have swung more wildly, even if that means "holding your nose" on the quality of the funds you're buying. He says that he is playing NAV movement in muni funds but discount movement in categories like high yield. And for all of the turmoil, Doty says his prediction for fixed-income closed-end fund returns this year "is still double digits, it's just going to be different."
John Cole Scott, President of Closed-End Fund Advisors — The Chairman of the Active Investment Company Alliance — is back with funds that can fit the bill of giving investors confidence amid the current stock market chaos. After answering audience questions last week, he supplements those answers with three investment ideas, discussing the details of the "trifecta analysis" — covering data points on discounts, yields and net asset values — that he performs on all funds when he sizes them up.
John Cole Scott, President of Closed-End Fund Advisors — the Chairman of the Active Investment Company Alliance — checks in on how closed-end funds have performed since the government's tariff announcement, particularly in bond funds, where the outlook for yields has put fixed-income markets under pressure; he also discusses discount levels, strategies that closed-end fund investors might use now, and how the current situation compares in closed-end funds to the market decline around the Covid pandemic.
John Cole Scott, Chief Investment Officer at Closed-End Fund Advisors — Chairman of the Active Investment Company Alliance — continues The NAVigator's ongoing effort to answer audience questions, this week digging into nuts-and-bolts issues like how to find the best closed-end fund in any sector, how to judge if a fund might reduce its distribution or change its term date, and how to size up expense ratios and yields to make sure you are accurately judging costs and returns.
Eric Purington, Portfolio Manager for the aberdeen Global Income Infrastructure fund says that large-scale infrastructure investors have raised billions to pump into the big names in the sector, the smaller private-equity firms and the middle-market opportunities have struggled to bring in capital. That has created an opportunity that Purington has taken advantage of for the last few years and that he sees continuing, as the infrastructure space continues booming; middle-market opportunities grow and mature and really pay off when they become investment targets for those well-funded, big private-equity investors. Purington says this trend has persisted over the last few years, is not dependent on government issues or subject to as much political risk as other infrastructure ideas.
Tony Rodriguez, head of fixed income strategy at Nuveen, expects the Federal Reserve to make two interest-rate cuts this year — he calls them "recalibration cuts," made to stabilize the economy but not in response to a hard landing — which will boost floating-rate assets like leveraged loans, collateralized loan obligations and more. Speaking at FutureProof Citywide in Miami Beach, Rodriguez said the Treasury market is over-valued right now, but that the municipal bond market is the most attractive of long-duration assets, which are particularly good looking considering closed-end fud discounts in the muni space.
Roxanna Islam, Head of Sector and Industry Research at VettaFi, discusses PCEF — the Invesco Closed-End Fund Income Composite ETF — which she considers the bellwether measure of the closed-end fund industry, a parallel to the Standard & Poor's 500 but for a closed-end space that is rapidly changing. Islam talks about how the ETF — which recently celebrated its 15th anniversary and has $800 million in assets — has changed over the years, how its approach has changed and how it stacks up to newer players in the space and why ETFs are particularly good representing niche industries and investment areas.
Kimberly Flynn, President of XA Investments — which runs the XAI Octagon Floating Rate & Alternative Income Trust — discusses the development, growth and heightened demand in alternative investments, as well as how current market conditions around rates, tariffs and uncertainty are hitting the loan markets. She notes that the current picture for leveraged loans involves healthy borrowers and muted defaults, making for good fundamentals and a solid outlook. She notes that the uncertainty surrounding tariffs and Federal Reserve moves will lead to more volatility but also should create new opportunities for active managers.
John Cole Scott, Chief Investment Officer at Closed-End Fund Advisors — the Chairman of the Active Investment Company Alliance — returns to The NAVigator in an ongoing project to answer audience questions, this week diving into the world of business-development companies. He sorts out the differences between BDCs and closed-end funds, explaining why some investors — himself included — analyze BDCs like a closed-end fund rather than a stock, but then digs into his firm's data to show what to look for to find "safe" business-development companies, and how bad things could get if a BDC encounters trouble.
Richard Stone, Chief Executive Officer for The Association of Investment Companies — the British equivalent to the Active Investment Company Alliance — discusses the similarities and differences in the closed-end fund industry between the two countries, and how activist investors, most notably U.S. based closed-end powerhouse Saba Capital, have struggled to gain traction in boardroom battles.
Jim Baker, Co-Head of Energy Infrastructure Strategies for Kayne Anderson Capital Advisors — President of the Kayne Anderson Energy Infrastructure Fund — discusses generating "excess free cash flow" that helped the midstream index generate gains of over 50 percent for fiscal 2024, an impressive gain that still actually lagged the total return of his fund. Moving forward — and despite a political climate that he says could be a double-edged sword in the infrastructure space — Baker sees gains continuing potential for the sector to earn gains in the "low to mid-teens" for the next three to five years, fueled by the power demands of artificial intelligence, data centers and other applications.
Christian Munafo, chief investment officer at Liberty Street Advisors — the manager of the Private Shares Fund — discusses how there are plenty of opportunities among late-stage venture companies working to make a splash in the artificial intelligence field, but how hard it is to find the transformational companies positioned to succeed. He discusses what he is looking for, and where he thinks the best prospects are, and also gives an update on initial-public offering and mergers-and-acquisition action, as well as how market conditions have stiffened for private companies looking to raise capital now.
John Cole Scott, chief investment officer at Closed-End Fund Advisors — the chairman of the Active Investment Company Alliance — brings his data and portfolio-management methods back to The NAVigator to answer questions from listeners, covering concerns for California municipal bond funds in the wake of recent wildfires, how a steepening yield curve will impact discount levels, why investors shouldn't worry if closed-end funds don't appear to be keeping up with the stock market, and how historical levels of returns for closed-end funds compare to traditional mutual funds and other alternatives.
Miguel Laranjeiro, investment director for municipal debt at Abrdn, says the appetite for muni-bond assets has been growing at a point when "tax-exempt yields look really attractive," with tax-equivalent yields running up to 6 percent for investment-grade bonds, an attractive option compared to corporate and other bond types. Laranjeiro notes that potential policy changes being discussed in Washington are likely to help muni-bond investors and issuers, and that the biggest concern — a repeal of the tax exemption for muni bonds — is unlikely, and would not impact current paper if enacted. Further, Laranjeiro discusses how the wildfires in California — and similar disaster scenarios — are having some unexpected impacts on the muni-bond market.
Larry Holzenthaler, Portfolio Manager for First Eagle Alternative Credit — part of the team running First Eagle Credit Opportunities fund — gives his outlook for credit markets in 2025, noting that after avoiding default troubles when rates were rising, it should be stronger now, with paper being particularly strong in private credit. Holzenthaler further explained why private credit benefits from the interval fund structure and discussed how liquidity and valuations are shaping up in private credit now.
Mark Gatto, Co-Founder and Co-Chief Executive Officer at CION Investment Group, says that the landscape for global infrastructure spending could be as high as $3 trillion annually worldwide, which is going to create an investment asset class that is consistent, that can overcome political challenges, and that has public and private investment opportunities with significant earning potential. CION recently announced that it was teaming with GCM Grosvenor on the new CION Grosvenor Infrastructure Fund, which is currently going through the launch process — which includes a seed portfolio with nearly $300 million in assets — that should be available to advisers and investors before March.
John Cole Scott — president of Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance — revisits the forecasts he made for the closed-end fund business a year ago and to grade himself as a soothsayer. Having made his 2025 calls for closed-end funds a week ago, he puts some weight behind his prognostications by showing that, for the second year in a row, the data that's now in the books proved most of his predictions to be correct.
John Cole Scott, President of Closed-End Fund Advisors, doesn't have a crystal ball, but he does have a mountain of data, and he digs through it to look at the stories he anticipates to be central to the closed-end fund landscape in the new year. Beyond looking at the big stories, John identifies five investments poised for breakout performances in the next 12 months.
Ken Burdon, a partner in the registered funds practice at Simpson Thacher and Bartlett, discusses how the return of President Donald Trump might benefit closed-end funds. One key development he will be looking for is for the approval of new investment vehicles that give retail investors more access to private credit markets and other alternative assets that have been until now the domain of affluent investors and institutions. He notes that the first Trump Administration was generally in favor of making more investment opportunities available, and he thinks that will pick up in the new term, especially with the selection of Paul Atkins as a potential new SEC chairman. Burdon also talks about how activist investors might be impacted by the regime change.
Ravi Chintapalli, Client Portfolio Manager on the Global Fixed Income team at Nuveen, says that the bond market has seen a structural change in the market for below-investment grade or junk bonds. Chintapalli says investors think of junk bonds as it was in times like 2007, when nearly one-third of the paper was teetering on the edge of default; today, however, only 10 percent of the below-investment grade paper carries those same low ratings, and default risk is much lower than in the past. As a result, investors can expect high-yield bonds to live up to their promise, with 7 percent income levels moving forward, and some extra risk cushion in the many cases where the bonds are selling below par.
Michael Lowenberg of White Mountain Capital — Portfolio Manager for the Modern Capital Tactical Income fund (ticker MCTOX) discusses the factors he considers when picking closed-end funds for the portfolio. Lowenberg — whose fund buys both stocks and closed-end funds — likes the funds for their downside protection, and explains that he values the assets for the portfolio more than he values any discount, noting that he will actually buy funds trading at a premium if conditions are right. He particularly likes high-yield funds right now, dislikes tech-heavy issues and is a bit heavy in cash with discounts having narrowed in recent months.
Kevin Mahn, President and Chief Investment Officer at Hennion & Walsh Asset Management — which runs the Smart Trust Unit Investment Trusts — says that he expects the Federal Reserve to cut rates over the next two years, which will drive investors to turn for income alternatives "since they can't find the 5 percent in the short-term CDs any more." That will drive investors toward business development companies and leveraged municipal closed-end funds, the latter benefitting from a reduced cost of leverage in a declining rate environment, as rates drive down. Mahn talks about using unit investment trusts — and specifically covers his firms UITs that invest in BDCs and closed-end funds — in current conditions, and talks about how the UIT structure can be a benefit for investors now.
The day after Thanksgiving is all about shopping at the biggest possible discounts, and John Cole Scott of Closed-End Fund Advisors puts a closed-end fund spin on it for the third straight year, culling through funds the way bargain shoppers look for the best deals. Scott — Chairman of the Active Investment Company Alliance — identifies three different closed-end funds and one business development company that, based on his firm's data, are particularly good bargains entering the holiday and tax-loss selling seasons.
The NAVigator this week offers a taste of the action from the Active Investment Company Alliance's 2024 Fall Roundtable, which was held on November 13 in New York City. Individual investor Jim Cohen discusses how consumers in closed-end funds are caught between activist "whales" and fund sponsors, wanting to hold funds to account to narrow discounts and improve management, but sometimes coming away with lesser results. Axel Merk, President and Chief Investment Officer at Merk Investments — manager of ASA Gold and Precious Metals Limited — discusses why gold has worked better as a geopolitical hedge but has been less successful as an inflation hedge. He adds that precious metals perform better in higher-rate environments, and he doesn't think the current round of rate cuts will go so far as to pose a problem for gold in the medium term.
Josh Duitz, Portfolio Manager for the Aberdeen Global Infrastructure Fund, took a break from the program at the Active Investment Company's Fall Roundtable in New York this week to discuss the state of infrastructure investing now that the presidential election has been decided and the policies of the second Trump Administration are becoming more clear. Duitz says that deregulation and lower corporate taxes will help certain freight, for example, balancing out initial concerns about how tariffs might impact demand. He also notes digs into renewable energy — which critics have said they expect the Trump Administration to hurt — noting that he expects demand to keep it rolling, with some of that demand also coming from the nation's increasing reliance on artificial intelligence.
Jared Hagen, Vice President at XA Investments, discusses this year's unprecedented growth in interval and tender-offer funds and how the number of funds in registration guarantees the trend will continue through 2025. Hagen talks about why the investment community has taken a shine to interval funds and covers how the expansion into the space has included some unique partnerships, with firms like KKR and Capital Group pairing up to bring new products to market.
John Cole Scott, President of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, digs into his firm's data to break down a great three-month stretch for closed-end funds and business development companies. He says it was a period in which discounts narrowed dramatically and changed the opportunity set without it becoming overvalued or unattractive.
Jonathan Browne, Senior Investment Analyst at RiverNorth Capital Management — and Portfolio Manager on five of the firm's municipal bond closed-end fund-of-funds — says that the headwinds that made for big struggles in the muni bond space have shifted to become tailwinds, creating opportunity despite the strong recent rebound among muni bond funds. Browne says that the rising-rate cycle had led to discounts reaching the 12 to 15 percent range — a level previously only reached during financial crises — making munis about as cheap as they had ever been. Now, even after a run of more than 30 percent, muni closed-end funds are at the 70th percentile of cheapness, with "quite a bit of room to run."
Dana Staggs, President of Arrowmark Financial Corp., talks about how regulatory capital relief securities — bank-generated floating-rate notes that are currently producing yields of up to 15 percent — can function as an alternative investment. He notes that due to their emergence during the financial crisis of 2008, regulatory capital relief securities can also function efficiently in low-rate environments. Staggs says he believes the economy has "a lot of room to absorb continued declines in interest rates," and that banks are relatively healthy right now. However, he notes that concerns over potential troubles in commercial real estate can't be ignored.
John Cole Scott, President of Closed-End Fund Advisors and the Chairman of the Active Investment Company Alliance, discusses interval funds and digs into the data on four funds that use the structure to create promising investment opportunities for investors. Plus, learn about the NAVigator Podcast's first-ever contest, in celebration of its fifth anniversary!
Sean Feeley, part of the U.S. High Yield Investment Group at Barings, says he believes that with the bulk of interest rate adjustments happening at the short end of the yield curve, a wave of refinancing of shorter-term debt is coming, and that this typically makes high-yield investments look more attractive. Feeley expects the economy to avoid a recession, with strong balance sheets contributing to a soft landing situation that plays out into 2025.
John Cole Scott, President of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, looks ahead to the fourth quarter on today's podcast. He discusses two equity and two fixed-income funds that hit his trifecta — an analytical mix of discount, dividend, and net asset value — and that he says look particularly promising for year-end portfolio moves.
Miguel Laranjeiro, Investment Director at abrdn, says we are seeing "the beginning of a robust in-flow cycle into the muni space," noting that credit spreads and all-in yields are attractive and that the value of the tax exemption will particularly pay off now. He says he expects the Federal Reserve's long-awaited rate cuts will end the longest yield curve inversion ever for municipal bonds. Once the yield curve has normalized, Laranjeiro expects leverage costs to become a positive for the total return of levered muni funds, creating an additional impetus for investors.
Mitchel Penn, Managing Director of Equity Research at Oppenheimer and Co., says that while business development companies (BDCs) have struggled this year, they are positioned well to ride out the changing interest rate cycle. He says that when the Federal Reserve starts cutting interest rates, he expects BDCs to see higher fee income, though some of that could be offset by a higher level of defaults. However, he notes that because those defaults are a hangover from high-rate conditions, they have already been priced into many portfolios, creating a cushion against potential credit losses. Penn also discusses the kinds of BDCs that balance out the current risks and that historically have generated high returns on equity with low credit losses, naming several BDCs that fit that description.
John Cole Scott, President of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, discusses how investors in funds trading at premiums can use sector swapping to turbocharge their gains. He describes a process where an investor sells out of funds trading at premiums and purchases similar funds trading at discounts, locking in profits and expanding the buying power of their money. He cites examples of how making swaps — even within the same fund family — could deliver instant advantages.
John Cole Scott, president of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, explains how closed-end funds have responded historically to corporate actions like tender offers, liquidations, transitions to open-end funds, rights offerings, and big changes in dividend policy. He notes that understanding how those events play out gives investors a guideline on what to look for and how to act if they see those same actions in the funds they own.
Maury Fertig, Chief Investment Officer at Relative Value Partners, discusses how the changing interest rate picture is impacting considerations on the closed-end funds he is considering for client portfolios — and which areas of the closed-end fund universe look particularly attractive now. He also talks about how a number of BlackRock funds are performing in the wake of a recent tender offer.
Chris Oberbeck, Chairman and Chief Executive Officer at Saratoga Investment Corp., says that private credit — which has been on the rise for several years — is being challenged by a cooling market for mergers and acquisition activity. That has put pricing pressure on managers, which should ease a bit as rates come down and mergers and financing deals become easier to do.
Aaron Filbeck, Managing Director of the Chartered Alternative Investment Analyst Association (CAIA), discusses interval funds, their evolution, fee structures, and potential. He also responds to recent media coverage that has been critical of them as investment vehicles, including a recent Wall Street Journal article on how interval fund fees "will leave you high and dry."
