CEF Holdings ---- April 2025

[Flute McG]

Thank you to all who are posting. This is very intriguing to me even though I am 10+ years from retirement. I love the scenario that @COcheesehead discussed on the first page of 30% of their portfolio is CEFs that generate 65% of their income. I am going to start doing the same thing. Dedicating more of my portfolio to these and get the snowball rolling.

I am scanning through CEFconnect looking at funds while researching them on morningstar.
Came across ECAT - BlackRock ESG Capital Allocation Term. 25% dividend with a 1.45% expense ratio. Morningstar 4 star rated, moderate risk, good volatility measures, dividend increase over time. What am I missing with this one? Seems "too good to be true".

Last year BlackRock hugely increased the dividends of some of their funds in order to fend off a take-over attempt (I think) by Saba. 25% is totally unsustainable and for the last three months they have slowly been sneaking it back down. Expect more cuts - and resulting price decreases in the future. The NAV ticker symbol is XESGX. I can't understand Morningstar's 4-star rating.

Flute

 

[pb4uski]

I agree with dick here. The only clear B&H asset in my opinion is a major index ETF which you purchase in some horrendous dislocation at perhaps a 50% discount to expected price. ...

I guess I'm a fool for buying bonds and holding them to maturity (or call).

 

[dickoncapecod]

I guess I'm a fool for buying bonds and holding them to maturity (or call).

Of course not. Your preference is to accept somewhat lower returns in exchange for known or relatively certain results and an ability to basically ignore volatility. Nothing foolish about that ---- just a different approach to the risk/reward balance.
Regards, Dick

 

[dickoncapecod]

Last year BlackRock hugely increased the dividends of some of their funds in order to fend off a take-over attempt (I think) by Saba. 25% is totally unsustainable and for the last three months they have slowly been sneaking it back down. Expect more cuts - and resulting price decreases in the future. The NAV ticker symbol is XESGX. I can't understand Morningstar's 4-star rating.

Flute

Indeed. Plus Morningstar really has no understanding of CEFs. D

 

[COcheesehead]

I guess I'm a fool for buying bonds and holding them to maturity (or call).

I do the same for a part of my portfolio

 

[drs]

I guess I'm a fool for buying bonds and holding them to maturity (or call).

I probably should have qualified that applying to equities/funds. I also hold bonds to maturity. Most of the time because the bids I can get on them are below what I paid....

 

[shridog]

I'll but Exchange Traded Debt with the thought to hold to maturity. Reduces volatility and increases my sleep time.

 

[dickoncapecod]

The abbreviated week ending 4/17 was generally better than it felt for bondish income CEFs. Almost all were up a bit from last week's close ---:but remain far below recent pre-tariff highs. Bond index ETFs HYG LQD MBB IEF were also up modestly on the week, while equity indices SPY and QQQ were down a bit. All financial assets are on technical sell signals, but since all markets have been cratered by chaotic government statements and an imposed tariff tax hike on businesses, most folks are ignoring the technicals because the entire move could reverse with a tweet or offhand comment.

Surprisingly, implied future interest rates from futures and curves are almost unchanged. Fed funds futures still predict 3 rate cuts in H2-2025 and another in Q1-2026. The year bill one year forward is estimated at 3.64%, and 5/10 year inflation averages are 2.45%/2.24%. These implied forwards are consistent with the week's data releases -- that still obviously take a back seat to tariff announcements. Import and export prices were flat or down. Retail sales were relatively strong on pre-tariff buying, but industrial production was down, housing starts were down, and the Philly Fed Mfr index literally fell out of bed.

This coming week is a data desert ---- so once again tariff policy changes will dominate the news and markets, although forward guidance offered by companies reporting earnings will likely add a bit to downward equity momentum. Finally, if quack about firing the Fed Chair becomes a reality, one may expect a small cadre of domestic buyers to come in on the theory that policy rates will fall. Then, after a few minutes, US assets and the dollar will likely plunge to new lows as waves of nearly-price-insensitive foreign and domestic institutional sellers enter from all directions.

Bottom line: in a government-driven tariff and policy Mixmaster, the future economic environment and asset prices are impossible to forecast with any confidence. BEFORE 4/2, data show the economy/employment were slowing very modestly and inflation was gliding comfortably down toward Fed's 2% objective. But the sudden uncertainty regarding future prices, corporate taxes and other policy outcomes have at least temporarily rendered future asset prices a guessing game. I remain long bondish income CEFs and a bit of cash, still willing to add 12% to 17% yielding assets to the portfolio --- with fingers crossed.
Regards, Dick

 

[leb]

PIMCO's March UNII numbers are out and they aren't great, at least for the CEFs that I own

Columns in orange added by me

View attachment 55236

Thanks Pete. Wow what a difference a month makes.