Kimberly Flynn, Managing Director of Alternative Investments at XA Investments, discusses the state of interval funds, which have been growing rapidly and expanding their asset reach. It's not just the 50-plus funds on file and the entry of big players and new investment ideas, but also the recent rise in media interest. In the interview, Flynn responds to a recent Wall Street Journal article critical of interval funds and their fee structure.
Duncan Farley, Portfolio Manager on the Developed Markets Special Situations team at RBC BlueBay Asset Management — manager of the BlueBay Destra International Event-Driven Credit Fund — says corporations that have been "dining out on cheap finance" now have indigestion because their debt levels, leverage, and costs have gone up, so "the math doesn't work." As a result, he's expecting trouble for corporate paper globally, with a sharp rise in default rates, though he notes that creates opportunities for special situations investors.
John Cole Scott, President of Closed-End Fund Advisors — the chairman of the Active Investment Company Alliance — provides an update on what's happened with closed-end funds through the first half of 2024, noting that discounts narrowed almost across the board, but yields increased, resulting in positive returns for most asset classes.
Jason Akus, Senior Investment Director and Head of Health Care Investing at abrdn — Manager of the firm’s four closed-end funds covering biotech and health care — says that the stock market appears to be broadening out and that health care and biotech are both likely to be beneficiaries. Health care stocks have generally lagged the stock market since the start of 2023, but with the Standard & Poor's Health Care index up 11 percent in 2024 — respectable but still trailing the broader S&P 500 by about seven percentage points — there are strong signs of recovery. As the catch-up trade materializes, Akus believes there will be no shortage of potential opportunities ready to benefit even if the economy begins to
Mark Gatto, Co-Founder and Co-Chief Executive Officer at CION Investment Group — which runs CION Investment Corp., a business-development company — discusses the heavy interest and cash-flow into BDCs and how that is changing the space and making it important for investors and advisers to "pull back the layers to understand what they are investing in," paying particular attention to the deals and credit quality a BDC gets involved in. Gatto says that the biggest players in BDCs are becoming "very homogeneous, a lot of them are doing the same thing and you will not see a lot of differentiation when you get very large," but that also creates opportunities for investors who want to diversify their BDC holdings by investing in middle-market deals, where smaller BDCs can be more nimble and offer different exposure.
John Cole Scott of Closed-End Fund Advisors — The Chairman of the Active Investment Company Alliance — compares two high-yielding offerings from Ares, breaking down Ares Dynamic Credit Allocation (ARDC) and CION Ares Diversified Credit I (CADUX) to show that while both could be viable and attractive options for investors diversifying a portfolio into the alternative credit space, there's much more to picking between them than big yields, reasonable expense ratios, discounts and recent results.
John Cole Scott, President of Closed-End Fund Advisors — The Chairman of the Active Investment Company Alliance — returns from a recent industry conference that was focused on business-development companies and he gives his takeaways from the event, including how BDCs compare to private credits, how the market is changing and how some money managers are using artificial intelligence to get better information on the market trends that should help them pick better investments or to have better timing on the trades they make and more.
Roxanna Islam, Head of Sector and Industry Research at VettaFi, discusses the benefits and flaws of applying rules-based investing to closed-end funds, noting that changes in the industry have forced changes on a rules-guided index of the closed-end fund space that was created by VettaFi, and how that is impacting the holdings and asset allocation of the fund-of-funds that some investors are using instead of building their own portfolio of individual closed-end issues.
Rob Shaker, Portfolio Manager at Shaker Financial Services — who follows what he calls a "discount-capture" investment style in closed-end funds — discusses the moves that fund companies have made to enhance yields, narrow discounts and discourage activist investors, and says that while they might have a slight impact on the equilibrium of the industry, they're not eliminating opportunities. "It's actually a positive," Shaker says, noting that it makes no difference to him if it's an activist or the fund sponsor that is helping the discount. "Either way," he says, "I'm winning. ... Any time the industry as a whole starts thinking 'We all want our discounts to narrow a little bit,' that's good for all of us."
Dave Lamb, Head of Closed-End Funds at Nuveen, says there is a "much more aggressive form of activism today than what we saw years ago," nd notes that it's driven entirely by discount-arbitrage opportunities rather than whether a fund is underperforming due to management decision-making. With discounts at wide levels — particularly for fixed-income funds —sponsors like Nuveen are taking more steps to cut the gap and reduce their funds' attractiveness to activists. Lamb discusses Nuveen's strategies — largely focused on enhanced distribution tactics, trying to drive demand and narrow the discount — which included moves to increase distributions on more than two-dozen funds announced at the start of this week.
John Cole Scott, President of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, talks about the good and bad in recent industry developments. For example, Scott discusses how fund sponsors are taking steps to keep a lid on discounts, potentially reducing a fund's attractiveness to activist investors. He also highlights the trend towards managed payouts and how investors should size up distributions that might be connected more to marketing materials than to what a fund can actually deliver.
Stephen Minar, Managing Director and Head of closed-end funds at BlackRock, discusses how discounts drive money flows into closed-end funds, but they also attract activist investors whose actions may be harmful to long-term individual investors. BlackRock has created some initiatives in a series of new funds that can reduce discounts — making a fund less likely to attract activist investors — while increasing consistency in distributions, hoping to make the issues more useful and enticing for investors and investment advisors.
Charles Lewis Sizemore, chief investment officer at Sizemore Capital Management, says that while short-term rates are as high as they are likely to be, the "massive discount" created in closed-end funds while rates were on the rise have not dissipated. That means closed-end funds remain a compelling value now, and Sizemore said he is finding particularly strong values in REIT-oriented funds and term funds. However, he noted that he's not a big fan of most equity-based funds now because with the market looking frothy "you probably don't want to be adding leveraged exposure to the stock market."
Clayton Triick, Head of Portfolio Management, Public Strategies at Angel Oak Capital Advisors — part of the team running the Angel Oak Strategic Credit Fund — says that fundamentals and valuations seldom get aligned the way they have right now for the U.S. housing market and American homeowners. He notes that valuations are "cheaper than they should be" given the strength of the market and mortgage holders, creating opportunity. Triick says homeowners "did a really good job of locking in low mortgage rates," making them the big winners of the rising rate environment and making mortgages look more attractive than other bond types — particularly corporates where valuations have gotten rich relative to the economy's strong fundamentals.
Christian Munafo, Chief Investment Officer at Liberty Street Advisors, which runs the Private Shares Fund, discusses how late-stage private venture companies are generating a huge chunk of economic power off most investors' radar. He says now is the time for many investors to pursue the opportunity, coming off of two years in which private shares struggled and markets for taking those companies public stalled. Munafo believes the recent pickup in IPOs is a positive sign. He also discusses Destiny Tech 100, an exchange-traded closed-end portfolio that has been trading like a meme stock, with massive gains — but also nosebleed losses — since its debut in March.
Jonathan Mondillo, head of North American fixed income for abrdn says that record discount levels for municipal bond closed-end funds, coupled with attractive yields on those funds, are creating real opportunities for investors, though he warns about the middle of the yield curve, noting that the most compelling values are at the two ends of the barbell -- the short-term and long-duration paper -- which he expects to continue even as the rate cycle plays out and the Federal Reserve finally moves to cut rates.
John Cole Scott, President of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, drills into the first-quarter data for closed-end funds. He notes that while municipal-bond funds still couldn't break out of their long-running slump, the first three months were a strong time for most closed-end funds (more than 90 percent were up for the period).
Bryce Doty, Senior Portfolio Manager at Sit Investment Associates, says the uptick in inflation is not enough to overwhelm the yields investors are earning, noting that real returns may be better than ever. He says investors should enjoy collecting the high yields while interest rates remain high, and while total returns should improve once cuts start, investors will have to wait for that to happen. Doty does not expect meaningful rate cuts this year -- he anticipates two reductions, one after the election -- but says that the long-term average gap between the Fed funds rate and inflation is well above its typical zero, so the central bank can cut rates and have a positive gap, meaning it can claim to be tough even as reductions start. Doty anticipates the important cuts -- the ones which narrow that gap back to near zero -- will occur in 2025.
Harin de Silva, manager of the Allspring Global Dividend Opportunity fund, says that the U.S. markets have remained among the best income-generating investment opportunities when it comes to the yields being generated relative to the risks being taken. While he favors a global allocation, de Silva noted that the fund has a surprising tilt toward the United States, helped along by the low volatility levels due to the strength of the U.S. economy. Globally, however, de Silva notes that the big surprise in recent markets has been how the bad news and headlines from Ukraine and Israel -- along with troubles at both the Suez and Panama Canal -- have not created uncertainty in the market and convinced investors to stop taking on risk.
Nicholas Marshi, editor at the BDC Reporter, talks about the struggles business development companies (BDCs) had at the end of 2023, saying he was shocked to see that more than a third of the BDCs his publication tracks were "performing below ... reasonable expectations regarding their key metrics." He says that troubles tend to spiral for a few quarters before they get sorted out. Marshi also notes that no BDC has cut dividends yet, leaving "a really wide disparity of value between the BDCs" and making this a classic stock-picker's market in the space.
Axel Merk, chief investment officer of the ASA Gold and Precious Metals, discusses the impact that Saba Capital Management is having on the fund and on shareholders as it entered the fund as an activist, moving to change the board as it pushes for a double-digit discount to be narrowed. Merk discusses the challenge of dealing with activist investors in a junior mining fund, the potential for the fund to be liquidated, the possible outcomes and the impact of the action on shareholders.
Dan Omstead, global head of health care investments at abrdn -- part of the team running the firm's Healthcare Investors, Life Science Investors, Healthcare Opportunities and World Healthcare funds -- says that after several years of struggling, the recent rally in health care and biotech is significant, the start of a positive trend that should be able to withstand the pressures of an election year to keep running higher from here. Omstead identifies a few areas -- most notably the GLP-1 weight management drugs -- that have the potential to not only change the world but to become massive sellers as they make and take over the market.
Cory Johnson, chief executive officer at Pender Capital -- which runs the Pender Capital Real Estate Credit Fund, a closed-end debt interval fund -- says that there's "an abundance of very interesting opportunities" as the commercial real estate market goes through big changes as regional banks pull back from the sector and reduce liquidity for borrowers. The result is "a kind of a hey day ... the most attractive risk-adjusted yields we have seen since the financial crisis [of 2009], borrowers buying at discounted valuations, looking for debt providers." He says the continued challenges for commercial real estate should keep providing good, safe opportunities for investing in senior-secured debt amid continuing headline woes.
Matt Kaufman, head of ETFs at Calamos Investments, says that years of experience running separately managed accounts of closed-end funds plus the firm's experience running closed-end funds -- as well as an investment environment where a fund that focuses on discounts had lots of investment prospects -- were part of the firm's thinking behind its new Calamos Closed-End Fund income and Arbitrage ETF which launched in January. While the fund is shopping for discounts in closed-end funds that are outside of the Calamos family, Kaufman said it will not be an activist investor in trying to narrow those discounts.
John Cole Scott, president of Closed-End Fund Advisors -- chairman of the Active Investment Company Alliance -- looks at two asset classes that investors are turning to now for yields. While business development companies and municipal bond closed-end funds have low correlation, investors are looking at both asset types in order to raise yield levels in this market. Scott digs into his firm's data to examine where the two asset classes stand and offers a few picks in each sector that he thinks are poised to handle the changing rate picture well for at least the rest of the year.
Dana Staggs, president of ArrowMark Financial Corp. -- a non-diversified, closed-end fund that trades under ticker symbol BANX -- talks about why the fund has changed in recent years to where 87 percent of its holdings are now in regulatory capital relief securities, and what that esoteric asset can add to a diversified portfolio. Staggs also discusses his outlook for banking -- where he acknowledges the potential for troubles but says they should not be systemic, disruptive problems -- and how reg-cap securities are set up to weather the potential storms.
Jonathan Mondillo, head of North American fixed income for abrdn, says the municipal bond market has been looking at a "teacup inversion," and as that changes when the Federal Reserve cuts rates later this year, it should set up well for a barbell approach, with the bargains and values being at the short and long ends of the curve. He notes that the last 12 to 18 months have been hard for muni debt and closed-end funds in general, but that with rates having come to a peak, there is now real opportunity in repositioning a portfolio, with record discount levels holding out potential for attractive income levels and heightened total return for investors willing to swim against the tide.
Ian Merrill, president of SCG Asset Management -- which runs The Alternative Strategies Income Fund, a continuously offered closed-end interval fund -- says that investors can change the risk-reward picture in equities by using derivatives to reduce risk but also set up the potential for higher income. He suggests that using derivatives allow a classic 60-40 balanced investor to go to 50-30-20, with derivatives representing the last part of the allocation and generating returns that normally would require a lot more equity exposure. Merrill says that the explosion in derivative products -- driven in part by the success of defined outcome ETFs -- makes it incumbent on investors to avoid confusion and make sure they know the investment intentions are for any manager using derivatives.
Roxanna Islam, head of sector and industry research at VettaFi, digs into the active and passive exchange-traded funds that invest in closed-end funds, looking at the choices, the new funds and the options investors have for buying ready-made portfolios of closed-end funds thanks to the simplicity of ETFs versus the chores of building their own portfolios. She notes that the active ETFs have some potential that the index-oriented versions have seemed to be missing in current market conditions.
Cheryl Pate, senior portfolio manager at Angel Oak Capital and manager of the Angel Oak Financial Strategies Income Term Trust, says that 2024 "will bring a still somewhat tough operating environment for the banks but net interest margins are abating, valuations are cheap and [mergers and acquisitions] activity should accelerate from here." That gives banks an attractive opportunity set, particularly by focusing on credit quality and looking for "a fundamental mispricing of bank debt" that is creating some compelling bargains for investors.
Aaron Filbeck, managing director at the CAIA Association -- industry association for Chartered Alternative Investment Analysts -- says that the evolution of alternatives over the last few decades has made it to where it's naive for investors to effectively lump the wide range of investment options under the simple label of "alternatives." Filbeck, who oversees UniFi by CAIA -- a platform that educates private wealth managers about alternative investments -- says that sophisticated investors look past the label to dig into the different risks and return profiles of assets that vary from hedge funds to private credit, real estate, commodities, infrastructure and more, but he notes that they also have a long way to go with alternatives which still represent a small percentage of investors' portfolios despite the wide range of assets available.
John Cole Scott, president of Closed-End Fund Advisors -- chairman of the Active Investment Company Alliance -- does his annual forecast for the year ahead, noting that he expects closed-end funds to outperform the general equity markets, and he expects a mild narrowing of discounts from current average levels of roughly 7 percent, noting that bond funds should benefit from changing interest rates. He also looks at shareholder activism, yields and more, before picking a few funds that he expects to be stellar performers in the new year.
John Cole Scott - president of Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance - looks back at how the closed-end fund industry bounced back from the challenges of a terrible year in 2022, and how his forecasts from a year ago played out. He came out on the winning side of the ledger in his forecasts, but especially with his basket of five funds selected as likely winners for 2023.
Brenda Langenfeld, lead portfolio manager for the Nuveen Preferred and Income Opportunities Fund and the Nuveen Variable Rate Preferred and Income Fund, says that conditions are favorable on a number of different levels, setting up preferred securities for a strong year ahead as interest rates move lower in the year ahead. She noted that heightened banking regulatory oversight will be favorable for credit investors, that positive fundamentals suggest stability and growth and that valuations are at levels "that present a capital appreciation opportunity over the next year."
Adam Sparkman, client portfolio manager at Thornburg -- part of the team running TBLD, the Thornburg Income Builder Opportunity Trust -- says that current market conditions favor the flexibility of a multi-asset approach, noting that "it's a different menu within fixed income entering 2024 than it was a couple of years ago." The changes in the rate environment have allowed the firm to increase credit quality. "We're taking less credit risk and we're looking to add a bit of duration," Sparkman says. On the equity side of things, Sparkman says international investments -- especially in Europe -- are trading at relative discounts, making them particularly attractive now.
Mike Taggart, closed-end fund specialist at abrdn, says that the overwhelming majority of closed-end funds were created to generate income -- and built with that in mind -- but that the sector gets a lot of its attention as the result of discounts, and he feels the discount angle is "overplayed," because the investor who focuses on the income gets the discount as a bit of extra yield but the person who wants to capture the discount needs to ride out the market's bumps and bruises to hang on hoping to see the market change and narrow the bargains. Taggart, formerly executive director of the Active Investment Company Alliance, talks deals, discounts and more and how current market conditions are impacting closed-end fund investors.
Axel Merk, chief investment officer for the ASA Gold and Precious Metals fund, says that gold prices are most tightly correlated to "the confidence the market has in the central bank to manage inflation over time," so gold's rally over the last six weeks -- as well as its path forward -- is "favorable because we might be entering a recession, most notably a recession that is more severe than is currently priced into the market." Merk says he does not foresee a soft landing for the economy -- he sees a decline that is more significant than most observers are expecting -- which is why he does not think "we are going to have the trajectory [for gold] that is priced in right now."
John Cole Scott, president of Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, tackles the biggest shopping day of the year closed-end fund style, talking about where discounts stand in general for the industry, but also hunting for year-end bargains and looking at three cases to determine whether the Black Friday sale on the fund is a real deal, an average play or a fake-out.
Bryce Doty, senior portfolio manager at Sit Investment Associates, says that muni-bond closed-end funds using leverage -- where the cost of their borrowings are effectively wiping out returns given current conditions -- are more interested in keeping fees high than making money for shareholders, which is one reason why his firm has become a more activist shareholder. With the average muni-bond discount at roughly 13.5 percent -- more than three times its historic norms -- Doty says it should be easy for shareholders to narrow the discounts and turn profits, but it will require the Federal Reserve cutting rates and/or fund managers selling losers and reducing the negative carry of their leveraged positions.
Eric Purington, portfolio manager for the Aberdeen Global Infrastructure Income Fund, says that two mega-mergers outside of the infrastructure space -- deals involving upstream energy giants Exxon and Chevron -- have a lot of implications for middle-market/midstream energy companies and infrastructure stocks. Purington says that the larger energy companies are now poised to make big investments, which will trickle down to infrastructure and services companies, but adds that these big deals have opened the door to other mergers at all levels of the industry, which should make for opportunity ahead. Says Purington: "With the leaders in the space doing it, that is going to work it's way down."
Steven Perry, vice president at XA Investments, discusses the surge in activity and creation for non-listed closed-end funds, covering why money managers, including a number of prominent sponsors who have never been in the space before, are turning to the products now and how investors can use the new issues to access additional asset classes.
Cheryl Pate, senior portfolio manager at Angel Oak Capital -- co-manager of the Angel Oak Financial Strategies Income Term Trust (FINS) -- says the banking industry's wild ride since the failure of Silicon Valley Bank in March has created "a market dislocation" in pricing for bank equities and debt, which has created a strong opportunity for bank debt to outperform moving forward. Pate notes that the banking industry has quelled fears over failure contagion, the Fed is nearing the end of the rate-hike cycle and deposits have stabilized. Banks have proven resilient and posted solid earnings, which should combine to create stronger results as the rebound from last March continues.
John Cole Scott, president of Closed-End Fund Advisors -- the chairman of the Active Investment Company Alliance -- digs into his data to give a recap of the third quarter for the closed-end fund industry, noting that municipal bond funds and REIT funds particularly took it on the chin, with the entire categories being down during the period by 10 and 7 percent respectively. Business-development companies were the top category based on average returns, but senior loan funds were the can't-miss asset class, with all of the funds there being up in the third quarter.
Roxanna Islam, head of sector and industry research at VettaFi, says that cautious retail investors have been looking for safety and yield and that while closed-end funds have traditionally filled that bill, investors in ETFs that buy closed-end funds have been avoiding a lot of the struggles by turning elsewhere to invest. She believes that could be changing, however, as investors recognize the bargains that closed-end funds represent, particularly in ETFs of CEFs, where investors get diversification at a reasonable price.
Robert Bush, director of closed-end products at Calamos Investments, says that with risk-free money from bank accounts and Treasury bonds at high levels -- and with leverage costs up in response to those higher rates -- investors can have a lot of choices for good income without ever considering closed-end funds. But with the average closed-end fund discount widening from roughly 8 percent at the start of the year to nearly 10 percent today, closed-end investors are likely to be rewarded for their patience. Bush also discusses how CPZ, the Calamos Long/Short Equity and Dynamic Income Trust, has navigated these challenging conditions to be better positioned regardless of how the market plays out from here.
Duncan Farley, portfolio manager for BlueBay Asset Management -- manager of the BlueBay Destra International Event-Driven Credit Fund -- says that the rising cost of capital for businesses and interest rates that are staying higher for longer is creating more "special situations" opportunities and that it's not too late for investors to take advantage of those credits despite several years of strong performance in the event-driven credit arena. He noted that it's easy to shake off common worries over defaults rising when interest rates go up by buying paper as close as possible to the recovery value. His fund has largely avoided trouble -- as proven by Morningstar placing it at the very top of its peer group over its five-year existence -- and he believes it can continue to deliver strong results because good opportunities are easier to find in worrisome market conditions, though he says finding them requires more due diligence.
John Cole Scott, president of Closed-End Fund Advisors -- and the chairman of the Active Investment Company Alliance -- returns to The NAVigator noting that the discounts on muni funds have continued to get wider. He notes that the average discount for a closed-end muni fund stands now at 12.5 percent compared to their 10-year average of just under 5 percent, and talks about what is discouraging investors from heading into m unis now. He also compares muni funds to BDCs and discusses how investors should size-up current risks in credit before ramping it up in their portfolio. Plus, he discusses AICA's upcoming Fall Roundtable in New York.
Colin McBurnette, senior portfolio manager at the Angel Oak Funds, says that while high-rate and high-inflationary conditions have made a lot of investors worry about the housing market, those conditions -- along with wide spreads and low housing stocks creating an imbalance in the supply-and-demand dynamic -- have created real opportunities in the space. The tight market has made the housing market of mortgage credit particularly robust, with strong borrowers as the rate cycle is likely to turn soon; he says the housing and mortgage markets are much more robust now than the corporate credit market in the U.S.
Mitchel Penn, managing director of equity research at Oppenheimer and Co., says that higher interest rates and stubborn inflation have impacted business development companies in terms of both defaults and leverage, but he notes that BDC executives have taken steps to minimize the impacts. Moreover, current conditions should have BDCs primed for better returns than they could deliver during low-rate times; Penn also names five BDCs worth considering now.
Veteran money manager David Tepper, president of Tepper Capital Management, looks at four of the oldest closed-end funds -- Adams Diversified Equity, Central Securities, General American Investors and Tri-Continental -- that he has owned for decades, but which remain relevant and effective today, and which are trading at attractive discounts now.
John Cole Scott, president, Closed-End Fund Advisors -- chairman of the Active Investment Company Alliance -- discusses portfolio construction and the many factors that go into a diversified safe and solid separately managed account with closed-end funds and business-development companies as the primary focus. He details a diversified tax-sensitive income fund, discussing the many factors that went into selecting each security for it, and how his focus on certain key elements excludes some securities that other closed-end investors might gravitate towards. Plus, a tribute to the late Don Cassidy, best known for his time at Lipper and the Retirement Investing Institute.
In a bonus episode of The NAVigator, John Cole Scott, president of Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, discusses the historic level of deep discounts he is seeing in closed-end funds, and how that translates to buying opportunities now. Closed-end funds have seldom seen bigger discounts in the last quarter-century, Scott said, and says the current level of yields are helping to confirm the current opportunity, despite the beating that closed-end funds took a year ago. 'Buying after carnage is such a good closed-end fund decision,' Scott says.'You should be uncomfortable with the last three to 12 months of the fund you are buying today, because if it looks bad, it should look better later.'
Christian Munafo, chief investment officer at Liberty Street Advisors -- which runs the Private Shares Fund -- says that the perceived higher risks in challening environemnts like the one we are facing today often lead to attractive opportunities and oversized future gains, which makes current conditions attractive for private equity and venture capital investing. Munafo notes that private markets are more stable than their public counterparts, but signs of improvement are there now, leading him to believe the asset class will see better relative performance moving forward.
Scott Caraher, head of senior loans at Nuveen -- manager of the Nuveen Floating Rate Income fund -- says that the higher-than-expected increase in rates that has driven up borrowing costs has made credit selection 'more important today than it has ever been.' He notes that lower-rated companies can't sustain high levels of interest payments for long levels of time. As a result, Caraher says he is underweight the lower-quality part of the market, worried about a pick-up in default rates; the flip side of the situation is an opportunity to overweight better-quality companies which are generating superior returns now and which will be more stable and solid whenever the Fed starts cutting rates int he future.
Chris Oberbeck, chairman and chief executive at Saratoga Investment Corp., says that the balance of power in the lender-borrower relationship has shifted dramatically in the last 12 to 24 months, with banks now pulling back which is leaving private lenders with better terms and more power to insist on superior deals. Oberbeck notes that those conditions are putting BDCs generally -- but Saratoga specifically, thanks to an all-weather portfolio of loans -- in a better position to minimize any damage that might be done if the economy goes through a recession.
Josh Duitz, head of global income at Abrdn -- manager of the Aberdeen Global Infrastructure Income Fund -- says that private infrastructure investments have attracted so much money that valuations have gotten off-kilter, creating an 'illiquidity premium' that 'makes no sense.' Duitz explains that publicly listed companies should have higher valuations -- because investors value the liquidity and ability to trade them easily -- meaning that current conditions are making public infrastructure investments particularly attractive right now. Duitz -- who says that politics isn't likely to impact infrastructure as much as headlines suggest -- makes a broad case for infrastructure investing now, but particularly likes the renewable space.
Eric Boughton, chief analyst at Matisse Capital and portfolio manager for the Matisse Discounted Closed-End Fund Strategy, says that while the stock market has roared this year, things haven't changed much with the closed-end fund space this year, meaning there are plenty of highly discounted issues, particularly in muni bonds and some other fixed-income spaces, as well as international funds. He notes that many closed-funds that were good deals based on discounts a year ago haven't narrowed those bargains but now deliver improved yields, which is why he is buying certain issues now 'hand over fist.'
Mark Asaro, director of investments at Noble Wealth Management, says investors should not think that a traditional open-end mutual fund is a good replacement for individual bonds. Without a maturity date, bond funds don't have the pull toward par of an individual bond. Closed-end funds, however, are immune to dilution from cash flows into the fund, thereby providing a stable yield that investors can bank on, making them a better portfolio mix with individual bonds. Asaro notes that closed-end bond funds work best when the yield curve is upward sloping -- as opposed to today's heavy inversion -- but notes that there are selective opportunities looking strong now, notably in funds which buy municipal bonds.
Kenneth Burdon, an attorney in the investment management group at Skadden, Arps, Slate, Meagher and Flom says that rules proposed by the Securities and Exchange Commission that would dramatically change liquidity requirements on traditional mutual funds could result in a boom for interval funds. While noting that the proposals still have a ways to go before approval, Burdon says that they would, if passed, make it so that many bank loans and other 'less liquid securities,' couldn't be held in traditional funds. Some funds may convert to closed-end status, he says, while other firms will plan more interval offerings if the rule passes.
Kimberly Flynn, managing director of alternative investments at XA Investments, says that demand for alternative investments as a means of adding diversification to a portfolio has spurred tremendous growth in interval funds, whose limited liquidity makes them an ideal vehicle for many types of less-liquid securities. Flynn notes that there are 190 interval- and tender-offer funds in existence today, but that 27 new funds are in registration, many from companies just entering the interval-fund space. Flynn says it's still very early -- 'maybe the second inning' -- in the current interval-fund growth cycle, which will force investors and advisers to do heightened due diligence to make sure the new issues can perform up to expectations.
John Cole Scott, president of Closed-End Fund Advisors, discusses what he is seeing in the market now by delving into four of the investments he is using the most and weighing heavily in client portfolios. He notes that the recent bank collapses actually made a few of his favorites more attractive -- because the market got angry at the financial sectors, driving prices down -- but he also explains that his favorites have more going for them than just a big discount.
Mickey Schleien, managing director for equity research at Ladenburg Thalmann and Co, says that business-development companies have seen the rising interest-rate environment lead to higher yields, which has helped to offset declines in net asset value that BDCs have suffered as a result of the Federal Reserve's tightening monetary policy. He says that middle market companies have seen revenues and earnings grow about 11 percent at the start of this year, without endangering their distribution or suffering through a lot of defaults. Schleien says that BDCs have managed credit trends well enough to now represent an attractive opportunity even as the economy heads toward a recession and despite the sector broadly being fully valued.
Chris Marangi, co-chief investment officer for value at the Gabelli Funds, says 'the new normal' is one where inflation is higher than the Federal Reserve's target of 2 percent and growth is below trend, but it is creating an opportunity for active management to shine to find the opportunities that exist beyond the seven stocks that have been carrying the market to gains this year. He particularly likes the live-entertainment and sports-related businesses, and dislikes the path for banks where higher interest rates and a potential recession are pressuring balance sheets and the fallout from the spring's headline-making bank collapses is not yet played out.
Doug Baker, head of preferred securities at Nuveen, says that while it is relatively common now to find preferreds with yields above 7 percent, the real opportunity for investors at the moment comes from looking beyond the yield. He says that preferred prices right now are at 'meaningful discounts' that are uncommon in the preferred industry, creating attractive entry points, particularly on preferreds with adjustable coupon rates. He also discusses how the banking crisis, interest rate environment and inflation picture are impacting the preferred market now.
Rob Shaker, portfolio manager at Shaker Financial Services, says that economic conditions -- the debt-ceiling debate, troubled banks, higher interest rates and persistent inflation -- have created a situation where the market isn't climbing the proverbial wall of worry, but rather a 'Wall of Meh,' and says that there is opportunity in the unimpressive current conditions, noting that long-term investors in closed-end funds can use lagging investor sentiment to capture discounts as early as the second half of this year, when he expects a 'generalized recovery' from today's worrisome issues.
Duncan Farley, portfolio manager at BlueBay Asset Management -- which runs the BlueBay Destra International Event-Driven Credit Fund -- discusses how his fund produced a 20-plus percent gain during one of the worst years ever for the bond market, and how the fund can avoid regression to the mean thanks to market conditions -- buoyed by the changing interest rate environment -- that if properly managed have the potential to keep delivering double-digit returns.
Matt Freund, co-chief investment officer/head of fixed-income strategies at Calamos Investments, says he expects interest rates to settle in and remain stable for quite a while before trending down; he expects more volatility in longer-term bonds, which will make it harder for investors to get comfortable lengthening duration ahead of rate cuts that, under good circumstances, should arrive in 2024. Freund also discusses the private credit market, and Calamos' new closed-end interval fund, the Calamos Aksia Alternative Credit and Income Fund (ticker CAPIX), which just opened this week.
Jim Baker, managing partner and co-head of energy infrastructure at Kayne Anderson Capital Advisors, says that the energy transition -- the push away from traditional fossil fuels towards renewable sources -- will take decades, creating a long-term megatrend in the energy business. With the last few years of global turmoil highlighting the critical nature of energy and the importance of keeping supply levels appropriate, energy infrastructure companies are wide-moat businesses that should ride out any economic downturn comparatively smoothly while generating consistent income for investors.
Christian Munafo, chief investment officer, in Liberty Street Advisors, which runs the Private Shares Fund, says there are two stories dominating the private equity markets, with high-performing well-financed private innovation companies being proverbial unicorns compared to less- differentiated, less-capitalized companies which are more prone than ever to failure due to conditions in the capital markets. Rising rates have resulted in more opportunities coming to market, but have also made it harder for many firms to find the financing they need at reasonable levels.
Host Chuck Jaffe attended this week's Morningstar Investment Conference in Chicago and took the podcast with him, catching up with 'Super Mario' -- investment legend Mario Gabelli, founder of the Gabelli Funds, a long-tenured fan of closed-end funds, who discusses the pros and cons of the closed-end structure, especially as it relates to the Gabelli Equity Trust and the 10 percent payout he has made a cornerstone of the fund's investment policy.
Roxanna Islam, associate director of research at VettaFi, says that exchange-traded funds that invest in closed-end funds give investors diversified portfolios -- and all the benefits of investing deeply in the closed-end space -- in a one-stop shopping wrapper. Islam says that investors worry about high fees in ETFs of closed-end funds, noting that CEFs tend to have higher expense ratios on their own, and the added layer of costs for the ETF sponsor can feel heavy, but she notes that fund sponsors recognize the issue and tend to keep the additional costs low. Meanwhile, ETFs covering nearly all style boxes and assets of the closed-end universe can provide diversification and professional management, and she provides examples of ETFs for listeners to consider.
Jonathan Mondillo, head of North American fixed income for abrdn says that 2023 has been a year of wild moves in the municipal bond market, performing well in January before selling off in one of the worst months of February ever, setting up a March rebound until the banking crisis hit. Most of those movements have been driven by macro headlines, and Mondillo says that investors want to drill down moving forward, focusing on finding credits that can outperform in a market that is likely to slow down, and ignoring the big-picture pressures that are driving the broad trend in the space.
John Cole Scott, president of Closed-End Fund Advisors, discusses how and why investors might pursue private equity and debt using closed-end funds, noting that expansion of the industry and changes in structure adding share classes have made private, alternative investments much more accessible for investors. Scott -- who also is chairman of the Active Investment Company Alliance -- He says the growth in tender-offer and interval funds is giving investors access to strategies they can't get anywhere else in the regulated-investment world in a form that is more liquid and affordable than investing in hedge funds. He includes two of his favorite funds in the space for investors to consider now.
Cheryl Pate, senior portfolio manager at Angel Oak Capital -- co-manager of the Angel Oak Financial Strategies Income Term Trust -- says that current problems in the banking sector are setting up a recovery, noting that 'opportunities like this are fairly rare, probably a once-in-a-decade opportunity for the banking space,' with the biggest opportunities being on the debt side as spreads start to normalize under the rules and conditions. Pate says investors have good reason to believe that discounts for bank-oriented closed-end funds are likely to narrow as sentiment improves for the sector, with debt benefitting from a consolidation cycle in the industry while the equity benefits from renewed confidence and better positioning for the future.
Steve O’Neill, portfolio manager at RiverNorth, says the average municipal-bond closed-end fund has a discount of 10.5 percent, which over the last 25 years would be in 'the 99th percentile of cheapness.' While O'Neill makes the case for buying muni bonds, he says the case for closed-end funds is largely because of the discounts being oversized, noting that the rest of the fixed-income market has not seen discounts get that big. O'Neill notes that if interest rates are peaking, the turning of the trend should help closed-end funds -- and particularly muni funds -- narrow the discount and generate bigger gains moving forward.
Bryce Doty, senior portfolio manager at Sit Investment Associates says that the problem at the heart of the current banking crisis is not a default problem, but rather is a logical outcome from how quickly the Federal Reserve raised interest rates. He expects it to keep impacting the value of fixed-income securities until things stabilize; that, in turn, will create more opportunities for closed-end fund investors who should benefit from good yields now and additional returns when widening discounts narrow once the banking industry and investors are less worried about insolvency.
John Cole Scott, president of Closed-End Fund Advisors says that -- despite a rough outing for business development companies this week -- BDCs have had a strong quarter from a total return perspective, and that prospects remain strong as BDCs have been raising their distributions but the dividend-coverage percentages have remained roughly steady, a sign that they're not only positioned well now but that they are ready to deal with rising interest rates and inflation. Scott, who is also chairman of the Active Investment Company Alliance, compares two BDCs -- one trading at a premium, the other at a discount -- and discusses how there is room for both in a portfolio despite the different way they are viewed by the market.
Jay Rhame, chief executive officer at Reaves Asset Management -- president of the Reaves Utility Income Fund -- says that the dividend-growth potential for utility companies makes them a viable investment option in today's high interest-rate high inflation market. While those conditions typically are not ideal for utilities, Rhame says utility stocks are reasonably valued; he also discusses infrastructure stocks, again pointing out that their consistent dividend-paying strategy and potential to grow dividends makes them attractive in a market where yields on fixed-income have improved.
Steven Perry, vice president at XA Investments -- where he oversees product management on the XAI Octagon Floating Rate and Alternative Income Trust, -- discusses the benefits and risks associated with leverage in closed-end funds during a rising-rate environment, noting that for the closed-end fund market at the end of 2022, the levered market yield on net asset value was about 7.8 percent, compared to 6.4 percent on unlevered yield. Perry says it is important to watch how managers respond to what the Federal Reserve is doing, noting that managers who don't 'get creative with how the leverage is going to be structured might miss out on opportunities.'
Will Rhind, chief executive officer at GraniteShares -- which runs the GraniteShares US High Income ETF -- says that it appears to him that inflation has peaked and that interest rates are more stable, which has created a more favorable outlook for business-development companies and closed-end funds. Rhind notes that with economic conditions improving, the prospects for the businesses that are funded by BDCs has become more stable; he also cited the dollar's peak against foreign currencies as improving the prospects for emerging-markets closed-end funds.
Michael Beth, director of trading at WallachBeth Capital, says that for all of the growth in the closed-end fund space, the amount of trading done each day is relatively small compared to other investment vehicles, which creates challenges for investors to get efficient execution on trades. Beth notes that conditions can make it so that an investor trying to buy a fund at a 10 percent discount could see as much as one-tenth of that benefit wiped out if 'the implicit cost of execution' meets with poor execution.
John Cole Scott, president of Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, returns to The NAVigator to discuss how closed-end funds responded to the year-end rally and then the sharply bullish January, examining which sectors and fund types came out ahead and where the opportunities appear to lie now. He's got details -- and fund picks -- across various sectors and asset classes on where to look for continued growth and income as the rally continues to take shape and play out.
Eric Purington, portfolio manager and infrastructure specialist at abrdn, says that middle-market private investments are a path to profitability and outperformance now due to a supply-demand imbalance that has large-cap operators -- working with an 'ocean of capital' looking to do more acquisitions and pay a premium for them. Purington, who is responsible for private-market investments for the abrdn Global Infrastructure Income Fund, says that while infrastructure provides services and assets for the community and predictable cash flows for investors, the premiums being paid for middle-market assets could generate roughly '200 basis points of outsized returns' moving forward.
Nate Jones, head of fund finance and Treasury at Nuveen, says that conditions and 'market nuances' from late in 2022 have carried into the new year, noting that the yield curve for municipal bonds is sloping upward even more than the plot on taxable bonds, which is creating opportunities for investors to benefit from using leverage to make closed-end muni returns attractive now. Jones also explains the December supply-demand imbalance in muni bonds, and why it might reoccur come tax time, and discusses how rising rates have raised default concerns but haven't led to a significant increase in bond failures.
Axel Merk, chief investment officer of the ASA Gold and Precious Metals fund, says that the market is pricing in a recession and the start of rate cuts down the road, and the gold market is already reacting because it tends to lead in these cycles. Merk makes the case for owning both precious metals and the mining companies now, though he notes their different risk profile and uses; he points out that both are being embraced now because the miners would be lumped in with all equities and poised for a takeoff if a recession is shallow, while the metal will be a diversifier in the event that a downturn is more severe and protracted.
Cheryl Pate, senior portfolio manager for Angel Oak Capital -- manager of the Angel Oak Financial Strategies Income Term Trust -- says that it's late in the cycle for rate hikes, mid-cycle for banks in terms of margin expansion and early in the cycle for credit, and she noted that the financial services sector typically goes through a profit-margin expansion that's a 'lagged benefit' that should show up early in the year when the rate hikes stop. She expects that benefit to show up late in the year or into 2024, but she says fundamentals -- including credit quality and default risk -- will be moving in the right direction and that financial services companies will experience the benefits they historically get from operating in high-rate conditions.
John Cole Scott, chief investment officer at Closed-End Fund Advisors -- the chairman of the Active Investment Company Alliance -- says that investors looking for the top sector bets in the new year will want to look at some of 2022's weakest areas, most notably real estate investment trusts 'REITs' and real assets. He also expects international bonds and more to be in the sweet spot. Scott gave his look-ahead for the closed-end fund industry for 2023, and it's a year when he suggests investors take more duration risk, tilt their equity portfolios toward value, dividend and international funds and expect to see discounts narrow and yields to fall, though the latter will be driven by some capital appreciation later in the year as the economy and market continue to digest inflation and more.
John Cole Scott, chief investment officer at Closed-End Fund Advisors -- the chairman of the Active Investment Company Alliance -- takes a look back at the challenging times experienced by the closed-end fund industry this year, noting that all the news wasn't bad despite slower-than-expected growth for the industry and bigger-than-anticipated losses on the market. His basket of five funds for 2022 came out ahead of the market is, like many parts of the industry, is poised to rebound in the new year.
Stacey Morris, head of energy research at VettaFi -- part of the team involved in the Alerian Energy Infrastructure Index suite -- says that energy markets are likely to remain tight and keep dealing with inflation in 2023, both of which can be tailwinds to energy companies and especially midstream companies, but she notes that the midstream/pipeline companies have cash-flow stability that makes them the more-defensive options in the energy space, and particularly attractive in a recessionary environment.
Steve O’Neill, who co-manages the closed-end fund trading strategies and oversees the closed-end fund analysts at RiverNorth, says the timing is right for closed-end fund investors looking for big discounts that will likely be shrinking right after the turn of the year as the tax harvesting process plays out. O'Neill discusses how the big discounts amount to extra gravy for investors hungry for better yields.
Chris Oberbeck, chairman and chief executive officer at Saratoga Investment Corp. -- one of the industry's largest publicly traded business-development companies -- says that BDCs have been a relative sweet spot during this year's troubled times largely because they benefited from being on the front end of rate hikes and turning them quickly into cash on the bottom line. While the companies must also deal with higher costs, he expects the trend to continue for at least as long as the Federal Reserve keeps projecting higher rates, which he thinks will be well into 2023.
With holiday shopping bargains on everyone's mind, John Cole Scott, chief investment officer at Closed-End Fund Advisors -- the chairman of the Active Investment Company Alliance -- sorts through the big discounts in the closed-end fund world to come up with the best bargains, the most meaningful plays now, based not just on current sale prices but the value and income streams investors can unlock. In his search, he identified two equity and two fixed-income funds that might be a good addition to any investment shopping list.
Michael Grayson, portfolio manager for First Trust Capital Management -- where he oversees their Alternative Opportunities, Private Credit and Real Assets funds -- says that investors should be sacrificing some liquidity for the flexibility to get different assets into their portfolios and to have investments that capture most of the upside in bull-market times while protecting capital during market dislocations. That's how the funds he manages have fared over the last two years and he says that current market conditions are bringing out the best properties in interval funds, making them more attractive for investors now.
Mitchel Penn, managing director of equity research at Oppenheimer & Co., says that business development companies have seen yields rising in line with higher interest rates, a trend he sees continuing while the Federal Reserve continues hiking rates. The higher rates have resulted in more credit risk with more borrowers struggling to make payments; as a result, unrealized losses at BDCs have increased, and while those setbacks remain within expected ranges this year, investors will want to watch the trend to make sure losses don't grow wildly if rates keep rising and/or remain high for several years.
Mitchel Penn, managing director of equity research at Oppenheimer & Co., says that business development companies have seen yields rising in line with higher interest rates, a trend he sees continuing while the Federal Reserve continues hiking rates. The higher rates have resulted in more credit risk with more borrowers struggling to make payments; as a result, unrealized losses at BDCs have increased, and while those setbacks remain within expected ranges this year, investors will want to watch the trend to make sure losses don't grow wildly if rates keep rising and/or remain high for several years.
John Cole Scott, chief investment officer at Closed-End Fund Advisors -- chairman of the Active Investment Company Alliance -- says that today's rate uncertainty has created attractive entry points for some municipal-bond funds because they are trading at big discounts and, in many cases, have gone through a dividend cut, thereby reducing the potential for another cut moving forward. Scott doesn't minimize the pain the muni funds have experienced this year, but notes that investors who are brave enough to double-down should be rewarded as the rate cycle plays out, although he cautioned against looking at yield as the selling point rather than combining yield with discount and net asset values to determine the best opportunities.
John Cole Scott, chief investment officer at Closed-End Fund Advisors -- chairman of the Active Investment Company Alliance -- says that today's rate uncertainty has created attractive entry points for some municipal-bond funds because they are trading at big discounts and, in many cases, have gone through a dividend cut, thereby reducing the potential for another cut moving forward. Scott doesn't minimize the pain the muni funds have experienced this year, but notes that investors who are brave enough to double-down should be rewarded as the rate cycle plays out, although he cautioned against looking at yield as the selling point rather than combining yield with discount and net asset values to determine the best opportunities.
Mark Milner, senior investment strategist at Parametric Portfolio Associates, says that a lot of asset classes of closed-end funds have now reached double-digit discount territory, "which historically has been a good opportunity to buy closed-end funds," noting that current discounts allow investors to add to their portfolios or rebalance into funds creating greater value for their money. Milner does worry that year-end tax-loss harvesting in 2022 will be higher than in years past as a result of the large market drawdown earlier this year -- but is hopeful that the compelling values will convince investors to reinvest the proceeds of those sales back into closed-end funds, which would help to minimize the potential impact all of that money movement.
Gretchen Lam, senior portfolio manager, Octagon Credit Investors -- sub-adviser on the XAI Octagon Floating Rate & Alternative Income Term Trust -- says that while economic conditions are challenging and that a recession will be bad for the credit markets, collateralized loan obligations and other loan products have held up relatively well during the current period of rising rates. They haven't been able to avoid the downdraft, she says, but they have outperformed other forms of credit, maintaining a historical pattern of superiority in tough conditions. Coupled with low default levels -- which she expects to rise a minimal amount despite higher interest rates -- it creates an opportunity for credit investors now.
Duncan Farley, portfolio manager at BlueBay Asset Management and manager of the BlueBay Destra International Event-Driven Credit Fund, says that the current economic and market conditions that are making headlines and rattling investors are actually creating something of a 'perfect storm' of opportunities that should make it easier to profit from alternative credit investments moving forward.
Robert Bush, senior vice president and director of closed-end products at Calamos Investments, says that convertible securities -- a hybrid product built to give investors the best of stock and bond performance -- have not been giving investors their cake and letting them eat it too this year, underperforming both stocks and bonds, but he says that positive returns to the end of the third quarter and the way convertible funds have held up relative to fixed-income funds suggests that convertibles should deliver better on their purpose moving forward. Bush also discusses two of the firm's funds, comparing a long-short strategy to a total-return fund and discussing how they have fared -- and what has happened to their discounts -- this year.
John Cole Scott, chief investment officer at Closed-End Fund Advisors -- the chairman of the Active Investment Company Alliance -- discusses and compares floating-rate and senior loan funds with preferred-securities funds, noting that floating-rate funds are a tool for combating high and rising interest rates, while preferred equities are a good weapon for battling a recession. As a result, investors in today's complex market may want to "split the ticket," using both types of funds to bolster their portfolio; he looks at the characteristics of each asset class, and has fund suggestions in each category for investors to consider.
Mark Scalzo, chief investment officer at Validus Growth Investors, Manager and the portfolio manager for the newly listed Destra Multi-Alternative Fund discusses the outlook for alternative investing, the process his fund went through in changing its status and becoming one of the few new listings on the New York Stock Exchange this year, and how that conversion and some other factors have led to a discount that is much bigger than average or than most closed-end fund investors would expect.
Mark Scalzo, chief investment officer at Validus Growth Investors, Manager and the portfolio manager for the newly listed Destra Multi-Alternative Fund discusses the outlook for alternative investing, the process his fund went through in changing its status and becoming one of the few new listings on the New York Stock Exchange this year, and how that conversion and some other factors have led to a discount that is much bigger than average or than most closed-end fund investors would expect.
Kyle Brown, president and chief investment officer at Trinity Capital, explains how the company's structure helps to support double-digit yields and makes them more secure than other high-yield investments, but also discusses the business development company's exceptionally high yield relative to the rising interest rate and high inflation rates of today. He also talks about how those conditions impact the high-growth, venture-backed, early-stage companies that Trinity finances.
Kyle Brown, president and chief investment officer at Trinity Capital, explains how the company's structure helps to support double-digit yields and makes them more secure than other high-yield investments, but also discusses the business development company's exceptionally high yield relative to the rising interest rate and high inflation rates of today. He also talks about how those conditions impact the high-growth, venture-backed, early-stage companies that Trinity finances.
Cheryl Pate, senior portfolio manager for the Angel Oak Financial Strategies Income Term Trust, says that community banks stand out as a part of the financial sector that is poised to benefit into 2023, as banks will likely see the bulk of continuing rate hikes fall directly to the bottom line. Even with that boost, however, she favors bank debt right now compared to holding bank stocks, noting that banks had an excess of deposits generated during the pandemic period and that is being flushed from the system and fee income is falling due to lower loan growth and higher costs, which have created headwinds to earnings. With capital levels at multi-year highs and high levels of liquidity and reserves, Pate sees opportunity in banking-sector debt now that coupons have been "rising nicely," plus she sees community banks as attractive merger candidates which should give a boost to their paper as transaction activity increases into next year.
Cheryl Pate, senior portfolio manager for the Angel Oak Financial Strategies Income Term Trust, says that community banks stand out as a part of the financial sector that is poised to benefit into 2023, as banks will likely see the bulk of continuing rate hikes fall directly to the bottom line. Even with that boost, however, she favors bank debt right now compared to holding bank stocks, noting that banks had an excess of deposits generated during the pandemic period and that is being flushed from the system and fee income is falling due to lower loan growth and higher costs, which have created headwinds to earnings. With capital levels at multi-year highs and high levels of liquidity and reserves, Pate sees opportunity in banking-sector debt now that coupons have been "rising nicely," plus she sees community banks as attractive merger candidates which should give a boost to their paper as transaction activity increases into next year.
Josh Duitz, deputy head of global equities at Abrdn -- portfolio manager for Abrdn Global Infrastructure Income and two of the firm's dynamic dividend funds -- says that the macro drivers for infrastructure -- globalization, upgrades and repairs, urbanization and increased demand -- coupled with current inflationary pressures have created an environment that is solid for recession-resistant infrastructure stocks. Meanwhile, with rising interest rates pushing demand higher, dividend stocks have been outperforming as well, and are likely to continue to remain in the market's sweet spot until the economy rebounds and convinces the public that it wants to focus again on growth rather than looking at total return. Duitz says that among dividend plays, he is most interested right now in sectors that can raise revenue to keep pace or stay ahead of inflation, so that they are not squeezed by the macro picture, which means the most-fertile hunting grounds now tend to be among health care, real estate, materials, industrials, utilities and consumer-staples companies.
Josh Duitz, deputy head of global equities at Abrdn -- portfolio manager for Abrdn Global Infrastructure Income and two of the firm's dynamic dividend funds -- says that the macro drivers for infrastructure -- globalization, upgrades and repairs, urbanization and increased demand -- coupled with current inflationary pressures have created an environment that is solid for recession-resistant infrastructure stocks. Meanwhile, with rising interest rates pushing demand higher, dividend stocks have been outperforming as well, and are likely to continue to remain in the market's sweet spot until the economy rebounds and convinces the public that it wants to focus again on growth rather than looking at total return. Duitz says that among dividend plays, he is most interested right now in sectors that can raise revenue to keep pace or stay ahead of inflation, so that they are not squeezed by the macro picture, which means the most-fertile hunting grounds now tend to be among health care, real estate, materials, industrials, utilities and consumer-staples companies.
Kenneth Burdon, an attorney in the investment management group at Skadden, Arps, Slate, Meagher & Flom, says the new "control share" statute enacted at the start of August by the state of Delaware should protect should protect investors from activist investors acting like corporate raiders trying to force a pop to net asset value without regard to what the broad group of shareholders is interested in. The law forces further negotiation between the board and outsiders, Burdon says, giving directors cards to play when activists come to the table.
Kenneth Burdon, an attorney in the investment management group at Skadden, Arps, Slate, Meagher & Flom, says the new "control share" statute enacted at the start of August by the state of Delaware should protect should protect investors from activist investors acting like corporate raiders trying to force a pop to net asset value without regard to what the broad group of shareholders is interested in. The law forces further negotiation between the board and outsiders, Burdon says, giving directors cards to play when activists come to the table.
Roxanna Islam, associate director of research at VettaFi -- which developed the the S-Network Composite Closed-End Fund Index and other benchmarks for the closed-end fund space -- discusses the construction of indexes of closed-end funds and the benefits to using them over individual issues, as well as how passive investing in the space has held up against active management during the rough start to the year.
Bryce Doty, senior portfolio manager at Sit Investment Associates, says that the market's troubles this year have set closed-end funds up to be in a sweet spot, able to generate additional returns that traditional mutual funds and ETFs can't get investing in the same spaces. Despite those potential benefits, Doty acknowledges that most investors shy away from closed-end funds for a lack of understanding, and also miss out on the benefits of running closed-end funds as a portfolio or bucket of money, rather than as a single investment or two that's part of a larger portfolio.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, discusses some equity and fixed-income funds currently trading at premiums and compares them with similar funds priced at a discount, noting that expenses, payouts and more determine relative values. Further, he notes that when the market takes a dive and discounts widen, investors should consider whether the best bargain is the fund with the widest discount or the fund whose premium has evaporated.
Portfolio manager Tim Ryan of Nuveen -- who runs the Nuveen Dynamic Municipal Opportunities closed-end fund -- says that after a miserable first half of 2022 that lagged Treasury bonds, conditions have stabilized for muni bonds, which now have a more attractive yield curve and offer a better investment opportunity than Treasuries. Ryan says that the first-half selloff was more about technicals than about the quality of the underlying municipal bonds, which means that when the interest-rate picture stabilizes investors will worry less about credit quality in munis than in other areas in fixed income.
Timothy Reick, chief executive officer at Liberty Street Advisors -- advisor to the Private Shares Fund -- says that private equity is an asset class that is not correlated to the broad stock market, and that individual investors largely overlook its potential role in their portfolios. Reick notes that with private companies waiting much longer both in terms of time in business and the asset size they grow to before turning to public markets -- if they ever go that route -- investors will find a vibrant market that they can approach in many different ways. Private Shares Fund is an interval fund that pursues mostly late-stage firms, but he notes that the space includes everything from angel investors to companies on the verge of going public, across virtually all businesses and industries.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, says that business-development companies -- which are built to handle a four-year business cycle -- are looking at positive surprises as second-quarter earnings season arrives. From July 26 to August 10 -- when the bulk of BDCs will report earnings -- Scott says that BDC discounts are currently about 13 percent wider than media discounts have been over the last two decades, and that there has been very little uptick in problem loans, which sets up a potential rally. Scott notes that BDCs have outperformed closed-end funds during the rough first half of 2022, and identifies several BDCs poised to deliver good yields, mostly at a significant discount now.
Rob Shaker, portfolio manager at Shaker Financial Services, says that the closed-end fund market showed signs of a "sympathy widening" in mid-June, an event when there is "excessive liquidation selling based on fear," leading to a bad day on the stock markets and bond closed-end fund discounts widening at the same time. Shaker says it can be a sign of a market bottom, which can lead to a bounce-back; still, he says, markets remain fragile and there could be more excessive selling again, though it hasn't happened since June 16. Shaker also noted that the first half of the year saw trouble for closed-end funds, but the behavior of discounts was very different for equity and bond funds, with fixed-income issues seeing a much more dramatic widening than stock funds.
Ben McCulloch, managing director and general counsel at XA Investments, says that the last five years have seen over $40 billion in growth in interval funds and tender-offer funds, and that interest has attracted more fund sponsors -- including companies that have been heretofore more focused on ETFs -- and more new ideas. That has brought with it increased regulatory scrutiny, as the Securities and Exchange Commission is evaluating what kinds of alternatives -- particularly with private-equity and venture-capital investments -- are right for the interval fund structure, but McCulloch sees the growth and the expansion of interval offerings continuing, with more new and different funds on the horizon.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, returns to The NAVigator to answer questions frmo listeners, including one on whether it makes sense to do tax-loss selling now rather than waiting for the traditional period for making swaps at the end of the year. Scott recommends closed-end fund investors tap their "tax assets" when they are valuable, and losses in today's market can be turned into a benefit easily. Scott also answers a question on the slow speed of recovery in the energy sector, and gives his take on how the across-the-board pullback is affecting different sectors of closed-end investments and how recovery has occurred after previous downturns.
Larry Holzenthaler, investment strategist and analyst for Nuveen, says that "floating rate loans actually look arguably cheap to us today," acknowledging that it's surprising that the asset class is trading at a discount "in the middle of one of the most brutal rate-hike campaigns we have ever seen." Holzenthaler -- who also covers the high-yield space -- says that senior loans have been one of the few places where investors have avoided much of the pain in the fixed-income markets, making them feel like a safer haven and a relatively good value.
In this bonus episode of The NAvigator, Jonathan Browne, director of research at Robinson Capital and portfolio manager of the Robinson Funds talks about how balancing closed-end fund investments with pre-market SPACs [special-purpose acquisition companies] creates opportunities for higher yields with diversification that helps to balance out risks.
Sam Brothwell, director of research at Energy Income Partners, says that the current cycle of under-investment in capital spending has made it harder for energy producers to respond to the current global supply-demand imbalance; that has pushed energy prices -- for oil, natural gains, electricity and alternatives -- dramatically higher, where they are likely to stay, even as energy companies work to increase capacity and respond to market conditions. Brothwell says that investors should respond to current conditions by diversifying their energy holdings as legislators and corporate executives wrestle with economic issues while searching for solutions.
With the volatility and downward pressure in the market pushing many investors to specialty funds, sector offerings and alternatives, John Cole Scott, chief investment officer at Closed-End Fund Advisors and chairman of the Active Investment Company Alliance returns to the NAVigator this week to talk about some funds that are more basic in strategy, core holdings by nature, and highlights five that represent good values and opportunities now.
Nicholas Marshi, editor of the BDC Reporter, says that business-development companies had a good first-quarter across the board, despite troubles across the broad market. After seven quarters of BDC's generally increasing net asset value per share, and while that growth decelerated during the first three months of 2022, Marshi says it was a "hinge quarter," where inflation, higher interest rates and more started to creep into results. He notes that business-development companies are poised to benefit from higher interest rates without suffering significantly higher credit losses in the process; as a result, he's bullish on BDCs now, even in the face of an economic slowdown.
Duncan Farley, portfolio manager for BlueBay Asset Management and co-manager of the Destra International Event Driven Credit Fund, says that today's headlines are driving more companies to distraction and creating the types of problems that he sees as investment opportunities. His fund has taken advantage, posting double-digit gains while most of the market has moved in the opposite direction, and he believes that investors willing to buy discounted credits will be rewarded if they can ride through the macro headlines to hold onto bargain credits until economic conditions improve.
Bill Kelly, president of the CAIA Association, discusses the importance -- which he believes is mostly misplaced -- that many investors place on having daily liquidity in their investments, even though they have no intention of touching the money in the short term. The result of these mis-aligned time frames is that investors pay a real price for liquidity they neither want and need; the offshoot of this thinking is helping to drive the expansion of new issues for closed-end and interval funds, Kelly says.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, talks about the search for closed-end funds that can deliver in rising-rate, high-inflation conditions, talks about five issues from different categories that pass muster now, and explains how in today's business-development company space, "Sometimes discounts are expensive and premiums are cheap."
Nathan Shetty, head of multi-asset for Nuveen and co-manager of the Nuveen Multi-Asset Income Fund, discusses the importance of using proper allocations to generate reasonable and consistent total returns in a low-return environment. Shetty notes that proper diversification and risk management are particularly important in times like today, with so many wild cards, headline risks and uncertainties.
Mike Taggart of Taggart Fund Intelligence -- executive director of the Active Investment Company Alliance -- reviews the first-quarter results for closed-end funds, noting that discounts widened out during a rough period for the market, reaching a crossroads where investors are trying to decide now if the discount has hit a level low enough to represent a good risk premium and a buying opportunity. Taggart also discusses interval funds, the focus of an upcoming AICA educational event, and how the growth in the space is giving investors interesting opportunities in alternatives.
Bob Long, chief executive officer at Conversus -- which manages the Conversus StepStone Private Markets Fund -- returns to the NAVigator to discuss private equity and how investors looking for success must commit to overcoming the J-curve, the start-up period when private-equity investments tend to lose money in the early days in order to be positioned for long-run success. Individual investors wanting to avoid the pain of those start-ups through diversification are increasingly turning to interval funds and business-development companies in the space, finding assets that are less correlated to the stock market, but which can ride out the volatility of the J-curve to benefit from start-up and private-equity exposure.
Steven Bavaria, author of “Inside the Income Factory” on SeekingAlpha.com, says that current market conditions have shown the value of focusing on income streams rather than the value of the underlying securities, allowing investors the peace of mind that comes from generating cash-flow and putting that money back to work buying at a discount. Bavaria noted that when a manufacturing company builds a production plant, they don't worry about the resale value of the factory but instead focus on its output; he says investors should act the same way, focusing less on the fluctuations in value of their investments and more on getting consistent, above-average yields, which provide a comforting cash stream that makes tough times -- like the first quarter of this year -- much easier to stomach.
Michael Bell, founder of Primark Capital -- which runs the Primark Private Equity Investments Fund, a closed-end interval fund -- discusses how changing market conditions have reduced the number of public companies and dramatically increased the number of available private equity investments, which he says are best handled in the limited-liquidity structure of an interval fund. It creates an opportunity to buy brand-name middle-market companies that investors can't access in traditional funds.
Mitchel Penn, managing director of equity research for Oppenheimer and Co., talks about the challenges of analyzing and evaluating business-development companies, and then highlights Runway Growth Finance Corp. -- which his firm expects to outperform the market and competition -- to show the methodology in action and to showcase the place BDCs should occupy in diversified investment portfolios.
Eric Boughton, chief analyst at Matisse Capital and portfolio manager for the Matisse Discounted Closed-End Fund Strategy, says that the war in Ukraine has been creating deep discounts and bigger buying opportunities for closed-end fund investors, noting that emerging markets and international stocks went into the conflict already at low levels, which now means investors are getting ‘a discount on a discount.’ He notes that international equity closed-end funds now are trading at a median discount of 12 percent, compared to a long-term discount of 10 percent; international bond closed-end funds now trade at a median discount of 11 percent, compared to a normal average of 8 percent. Those conditions – and wider discounts – should improve investor confidence that the investments can rebound quickly from the war.
Seth Brufsky, chief executive officer for the Ares Dynamic Credit Allocation Fund, says that conditions since the end of the year have changed from concerns over what the Federal Reserve would do, 'changing the calculus' for how people should and will invest. Brufsky says the focus entering the year was on floating-rate investments, but now that there are lingering concerns about inflation and higher rates that -- along with geopolitical concerns -- are forcing investors to re-evaluate priorities but also investment options. Brusky says that fixed-income markets are becoming increasingly attractive in these conditions -- particularly in high-yield bonds, but also with some investment-grade securities -- because the potential for capital appreciation has grown dramatically.
Mike Taggart of Taggart Fund Intelligence, the executive director of the Active Investment Company Alliance, returns to The NAVigator following up on his recent discussion of buying assets rather than discounts by answering some questions from the audience about the persistence of discounts and where discounts fit into the picture once you have purchased a fund.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the chairman of the Active Investment Company Alliance, says that 20 investment firms have launched 30 new funds under the 'Closed-End Fund 2.0' format since 2019, and the results and opportunities are promising. While the new funds show an average discount over 7 percent, the new structure returns the funds to net asset value after 12 years, which means that some of these funds are long-term bargains right now; he names four of the 2.0 funds that look particularly attractive to him now.
Mike Taggart, founder of Taggart Fund Intelligence and executive director of the Active Investment Company Alliance, says that the stock market's rough January along with the war between Russia and the Ukraine have put the market in a tizzy and widened discounts for closed-end funds by over 1 percent on average this year, but he notes that while discounts have become attractive, they don't make for automatic buying opportunities. Some closed-end funds, Taggart says, will stay at deep discounts and will see the net asset value fall towards the discount instead of rising to create the standard payoff bargain buyers are seeking. He says investors need to want the underlying assets and believe in their potential, rather than simply buying the big discounts.
Chris Oberbeck, chairman and chief executive officer at Saratoga Investment Corp., says that the structure of business-development companies -- which allows assets to increase in value when interest rates rise, while keeping liabilities fixed, thereby raising spreads -- makes them particularly attractive to investors looking for better real yields in a rising-rate environment. Oberbeck explains, generally, how BDCs will be able to weather the first rate increase, whenever it happens, with much less impact than most income investments will experience.
Maury Fertig, chief investment officer at Relative Value Partners, discusses the factors he considers when picking closed-end funds to add to client portfolios, and how those criteria have been impacted by headlines about rising rates and inflation, along with the stock market's heightened volatility and January losses. Fertig says that current conditions have changed some of his focus, moving him away from floating-rate funds -- which were trading at a significant discount a year ago, but which are close to net asset value now -- while convincing him to 'nibble' on some credit and mortgage funds that have fallen off in recent months, becoming more-attractive bargains as a result.
Mike Taggart, founder and chief executive officer at Taggart Fund Intelligence -- the recently appointed executive director of the Active Investment Company Alliance -- talks about his research into how closed-end funds have performed in rising-rate cycles, and also looks at how senior-loan funds perform, noting that the closed-end fund structure can make it harder for senior loans to live up to their narrative as being a plus asset when rates are going up.
Rob Shaker, portfolio manager at Shaker Financial, says that the market's recent struggles have re-started a cycle and repetitive pattern that closed-end fund investors should recognize and take advantage of. It starts when excessive selling pressures -- which the market experienced in January -- results in 'excessive selling' that widens discounts; once those selling pressures ease, the market rebalances and restores equilibrium, and investors take advantage of the bigger discounts to snap up bargains, which then completes the circle by raising prices and narrowing discounts to more normal levels. Shaker says investors should be at the buying point now, particularly for bond funds.
Duncan Farley, portfolio manager at BlueBay Asset Management -- manager of the BlueBay Destra International Event-Driven Credit Fund -- says that the many headline events affecting the market aren't all buying opportunities. The best opportunities in event-driven investing come from good companies with bad balance sheets or difficult circumstances, where the interval fund structure allows management to ride them back to good health, generating above-market returns in the process.
Connie Luecke, senior portfolio manager for Duff and Phelps Investment Management and chief investment officer of the DNP Select Income Fund says that the recently passed infrastructure bill -- plus the potential for elements of the Build Back Better bill to be broken out and passed -- should provide a business boost to energy and utility companies, communications firms and more, but she also explains why legislation isn't the only reason why infrastructure is poised to be a strong sector in the post-pandemic recovering economy.
Alex Condrell, managing director at Cliffwater discusses the firm's direct lending index and corporate lending fund and how investments in middle-market corporate credit should stand up to the challenges of rising inflation and interest rates, providing something close to historic return levels of 9 percent for the asset class without extending recklessly out the risk spectrum.
Robert Grunewald, chief executive officer at Flat Rock Global discussing how the interval-fund structure provides stability that allows a 'non-bank bank' -- which is the way he describes his firm -- to trade off some liquidity in pursuit of higher fixed-income returns. Operating in 'middle market credits' and investing in first-lien credits, Grunewald says that despite changing interest-rate and inflation conditions it remains reasonable to expect a return in the 7 percent range for the year ahead.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the executive chairman of the Active Investment Company Alliance, returns to the podcast this week and turns his lens forward, giving his 2022 projections for discounts, new funds, shareholder activism and more, and including some funds he says are well-positioned and constructed to benefit from the economic conditions that lie ahead.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the executive chairman of the Active Investment Company Alliance, reviews 2021, discussing the high number of closed-end funds that are currently trading at premiums, and the rebound that has represented in performance, as well as the expansive use of leverage, current high levels of dividend yields and more.
Nathan Briggs, a partner in the asset management practice at Ropes and Gray, discusses the burgeoning trend and inner workings of 'follow-on offerings' -- where closed-end funds raise additional capital and add to their outstanding shares -- and the mostly positive impact these actions have for shareholders.
Thomas DeCapo, partner at Skadden, Arps -- one of the largest law firms representing interests in the closed-end fund industry -- discusses developments and changes to the activist environment, noting that one thing he believes will not change is the high level of activity due to the many funds facing activists with stakes of 10 percent or more. DeCapo also discusses industry rumors that regulators are considering changing control-share statutes that have a major impact on how closed-end funds are governed.
Parth Doshi, vice president of closed-end funds at Nuveen, discusses the firm's new interval fund -- Nuveen Enhanced High Yield Municipal Bond Fund -- and how it compares to other closed-end funds. Muni bonds are a new area for the interval fund structure -- the Nuveen offering is just the second muni interval fund -- and Doshi discusses why investors might favor one structure over the other, or how both could be used in a diversified portfolio.
Gaal Surugeon, portfolio manager at Brookfield Asset Management's Public Securities Group, says that investing in physical assets like infrastructure and real estate provides inflation protection with stabilized yield potential and long-term growth prospects tied to the economic cycle, but the short- and mid-term prospects for real assets is also attractive now, given the economic recovery, investments in infrastructure and the need to fund upgrades to the underpinnings of society like airports, toll roads and more.
Stephen Hester, partner at Wide Moat Research and editor at the Intelligent REIT Options Advisor newsletter, offers his take on new developments within the business-development company realm, and compares how current market conditions are making BDCs an attractive alternative to real estate investment trusts, noting that the standard BDC cycle periodically makes them a buying opportunity -- especially compared to REITs -- and one of those times is now.
Michael Spatacco, director at Bancroft Capital, says that the latest evolution in closed-end funds will have more impact on the closed-end fund business and the evolution of funds and how they are sold than exchange-traded funds had on the traditional mutual fund industry. In a wide-ranging discussion on the state of the closed-end fund business, Spatacco says that the ETF evolution mostly changed the way funds are built, with the underlying investments remaining mostly the same; the changes in the closed-end fund business have dramatically expanded new offerings and who will participate in new funds, which is leading to the development of more new and interesting closed-end funds.
Matt Kence, portfolio manager for the Aberdeen Credit Income Strategies Fund (ticker ACP), says that the headwinds facing high-yield investors -- higher inflation and concerns over rising interest rates -- can be overcome with diligent security selection from the wider range of options available now thanks to record levels of bond issuance. Kence notes that if the economy delivers inflation and growth at the same time, high-yield bonds should do well, but the worry is that if inflation stunts growth -- which is not his base expectation -- that's when real troubles could arise.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and founding chairman of the Active investment Company Alliance, gives his take on wher business-development companies stand midway into earnings season and with the New Year just around the corner. He highlights four individual BDCs, talks about portfolio construction and highlights an upcoming BDC event that the Alliance will host later in November.
Larry Holzenthaler, an investment strategist and analyst at Nuveen who specializes in floating rate and high yield investments says that income-oriented investors who have allocations to junk bonds are likely under-allocated to loan funds, which offer equal returns with less risk. Holzenthaler says the floating-rate opportunities are particularly attractive in closed-end funds, thanks to persistent discounts -- despite more interest in loans -- that let investors buy the economic earning power of a dollar in loans, plus leverage, for about 95 cents.
In this bonus edition of The NAVigator, John Cole Scott, chief investment officer at Closed-End Fund Advisors and executive chairman of the Active Investment Company Alliance again helps Chuck Jaffe answer audience questions, this time going into the nuts and bolts of how funds work to answer a complex inquiry about proxy votes, distribution decisions and how investors should view and respond to these actions.
Sam Brothwell, director of research at Energy Income Partners, says that the frothy market for energy has created solid opportunities for infrastructure plays, such as pipelines, storage facilities, and liquid natural gas logistics companies. Brothwell discusses the emergence of renewables, noting that while they hold tremendous potential, they are not replacing legacy energy sources for use, and they should not replace those companies in investment portfolios either.
In this bonus edition of The NAVigator, John Cole Scott, chief investment officer at Closed-End Fund Advisors and executive chairman of the Active Investment Company Alliance dispels the notion that closed-end funds are only suited for individuals in or near retirement age, investing in tax-advantaged accounts, helping host Chuck Jaffe answer a listener's question. He offers suggestions and creative ways that a younger investor can enhance an established taxable portfolio with a few well-chosen closed-end funds.
Eric Chadwick, president and portfolio manager at Flaherty & Crumrine, says that at a time when investors are searching for yield and are being tempted to take on more risk to get it, preferred securities are shining, providing a relatively attractive return without adding danger to the portfolio. Chadwick notes that preferreds now are offering the best credit quality he has seen in years, and at shorter durations, making them less risky than high-yield and emerging-markets debt, and more in line with investment-grade bonds. That said, those conditions have generated significant demand for preferreds, generating premiums that closed-end fund investors must consider.
Bryce Doty, senior portfolio manager at Sit Investment Associates, says that yield-hungry investors can pursue better payouts through closed-end funds without stretching dangerously for yield, though he notes they will want to diversify -- and offers a number of promising funds to fill those varied portfolio slots -- in order to better manage the risk that typically comes with pushing to get higher distributions.
Erik Herzfeld, president of Thomas J. Herzfeld Advisors, says that investors are sacrificing returns for liquidity when they choose traditional mutual funds and ETFs instead of closed-end funds. The issue -- which arises due to the structures of the different fund types -- is a problem because most investors never even consider it; Herzfeld notes that most investors would be willing to trade liquidity -- to lock in for longer -- if it meant for better returns from fixed-income on long-term investments.
In this bonus edition of The NAVigator, Jonathan Browne, director of research at Robinson Capital, talks about how closed-end funds can help investors meet their needs for income in ways that traditional fixed-income strategies are struggling to do given current rate levels. By managing duration and supplying above-market yield -- and by focusing on credit risk at a time when it is more worrisome than interest-rate risk -- Browne says investors can better achieve income goals.
James Thom, senior investment manager in Aberdeen’s Asian equities team based in Singapore and portfolio manager for The India Fund, says that the country's economic recovery from Covid-19 has resulted in astronomical growth levels -- significantly higher than in the United States -- that have the potential to continue longer, since the recovery there is still in early stages. Still, with vaccination levels low and concerns over variants, Thom noted that he expects more volatility ahead during the recovery process before, ultimately, the nation's demographics win out and pay off in a long-term growing market ahead.
Michael Ordonez, director of client portfolio management at Thornburg Investment Management, says that the biggest issue income investors face today is economic dynamics that are leading to a 'very difficult sustained income demand landscape, with less and less opportunities to generate that income.' That situation led Thornburg to enter the closed-end fund space for the first time with the Thornburg Income Builder Opportunities Trust, a new fund that uses the new, commonplace pricing structure, which Ordonez describes as 'Closed-End Fund 2.0' thanks to enhancements that should make the investing experience better for investors.
Daniel Wildermuth, chief investment officer for the Wildermuth Endowment Fund -- an interval fund that uses an endowment-like investment strategy built around alternative investments -- discusses how private equity investments have not only weathered the storm of the pandemic, but have largely outperformed the broad stock market over the longer term, and how they can spark and diversify a portfolio.
The right mix of closed-end funds creates a quasi-bond, delivers steady ionJohn Cole Scott, chief investment officer at Closed-End Fund Advisors -- the founder/executive chairman of the Active Investment Company Alliance -- discusses what is involved in turning portfolios of closed-end funds into 'synthetic bonds,' delivering consistent returns above what is available in the fixed income markets, during times of concerns over inflation interest rates and possible tax hikes.
Roxanna Islam, associate director of research for Alerian and S-Network Global Indexes, discusses why her firm's indexes of closed-end funds show particularly high yields right now, but suggests that investors keep an eye on distribution coverage ratios -- which look at whether a fund's earnings can cover its payouts -- to identify issues where distribution cuts are more likely in the future.
Mike Taggart, founder of Taggart Fund Intelligence, joins the NAVigator to discuss current trends in closed-end fund mergers, and while he says that most deals benefit shareholders and management alike, he raises concerns about those times when consolidations and investment-mandate changes aren't great for a fund's owners. Taggart cites two affiliated funds that have been going through transitions, NexPoint Strategic Opportunities and Highland Income, as examples, noting that the former has been in the process of converting to a REIT for year, while Highland Income is currently proposing to morph into a diversified holding company, a move that has drawn scrutiny from activist investors; Taggart says the cases highlight the importance of shareholders reading their fund's documents, to learn the benefits and downsides before approving a fund's change.
Portfolio manager Brian Kessens of Tortoise Ecofin, who oversees the closed-end Tortoise Pipeline and Energy, and the Tortoise Power and Energy Infrastructure Fund, says he expects double-digit total returns from midstream and other energy companies based on current high yields, supported by stock buybacks and debt paydowns. The energy sector had a rocky time through 2020 and has rebounded sharply, but Kessens says valuations generally remain reasonable and that 'as the market starts to appreciate some of these growth opportunities, there's further upside ahead.'
Nicholas Marshi, editor of the BDC Reporter says that business development companies are heading into 'a bit of a golden age' over the few years as a result of low interest rates continuing to help with the cost of capital, improved credit conditions generally, and thanks to mergers that have swallowed up some of the weaker players in the field. It all combines to make Marshi's take on the BDC sector as good as it has ever been in his two decades covering the field. Marshi also gives his take on the sector's second-quarter earnings picture, which looks like it will see nearly all BDCs return to record NAV levels, completing the strong bounceback from a disastrous fall early in 2020.
Jerry Paul, senior vice president of fixed income for ICON Advisors -- manager of the ICON Flexible Bond Fund -- says that fears of rising interest rates and inflation haven't made reasonable yields on closed-end investments dry up. Paul continues to look at closed-end activism situations, which has brought him to bank-loan funds; he worries about decreased investor activism but thinks they will always play a role in closed-end fund investing.
Patrick Galley, chief investment officer at RiverNorth Capital Management -- which runs four municipal bond closed-end funds that invest in both individual bonds and in other muni closed-end funds -- says that as tax-equivalent yields in the muni space have become relatively attractive, the supply-demand picture has changed, narrowing discounts. That doesn't diminish the tax edge provided by the bonds, but makes selective buying critical for investors looking for tax advantages now.
Dan Omstead, chief executive officer at Tekla Capital Management -- which sponsors four health-care oriented closed-end funds -- says that the pandemic proved the promise of health care and biotech companies as it helped vaccine maker Moderna grow from a small form to one of the largest health-care companies in the world, and now he is looking at 'a new generation of companies that are well funded and developing very innovative products against every health-care target you can imagine.'
Long-time activist investor Phillip Goldstein, co-founder and portfolio manager at Bulldog Investors, says that narrowing discounts and regulatory and legal changes have made it tougher for shareholders to find appropriate targets where they can mount a viable campaign against management. A new law proposed in Congress would take that further, Goldstein says, but he ultimately believes that activists will adjust and continue to bring action in cases that warrant the approach.
It's the 100th NAVigator podcast, and John Cole Scott, chief investment officer at Closed-End Fund Advisors and the executive chairman of the Active Investment Company Alliance returns to discuss narrowing discounts and why investors shouldn't wait for them to widen before investing, developments in the closed-end business, the state of closed-end funds now and a few funds worth considering for the second half of 2021.
Portfolio manager Rob Shaker of Shaker Financial Services returns to The Navigator, having been a happy camper when discounts grew massive at the start of the pandemic, and having been more circumspect as they narrowed late in 2020. Now, he's seeing pockets of opportunity, looking for relative bargains and watching to see whether closed-end funds now are repeating their pattern from the financial crisis of 2008, when discounts got huge, then tightened up, then struggled during the "taper tantrum" reaction to Federal Reserve efforts in 2013. He's watching the Fed -- and the market's reaction to it -- now to see if history will repeat for closed-end investments.
Daniel Ashcraft, portfolio manager for Gateway Investment Advisers -- part of the firm’s team responsible for running the Nuveen S&P 500 Buy-Write Income Fund -- says that with volatility on the rise and likely to stay that way, covered-call strategies are headed for a period that should be ideal, where they can deliver their 'bread-and-butter' of lower-volatility exposure to the markets with attractive risk-adjusted returns.
Bob Long, chief executive officer at Conversus, discusses how 'tender funds' give investors access to private markets, which creates improved diversification and generates an investment premium. Long discusses the pros and cons to the fund structure, as well as the challenges of evaluating the funds given the absence of ratings and rankings for the funds.
Randy Anderson, chief executive officer at GC Asset Management and portfolio manager for the Griffin Capital Institutional Access Real Estate fund says that the bad headlines the real estate market got during the coronavirus pandemic have not materialized as expected, at least where institutional real estate (high quality properties/investable markets), noting that the market has largely recovered and are now showing new opportunities ahead. That said, he noted that there will be heightened volatility, which is countered particularly well by interval funds, which themselves have limited liquidity helping shareholders ride out the bumps.
Kimberly Flynn, managing director for alternative investments at XA Investments, discusses how money managers benefit from opening London-based unit investment trusts -- roughly the equivalent of a US-based closed-end fund -- and how the strategies have synergies, especially with illiquid alternatives, that are making for new and interesting investments, notably right now in the development of ESG-based infrastructure funds.
Eric Boughton, chief analyst at Matisse Capital and portfolio manager for the firm's closed-end strategy funds, says that since taking a beating during the 2020 pre-pandemic market meltdown, closed-end funds have rebounded to where discounts on average are now 3 percent, compared to a long-term average discount of 5 percent, making this 'a less-than-average time to invest in closed-end funds from a discount perspective.' Still, he noted that there are sectors and industries that remain cheap, and he highlighted master limited partnerships, noting that the median discount for the sector is currently 16 percent, compared to the average of 6 percent over the last 15 years. In this NAVigator bonus -- originally broadcast as the Money Life Market Call with host Chuck Jaffe -- Boughton also discusses the prospects of some individual funds.
Mark Asaro, director of investments for Noble Wealth Management, says that investors who are staring down low interest rates that have them questioning the classic, traditional 4 percent 'safe withdrawal rule' should be looking at closed-end funds to bolster returns and to act as a paycheck-replacement, providing steady income that -- when applied tactically -- should weather changing inflation and interest-rate conditions.
Mike Taggart, founder and chief executive at Taggart Fund Intelligence -- a new analytical firm being built to cover closed-end funds -- says that individual investors and financial advisers should move away from their obsession over discounts in closed-end funds, noting that total return and other factors drive long-term satisfaction with a closed-end fund investment. He discusses the factors he is focusing on -- and that he thinks investors should be looking for -- as well as the need for independent fundamental analysis of closed-end offerings that he feels the industry currently lacks.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the executive chairman of the Active Investment Company Alliance, says that with strong recent performance, 'getting big fat discounts continues to be hard,' but he says that shouldn't dampen enthusiasm for closed-end funds and business development companies. He cites opportunities in energy, real assets and real estate funds and notes that narrower discounts make this a time to consider non-listed funds, which tend to be less levered and volatile in the choppy market conditions we're likely to see moving forward.
Tom Dinsmore, chairman and chief executive at Dinsmore Capital Management, which manages the 50-year-old Bancroft Fund and several other issues that specialize in convertible securities, says that investors looking to increase yields with a 'bond-like equity' will be hard-pressed to create a portfolio of currently available convertible issues that do the job. He notes that many new convertible issues -- coming from health-care and technology companies -- require the underlying common stock to do well, and don't carry big coupons, so that investors should use them as a lower-volatility equity alternative.
Michael Spatacco, director at Bancroft Capital, discusses how ESG investing -- for environmental, social and governmental factors taken into consideration -- is starting to gain a foothold in the closed-end funds with the opening of a new issue from Nuveen that he has been an adviser to. He expects the trend to continue, as the closed-end fund space more fully reflects the rest of the world, which has seen tremendous movement of monies into 'social investments.'
With many experts questioning the validity of classic investment allocations, Patrick Galley of RiverNorth Capital Management discusses how closed-end funds fit into the standard 60-40 stocks/fixed-income mix as a way for investors to get more from the bond side of the equation without actually changing their broad asset plan. He also discusses how current market times -- with the threat of rising interest rates and inflation mixing with lingering discounts from the market meltdown of early 2020 make for interesting opportunities now as both a closed-end fund investor and for fund sponsors.
Keith Ashton, portfolio manager for the Ares Dynamic Credit Allocation Fund (ticker ARDC), talks about why he likes collateralized loan obligations and other credits as a way of adding low-duration, high-yielding income instruments to a portfolio, and discusses what investors should expect from adding these alternative credits for the income-generating side of their portfolio.
Michael Naughton, chief operating officer for U.S. retail at Lord, Abbett and Co., says the interval-fund structure -- which limits shareholder redemptions -- has given managers of the Lord Abbett Credit Opportunities Fund the ability to pursue the firm's best ideas, including illiquid investments, and discusses how the liquidity risk of interval funds can balance out other risks faced by fixed-income investors in today's challenging interest-rate environment.
Craig Packer, co-founder, Owl Rock Capital Partners and chief executive officer at Owl Rock Capital Corp., says that business-development companies held up well through the pandemic -- noting that his own company has been making loans at rates that are twice the cost of the financing -- with better-than-expected performance which should only get better as the economy re-opens. He also discusses the impact of interest rates and inflation and more on lending activity, and whether booming activities in SPACs -- special purpose acquisition companies -- is having any impact or fallout on BDCs.
John Miller, head of municipals at Nuveen, says that the combination of the American Recovery Act and the progress towards recovery and the growing vaccination numbers, have made it so that state and local governments that had been crying poverty are now seeing a boom. He notes that municipal tax revenues have held up better than expected through the pandemic, and now are poised to increase; coupled with stimulus monies, he believes conditions are right for improved credit quality which should help muni bonds thrive for at least the next few years.
Will Rhind of GraniteShares talks about balancing high yields against risk in the GraniteShares High-Income Pass Through Securities ETF, a fund that invests entirely in business development companies and closed-end funds. Rhind discusses why the fund currently favors closed-end funds slightly, how he believes it is miscategorized by the ‘stack-and-rank services’ like Morningstar and talks about a few investments and why they pass muster with the fund’s methodology.
Nick Holmes, portfolio manager for the Tortoise Essential Assets Income fund, discusses how investing in water infrastructure is mostly lumped in with other infrastructure plays, which he considers a mistake, noting that water is viewed differently as an asset class around the world than it is in the United States. He explains why his fund gets involved in private investments, how it was hit harder than most closed-end funds during the market';s 2020 decline and why he thinks both the fund and water assets are poised for success moving forward.
Paul Wick, long-time manager of the Columbia Seligman Communication and Information Fund -- one of the most successful sector funds in history -- talks for the first time about managing a closed-end fund, Columbia Seligman Premium Technology Growth, and discusses the similarities and differences between the two, and whether he views the closed-end fund as a chance to get a bargain price on his flagship fund. One similarity between the funds: annualized average returns north of 15 percent since inception.
Neil Azous, chief investment officer at Rareview Capital, says that 10-year real US interest rates -- which have been on the rise for the last few weeks -- are 'the most impending danger' to investor portfolios. He says the market is now acting as if the pandemic is nearly over and says that investors need to be thinking of the big economic themes beyond the re-opening, including the changing rate picture.
Maury Fertig, chief investment officer at Relative Value Partners, discusses the factors he considers when picking closed-end funds to add to client portfolios, and how those criteria are impacted by current market conditions that have seen closed-end issues get whipsawed by the market over the last year. Fertig appeared on The NAVigator last week, but this appearance in the Money Life Market Call serves as a special bonus episode/follow-up with much more of his closed-end fund insight.
Maury Fertig, chief investment officer at Relative Value Partners, says the market's rebound from a year ago has made it harder to find closed-end issues worth buying and holding now, but he says there are selected opportunities still worth pursuing. He suggested that floating-rate funds and credit funds will continue to perform well, and that closed-end funds still offer value from a discount level, but with discounts narrowing, investors should look at cutting back. He also discusses closed-end funds as an alternative source of yield, why he never buys at a premium and more.
Bill Pekowitz, portfolio manager for the Aberdeen Global Premier Properties Fund, says that lockdowns during the coronavirus pandemic hit brick-and-mortar retail, hotels, office space and the urban apartment sectors, but boosted cell towers, warehouses, industrial data centers and more. Now, with economic recovery, he expects some troubled areas to rebound and suggests balancing real estate investments between those that are peaking with those that are recovering.
Wendy Huang, business development manager for primary markets at the London Stock Exchange Group, discusses the differences between American markets and closed-end funds and those in England and explains why fund sponsors and businesses are finding it particularly lucrative and timely to take their issues overseas now.
Anne Kritzmire, an independent closed-end fund trustee, explains how the role of directors differs in closed-end funds compared to traditional mutual funds, where boards are known for passing everything management's way. She explains the ways in which independent directors in closed-end funds have a more active hand in oversight on key factors like leverage, involvement in alternative and illiquid investments, dividend payout policies and interactions with activist shareholders, and how that involvement is crucial in protecting investors.
Michael Roomberg, manager of the Miller/Howard High Income Equity Fund, says that the end of election uncertainty -- and sustainable fiscal policy that provides a tailwind for domestic consumption -- and the development of vaccines for coronavirus fueled a rally in value stocks at the end of 2020 that should carry through 2020, especially as investors get more excited about stocks and broaden their interest beyond the few names that drove the market a year ago. While value has struggled as an asset class since the turn of the century, Roomberg notes that it outperformed growth stocks for the majority of the 1990s, and he thinks that, pos-pandemic, high-dividend value stocks are set up for that kind of run of outperformance again.
William Costigan, managing director at Guggenheim Partners and senior member of the active fixed-income team, says that with real interest rates low and nominal yields on Treasuries at or below zero, investors must look to creatively expand their bond exposure. He calls for investors to be more creative, more thoughtful and do more homework' -- looking at, for example, alternative credits -- if they are going to be satisfied with returns in the current environment.
Larry Antonatos, portfolio manager overseeing real asset strategies at Brookfield Asset Management, says that infrastructure investments will benefit in 2021 from the political changes in Washington that may spur additional government investments, as well as the end of the pandemic, which should lead to economic expansion. He says that real assets -- and infrastructure in particular -- will benefit from job creation in the short run and long-term GDP growth down the line to pick up performance in the year ahead and beyond.
John Cole Scott of Closed-End Fund Advisors, the founding chairman of the Active Investment Company Alliance, compares 2020 to unusual years from the past, looks at the best and worst performing investment areas for closed-end funds from this year and looks ahead at the opportunities ahead in 2021.
Cheryl Pate, portfolio manager for Angel Oak Capital, says that banks took steps to shore up their balance sheets and now are sitting on excess reserves, which should boost earnings in the latter half of 2021. Coupled with a positive picture on interest rates, inflation and government oversight, she says valuations are poised to show gains next year, although she notes that she has a slight preference for owning financial debt versus equity in the year ahead.
Andrew Kerai, senior credit strategist and portfolio manager at RiverNorth Capital Management, says that investors looking to improve fixed income returns should consider middle-market corporate credits and other issues in the private credit market, but he notes that investors should be attuned to downside risks, noting that they make more with a manager who does better avoiding defaults than with one who chases higher yield but takes on more risk.
W tym odcinku wszystko, co powinniście wiedzieć o pierwszym tańcu! 🙂 👰🤵
Najpopularniejsze utwory, najłatwiejsze style taneczne i spektakularne figury, które nie wymagają dużej kondycji fizycznej. 💃🕺
Co zrobić, gdy buty się ślizgają, albo podłoga jest tak "tępa", że nie można zrobić obrotu? Instruktorka tańca Zuzanna Sołtysiak ma na to domowe sposoby! 🙂
Zapraszam!
Gabriela Jelonek
FB/welonimuchaprogram
James Clark, client portfolio manager at Nuveen Asset Management, says that real assets and infrastructure investments -- normally consistent, defensive investments -- have seen those appealing characteristics under attack because of the pandemic shutdowns, but he noted that Covid-19 tended to accelerate trends that were in place rather than disrupting those movements. With the development of a vaccine,he expects pricing to firm up as uncertainty starts to melt away -- 'the worst case scenario has been taken off the table for a lot of folks' -- but for those positive trends to continue, particularly in an area like industrial real estate.
Przy czym najlepiej bawią się goście? Kolejna audycja, a w niej ZABAWY WESELNE!
Jakie wybrać, co najlepiej się sprawdza i jak uniknąć "oklepanych" zabaw - o tym porozmawiam ponownie z DJ-em i wodzirejem Damianem Muńko - Muńko i Kompany - oraz Szymonem Płachcińskim, wokalistą i wodzirejem z zespołu Cuda Niewidy. :) Będzie też ponad 10 pomysłów na alternatywne oczepiny!
To druga część naszej rozmowy, z pewnością nie raz się przy niej zaśmiejecie, a może nawet zacznie Wam chodzić nóżka do tańca!
Zapraszam - Gabi Jelonek
FB/welonimuchaprogram
Marzeniami człowiek żyje! Więc mimo braku wesel, zachęcam Was do planowania swojego wymarzonego dnia. :) Dlatego zapraszam na kolejny odcinek audycji!
Planując wesele wiele par zadaje sobie pytanie: kto powinien grać na weselu, DJ CZY ZESPÓŁ? 💃🕺
Wraz z DJ-em i wodzirejem Damianem Muńko - Muńko i Kompany - oraz Szymonem Płachcińskim, wokalistą z zespołu Cuda Niewidy, spróbujemy pomóc Wam znaleźć odpowiedź na to pytanie.
P.S.: Rozgadaliśmy się tak bardzo, że kolejna audycja będzie w tym samym składzie i o zabawach weselnych. Dlatego koniecznie posłuchajcie pierwszej części!
Zapraszam - Gabi Jelonek
FB/welonimuchaprogram
Jonathan Browne, director of closed-end fund research at Robinson Capital, says that investors should be looking to closed-end funds to help solve the yield challenges they face today, when low interest rates have challenged the traditional 60-40 portfolio and when bonds have performed in lock-step with the stock market. While the industry keeps developing new and different investment solutions, Browne notes that closed-end funds are a more simple half-step toward alternatives that can be just as effective.
Rob Shaker, portfolio manager at Shaker Financial, says that the tax-loss selling season for closed-end funds should be particularly interesting in 2020, given the volatility funds saw throughout the year. That said, he anticipates that discounts will widen in December, making a good opportunity in closed-end issues look even better by mid-month, with the expectation of a January effect that will narrow the discounts back again in favor of investors.
Robert Bush, senior vice president and director of closed-end fund products at Calamos Investments, says that the benefits of closed-end fund investing have been on display this year in the rebounding stock market coupled with the low rate environment, because that low borrowing costs have helped funds profit from using leverage. He also discusses convertible securities, where many of the closed-end funds have not kept up with the underlying securities -- convertibles are up about 20 percent on average, he says -- creating particularly attractive opportunities now.
Brian Schaffer, managing director at Prosek Partners -- and the head of special situations for the public-relations firm -- discusses the changing face of shareholder activism for closed-end funds, and the role that communications has in helping investors measure the relative merits of any deal that pits fund management against shareholders making a move to take control.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the founder and executive chairman of the Active Investment Company Alliance does a quick 1-2-3 in this week's edition of The NAVigator, answering three questions from the audience and giving 2 ticker symbols worth following in one wide-ranging interview. He discusses the way discounts widen during bear markets, the expanded role closed-end funds could play in fixed-income portfolios looking for higher yields, and why he likes master-limited partnerships now.
Porozmawiajmy o oprawie muzycznej ślubu! Tym razem cywilnego, a więc wszystkie chwyty dozwolone! Tylko jak pośród wielu propozycji wybrać to, co będzie muzycznie najpiękniejsze?
O muzyce na ślubach porozmawiam ponownie z Katarzyną Jaskulską i Dominikiem Pukiem z oktetu Vidi Aquam.🎵 Zapraszam!
Tematem odcinka są... zakazane piosenki 😈🔥 na ślubie kościelnym. 👰🤵💒
Wiedzieliście, że na mszy nie powinno wybrzmieć "Ave Maria", a w kościele nie powinniśmy usłyszeć wszystkich instrumentów?
Temat budzi sporo kontrowersji zarówno wśród par młodych, księży, jak i samych muzyków. Dlatego zapraszam Was serdecznie do słuchania
Wiele bardzo ciekawych rzeczy, zarówno z teorii jak i praktyki, opowiedzą Wam moi goście: ks. dr hab. Mariusz Białkowski, specjalista od muzyki sakralnej oraz przedstawiciele oktetu Vidi Aquam, Katarzyna Jaskulska i Dominik Puk.
Bryce Rowe, senior equity research analyst for business development companies at National Securities Corp., returns to the NAVigator to revisit business-development companies now. In his last appearance -- just days before the stock market bottomed out from its winter swoon and as the country was just entering the pandemic shutdown, Rowe said that beaten-down BDCs were a strong buy. Now, despite a solid run up along with the market, Rowe says that the bulk of business-development companies he watches -- and especially those focused on credit spreads -- remain worth buying, presenting both great value and strong upside potential.
David Tepper of Tepper Capital Management in San Francisco explains why he uses closed-end funds almost exclusively in his client portfolios, noting that in today's market conditions there are plenty of opportunities to build a well-diversified portfolio at a discount, and adding that even long-term closed-end fund investors need to be prepared to take advantage of times when discounts narrow suddenly, creating short-term chances for bigger-than-expected gains.
Peter Vanderlee of ClearBridge Investments, co-manager of the LMP Capital and Income Fund, says that the stock market's recovery back to record-high levels hasn't made dividend stocks overpriced because much of the move has been in stocks that don't make distributions. Coupled with lower-for-longer interest rates, it makes dividend stocks the compelling buy for income-oriented investors in today's market.
Terry Gallagher, executive vice president at UMB Fund Services, sees an industry-wide trend towards the development of new interval and tender-offer funds. Gallagher -- whose firm helps investment companies launch new issues -- covers the reasons why the structures are growing in popularity, the tax implications that issuers consider when setting up a fund and more.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the founder/executive chairman of the Active Investment Company Alliance, celebrates the end of the first year of The NAVigator podcast with a quick look back at a tumultuous 12 months for closed-end funds, but looks ahead at the industry with an eye toward how inflated by the pandemic economy are creating strong opportunities in the credit markets, in municipal bonds and beyond.
Daniel Wildermuth, chief executive officer, Wildermuth Wealth and portfolio manager of the Wildermuth Endowment Fund, says that investing like the big college endowment funds creates a long-term outlook that's heavy in private equity and other alternative asset classes, but that having that approach in an interval fund's structure forces investors to be patient and to ride out short-term market noise, which is necessary when loading up on private investments. He also provides his assessment of how private equities have responded in the topsy-turvy pandemic times of 2020.
Dave Lamb, head of closed-end funds for Nuveen, says that while municipal bonds have rebounded sharply, they haven't quite kept pace with investment-grade issues or recovered to pre-pandemic levels, creating an opportunity for investors. He notes that closed-end fund investors can find bargains and don't have to worry much about being disappointed when they can buy issues at wider discounts the way they can now.
Thomas DeCapo, a securities attorney with Skadden Arps who recently appeared at the AICA's Summer Summit, joined Chuck Jaffe to discuss control shares statues that critics have said will reduce activist challenges to closed-end funds. DeCapo says that the rules will protect investors, result in more closed-end funds bring brought to market and that it won't stop real activism -- where investors are looking for real change and improvement rather than boosting a price and grabbing a quick profit -- and he described the actions as consumer-friendly and democratic for small shareholders.
Eric Boughton, chief analyst at Matisse Capital -- a firm that manages portfolios of closed-end funds -- says that outsized discounts make most closed-end funds attractive potential investments now, noting in this interview from 'Money Life with Chuck Jaffe' that nearly every type of fund represents assets currently on sale. Still, Boughton notes that discounts by themselves are not a reason to buy, saying investors need to understand leverage and assets before taking a chance on higher-risk areas like master limited partnerships and more.
On today's edition of the NAVigator, Lawrence Holzenthaler, investment analyst at Symphony Nuveen, discusses high-yield investing in a low-rate environment, noting that equity markets are more optimistic than the broad corporate credit market and how average credit investors see risk very differently right now when compared to the typical equity investor. Holzenthaler adds that closed-end junk-bond and floating-rate funds now are a way to 'buy discounted assets at a discount,' which should make them attractive to bargain-conscious investors.
Long-time financial journalist John Waggoner explains why he has always gravitated towards closed-end funds even as investors and the news media often ignored them, and then explains how and why closed-end funds can provide advantages that he thinks most investors miss by focusing on closed-end funds, exchange-traded funds and active ETFs.
Tom Roseen, head of research services at Lipper Refinitiv, says that closed-end fund discounts currently stand at an average of 8.7 percent, significantly wider than the 5.65 percent of the past but significantly improved from February and March as closed-end funds were hammered during the pre-pandemic market downturn. Roseen notes that convertible-securities funds have been exceptionally strong during the bounce back -- up 25 percent over the last three months -- but that energy MLP funds remain down more than 58 percent and that natural resources funds are down 34 percent as they struggle to regain footing; he expects those trends to continue as the economy and the closed-end space slowly recover.
Kimberly Flynn, managing director of alternative investments at XA Investments, talks about the new and different ways alternatives are being packaged in closed-end funds and how investors and fund companies deal with discounts and new structures in order to invest in assets that otherwise wouldn't be available to individuals. She also discusses auction funds and hybrid funds, new ways to put alternatives and real estate into portfolios that are just being brought to market now, but which have big potential for the future.
Gregg Bell, co-founder of A3 Financial Investments -- which runs the A3 Alternative Credit Fund -- discusses why investing in alternative credits like reverse mortgages, private credit, credit-linked notes and more can create income streams that wouldn't be available to most individual investors without the closed-end, interval fund structure. Bell -- whose fund is positive this year and up nearly 9 percent since opening in October 2019 -- says that few retail investors have exposure to the alternative credit market, and explains how and why they could benefit from thinking beyond Treasuries and corporate bonds.
Financial journalist Steven Bavaria of SeekingAlpha.com -- author of 'The Income Factory: An Investor’s Guide to Consistent Lifetime Returns" -- talks about how current market conditions should have investors looking to closed-end funds as a way of generating consistent income streams. Bavaria compares closed-end funds to factories, where the company owners are more concerned with the production they get from the workshop rather than the moment-by-moment value of the building. He notes that the strategy is particularly comforting now as a balance to market news and noise.
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the founding chairman of the Active Investment Company Alliance, returns to the NAVigator for a fresh look at where closed-end funds stand now. It was a big rebound for CEF issues in the second quarter, with strong gains despite facing an environment of heavy dividend cuts; while closed-end issues remain down on average for the year, Scott notes that wider discounts make them particularly attractive at this point, especially for income-oriented investors. He also provides two closed-end funds he thinks are worth a look-see now.
Ślubne tradycje i przesądy - kultura i folklor czy zabobon? 👰🤵
O ślubnych tradycjach porozmawiam z kulturoznawcą dr Małgorzatą Bulaszewską z Uniwersytetu SWPS oraz księdzem Wojciechem Nowickim, red. naczelnym Radio Emaus.
Skąd wzięły się te wierzenia i dlaczego tradycja miesza się w nich z wiarą? Posłuchajcie koniecznie!
Neil Azous, chief investment officer at Rareview Capital in Stamford, Conn., discussed how the four ways that investors typically make money in municipal-bond closed-end funds typically aren't all in favor at the same time. These times, however, are anything but typical, and Azous says that in the current unusual times, all four potential return streams are lining up in ways that make muni funds a particularly attractive option right now.
Larry Antonatos, managing director / portfolio manager at Brookfield Asset Management, says 'the depths of uncertainty and the market lows surrounding coronavirus are behind us.' The manager of Brookfield Real Assets Income Fund, said the firm's real asset managers are positioning now for a recover -- which he noted may not be particularly strong -- by focusing on areas where valuations are most attractive and recovery-driven cash-flow growth should be strongest. That means hotels, retail real estate, airports and more.
Czy wesele w czasie pandemii może skontrolować policja i wystawić mandaty? Te i wiele innych pytań przesyłali do naszego radia słuchacze. Dlatego w tym odcinku, wszelkie wątpliwości na temat nowych wytycznych dotyczących wesel, rozwieje radca prawny - Kinga Tesko, współautorka bloga Ślubne potyczki prawne.
Zach Forman, head of fund relations at Griffin Capital Securities -- which runs the Griffin Institutional Access Real Estate Fund -- says that the illiquidity of interval funds can be a real benefit to investors during turbulent times, not only by providing access to private markets that many investors couldn't access otherwise, but by giving managers the ability to run a fund without fearing withdrawals while forcing investors into longer-term thinking.
Michael Spatacco, director at Bancroft Capital, says that closed-end funds were an overlooked investment type for years, largely because the structure used for selling new issues put investors at a disadvantage. With that negative now mostly gone, however, he believes closed-end funds can be a particularly effective investment tool, and that new issues no longer need to be avoided when they open. He also explains how his firm incorporates closed-end fund investing into its mission of helping veterans.
Phillip Goldstein, co-founder of Bulldog Investors and a leading activist investor in closed-end funds, discusses a recent Securities and Exchange Commission decision that he says protects the fund operators at the expense of shareholders, and which he believes will widen discounts and make closed-end funds less attractive in the future.
Dzieci na ślubie - dla jednych aniołki 👼👸, dla innych rozbiegane diabełki 😈😂
Czy patrząc pod kątem pedagogicznym udział dzieci w ślubach jest ważny i ma sens? Jak zająć maluchy na weselu bez wydawania fortuny? 🎈🎉🎊
Gośćmi są dr Marta Majorczyk, pedagog i doradca rodziny w poradni przy Uniwersytecie SWPS oraz Florentyna Szofer, animatorka AnimaFlo.
Andrew Kerai, senior credit strategist at RiverNorth Capital Management, portfolio manager for RiverNorth Specialty Finance Corp., says that the difficult market has created strong opportunities for increasing the credit quality in bond portfolios, noting that the fixed-income space currently represents a buyer-friendly opportunity unlike anything seen since the Financial Crisis of 2008. He explains how he has re-positioned the portfolio to take advantage of those conditions, and when he expects those decisions to pay off.
Wypowiedzenie najważniejszych słów w życiu to nie taka łatwa sprawa! 👰🤵💒
Co zrobić, gdy tuż przed przysięgą zaschnie nam w gardle? Są na to specjalne techniki! ;)
O wznoszeniu toastów i przemówieniach na ślubach rozmawiam z Aleksandrą Rutkowską, bajarką i storytellerką znaną jako BajOla.
Kelly Thompson, founder and editor at Direct Lending Deals, says that business development companies specializing in middle-market lending are facing the pain of some defaults and the potential for restructurings, but she believes that the problems ultimately will make for buying opportunities and better conditions for BDC managers. While waiting for those calmer, surer times, Thompson suggests sticking with older, more-established BDCs, particularly those that rode out the financial crisis of 2008.
Matt Freund, co-manager of Calamos Long-Short Equity & Dynamic Income. says that while interest rates have been positioned lower-for-longer by the Fed, there are still ways to diversify bond holdings to generate income. In addition, he discussed how the fund has been able to tactically navigate the volatile pandemic-impacted market to bounce back sharply from when the market bottomed out.
Kłębek nerwów😨, drama queen 😭 albo po prostu bridezilla 👿? Posłuchaj koniecznie! 👰🤵
Stres i kłótnie przed ślubem? Napięcie z powodu sytuacji związanej z pandemią? To podcast dla Ciebie. 👰🤵💒
Z psychologiem - Mariką Witkoś - rozmawiamy o emocjach związanych z przygotowaniami do ślubu i o tym, jak radzić sobie z napięciami w związkach . 💞
Zmiana nazwiska i mówienie "mamo i tato" do teściów nie dla każdego są łatwe. ;)
John Cole Scott, chief investment officer at Closed-End Fund Advisors and the founder of the Active Investment Company Alliance, returns to the NAVigator to compare traits, characteristics and results of closed-end funds with non-listed interval funds offered by the same management company. The analysis -- which you can request by writing to theNAVigator@aicalliance.org -- shows that while interval funds raise some liquidity concerns, they also can create a performance edge in certain market conditions.
Bill Meyers, head of the closed-end business development group at Nuveen Inc., discusses how leverage works in closed-end funds and the types of leverage and rules governing it because leveraged funds -- and their potential to blow up fast when facing trouble -- could scare off nervous investors during volatile times.
Adam McCabe, head of fixed income for Asia and Australia for Aberdeen Standard Investments, said in an interview from Singapore that the countries on the leading edge of the viral economy -- the ones who can awaken from global hibernation first -- will have a mild advantage over nations that quarantine longer, but they won't have all of their trading partners and won't gain any long-lasting benefit. Even when economies have re-started globally, McCabe says recovery likely will be slow as investors try to regain footing amid the 'new normal.'
Koronawirus pokrzyżował plany i ślub w kościele/urzędzie weźmiesz w małym gronie, ale wciąż marzy Ci się uroczystość w obecności przyjaciół i rodziny? 👰🤵 Można dodatkowo wziąć ślub humanistyczny!
Jeśli myślałaś/myślałeś kiedyś o ślubie w balonie🎈, nurkując 🏊♂, na lodowcu 🗻 albo w innym nietypowym miejscu - posłuchaj koniecznie!
Co to takiego i w jakich krajach jest popularny? Posłuchajcie rozmowy z celebrantką Joanną Humerczyk.
Zapraszam - Gabriela Jelonek
FB/welonimuchaprogram
Co w świetle prawa oznacza dla nas małżeństwo? Jakie dokumenty są potrzebne do ślubu i kiedy nasze dokumenty trzeba wymienić po ślubie? Na co zwracać uwagę podpisując umowy? Czym różni się zaliczka od zadatku? Kto powinien opłacać ZAiKS? Czy fotograf i kamerzysta może udostępniać nasz wizerunek? U kogo szukać pomocy, gdy trafimy na nieuczciwych usługodawców i jak reklamować suknię ślubną?
Na te pytania odpowiada gość programu - Joanna Krukowska-Głowińska, prawniczka i autorka bloga SPrawnie o ślubie.
Zapraszam - Gabriela Jelonek
FB/welonimuchaprogram
Bardzo konkretna i rzeczowa rozmowa o ślubach w kontekście koronawirusa. Audycja z radcą prawnym Kingą Tesko, współautorką bloga Ślubne potyczki prawne.
Jeśli masz ślub w marcu i kwietniu - słuchaj koniecznie, podpowiemy, co teraz trzeba zrobić.
Jeśli Wasz ślub zaplanowany jest na maj, czerwiec czy wakacje - posłuchajcie, jakie macie możliwości i z czym to się wiąże.
Ważne: Audycja została nagrana 18.03.2020. W kolejnych dniach w Polsce wprowadzane były nowe obostrzenia. Szczegóły znajdziesz na fanpage'u audycji "Welon i mucha - program o ślubach", FB/welonimuchaprogram .
O duchowym przygotowaniu do ślubu rozmawiam z ks. Radosławem Rakowskim prowadzącym Duszpasterstwo Akademickie Winiary w Poznaniu 💒🙏😍
Będzie o naukach przedmałżeńskich i o często drażliwym temacie ofiary/finansów. O co pytać księdza i dlaczego nie powinno się go bać?
Posłuchajcie koniecznie! 😁
Gabi Jelonek
- odcinek audycji nagrałam z wyjątkowym gościem - specjalnie dla Panów! Tematem są garnitury na ślub.
W programie rozmawiam z najlepiej ubranym piłkarzem reprezentacji Polski - Grzegorzem Krychowiakiem, który po raz pierwszy opowiada o swoim ślubie.
W drugiej części programu dowiecie się, jak dopasować garnitur ślubny do sylwetki Pana Młodego. Tajniki męskiej garderoby odkrywa Damian Kozłowski z salonu Balamonte.
Posłuchajcie! :)
Tym razem porozmawiamy o kwiatach i oprawie florystycznej ślubów i wesel. Jak je wybierać, aby były piękne i trwałe? Jakie są kwiaty sezonowe? Czym się kierować przy wyborze bukietu dla panny młodej? I jak przystroić kościół na uroczystość? Posłuchajcie koniecznie rozmowy z Moniką Rusin z INNA Studio.
Tym razem trochę inny odcinek - nie będzie gości, ale opowiem Wam o zmianach w ślubach, które wchodzą od 2020 roku - jeśli planujecie swoją uroczystość KONIECZNIE posłuchajcie!
Będzie też podsumowanie 2019 roku - tego co najchętniej wybierały pary, gdzie szukały usługodawców, jak wyglądały śluby cenowo - i jak przewiduje się, że będą wyglądały kolejne lata.
Będzie też kilka słów o trendach na 2020 rok :)
Informacje przydatne zarówno dla par, jak i dla osób z branży ślubnej!
Jak dbać o włosy przed ślubem - kiedy je obcinać, farbować i czy warto doczepiać pasma? Jak dobrać fryzurę ślubną do kształtu twarzy, sukni i charakteru uroczystości? Tego dowiecie się w kolejnej audycji - gościem jest Katarzyna Marlewska, fryzjerka znana w sieci jako "Zaczarowane warkocze".
Tematem kolejnej audycji jest makijaż ślubny. Każda z pań wie, jak ważny - aby czuć się pewnie i pięknie - jest dobrze zrobiony make-up!
Jak uniknąć efektu ciotki-klotki na swoim ślubie i jednocześnie dobrze wyglądać na zdjęciach?
Jak dbać o cerę przed ślubem i jak samodzielnie wykonać makijaż, jeśli nasza wizażystka nie dojedzie?
O tym rozmowa ze specjalistką od pięknego makijażu Aleksandrą Aszyk. Zapraszam - Gabriela Jelonek.
Tym razem omawiamy fotografię ślubną - na co zwracać uwagę wybierając fotografa, co powinno znaleźć się w umowie i co zrobić, aby dobrze wyglądać przed obiektywem? Na te i inne pytania odpowiemy Wam wraz z fotografką ślubną, Wiolettą Kobusińską.
Papeteria ślubna wydaje się być mało ważna? Nic bardziej mylnego! Tym razem w programie rozmawiamy o zaproszeniach ślubnych - ale nie tylko o ich wyglądzie, ale i o tym, co według zasad savoir-vivre powinno się na nich znaleźć.
Jak zaprosić rodziców, którzy najczęściej współorganizują imprezę? Czy sztuka pięknego, odręcznego pisania wciąż jest na czasie?
Gośćmi programu będą Blanka Cybińska z poligrafii Ślub&Papier oraz kaligrafka Agnieszka Węgrowska.
Zapraszam do słuchania - Gabriela Jelonek.
Welon czy woalka? Narzutka, szal czy płaszcz do sukni ślubnej, jeśli będzie chłodno?
Czy do ślubu zabiera się torebkę? Rękawiczki na ślub to przeżytek?
Pewnie te pytania przyszły już Wam - drogie panny młode - do głowy. :)
Dlatego o garderobianych dodatkach ślubnych rozmawiam z Ewą Okularczyk, modystką i projektantką fascynatorów YOKOdesign i stylistką Basią Józefiak.
W drugim odcinku na warsztat bierzemy suknie ślubne! Tym razem stylistka Basia Józefiak opowie, jak dobrać suknię do swojego typu urody i kształtów! Będzie też o najnowszych trendach - i jak się w nich nie zatracić, pozostając na ślubie sobą - a nie być kimś przebranym.
Wiedza przydatna nie tylko dla panien młodych - zdziwicie się, ile można się dowiedzieć o swojej urodzie po prostu przyglądając się sobie w lustrze z odpowiednimi kolorami tkanin w dłoni!
W pierwszym odcinku programu "Welon i mucha" goszczę Agnieszkę Nowak - konsultantkę ślubną! 💍
Od czego i kiedy zacząć przygotowania ślubne, jak przeliczyć koszty uroczystości i na co zwracać uwagę planując wesele - na te i inne pytania odpowiemy Wam w pierwszej audycji. :)
Zapraszam!
Gabriela Jelonek