 

[zaharaone]

For newbies: there are several false "barriers to entry" in the CEF world. One is what Dick is commenting on above. The PIMCO accounting statements do not reflect reality, they reflect accounting rules and tax issues. Another is that distribution rates are typically not quoted with special dividends included, thereby understating the truth. Hopefully this will be a big problem in the years ahead! Still another one is the "leverage scare." Leverage is not the issue, volatility is the issue. CEFS tend to be no more volatile than the SP500 unless there is retail panic, which is a great opportunity to buy. Unlike stocks, you get paid to wait. I am sure there are others. Cheers, Paul

 

[dickoncapecod]

For newbies: there are several false "barriers to entry" in the CEF world. One is what Dick is commenting on above. The PIMCO accounting statements do not reflect reality, they reflect accounting rules and tax issues. Another is that distribution rates are typically not quoted with special dividends included, thereby understating the truth. Hopefully this will be a big problem in the years ahead! Still another one is the "leverage scare." Leverage is not the issue, volatility is the issue. CEFS tend to be no more volatile than the SP500 unless there is retail panic, which is a great opportunity to buy. Unlike stocks, you get paid to wait. I am sure there are others. Cheers, Paul

Indeed. D

 

[Phroig]

For newbies: there are several false "barriers to entry" in the CEF world. One is what Dick is commenting on above. The PIMCO accounting statements do not reflect reality, they reflect accounting rules and tax issues. Another is that distribution rates are typically not quoted with special dividends included, thereby understating the truth. Hopefully this will be a big problem in the years ahead! Still another one is the "leverage scare." Leverage is not the issue, volatility is the issue. CEFS tend to be no more volatile than the SP500 unless there is retail panic, which is a great opportunity to buy. Unlike stocks, you get paid to wait. I am sure there are others. Cheers, Paul

I sometimes invest in CEFs but have no expertise. Leverage doesn’t bother me, especially when borrowing costs are low or decreasing, but I do watch coverage ratios and UNII/ROC. I understand these aren’t perfect, so what are some other indicators I could be looking at? (I know some folks watch NAV, but I worry that this just represents unrealized investment appreciation which may never be realized.)
When PCM cut its distribution, were there any red flags beforehand?

 

[dickoncapecod]

I sometimes invest in CEFs but have no expertise. Leverage doesn’t bother me, especially when borrowing costs are low or decreasing, but I do watch coverage ratios and UNII/ROC. I understand these aren’t perfect, so what are some other indicators I could be looking at? (I know some folks watch NAV, but I worry that this just represents unrealized investment appreciation which may never be realized.)
When PCM cut its distribution, were there any red flags beforehand?

Hi. PCM was a tiny toy trading at a 30% to 40% premium and easily pushed around for fun by a few institutions/hedgies. It is atypical and IMO PIMCO just knocked the distribution down in prep for a merger or closure.
I assume you watch UNII / ROC because you are most concerned by the possibility of a distribution cut and consequent market price drop. Somewhere above, you'll find posts on why the monthly UNII/ROC reports are uninformative/misleading. Aside: consider looking at the flip side of risk: opportunity. NAV SOMETIMES represents unrealized investment losses that may never be realized (and, a $1mm 5% bond PAYS $50k per year whether it's current market price is 85 or 115.....
Regards, Dick

 

[retired at 48]

@dickoncapecod . I gave a shout-out for this CEF Forum in the post below on the Introduction Thread:

@HawkeyeNFO ...who posted: "(R48)Not sure you're qualified to be here. 28,000 posts? ER'd at 48? Signed letter from Mr. Bogle? Doesn't seem like you're truly dedicated to the FIRE movement."

My adult kids are chuckling at your post!

A poster noted I first joined this forum in 2008. Yes. My recollection is that the membership base and activity was much smaller then. I was posting on the boglehead.org forum, the largest of forums. Back then, bogleheads initially had a lot of engineering/math based posters who were trying to sort out best ways to invest...and PROVE IT. I liked this aspect.

At an evening dinner once with Morningstar management (at a Boglehead annual convention), they offered me a forum titled Retire at 48, and be moderator, if I would join them. (Pro bono). I declined as seeming too much responsibility. Did join them however, as I am more of an active investor. Did create a forum and was moderator for a decade, titled Portfolio Design/Management.

Later joined the Fidelity Forum on an invite. In perspective, Bogleheads got too large; an OP post is met with 50 to 100 quick replies. Morningstar and Fidelity both deemphasized and stopped supporting their forums with poor technology architecture; many have departed. Some departures have created a forum called Big Bang Investor, where I also hang. Some came here. Would like to give a shout-out to those investors who are unfamiliar with Closed End Funds, especially leveraged fixed income ones, that the continuous monthly thread here pioneered by "@dickoncapecod " is top shelf information and support.

Thanks for all the "welcomes."

R48

 

[Flieger]

Thanks for all the "welcomes."

R48

i am so glad to have all of the new folks coming in, and to have a few more Income oriented investors to provide knowledge and insight like you, dickoncapecod, and others!

This (Income Investing, and retirement) is something I just recently embarked on after discussions with a former employee/engineer that retired about 2 years before me and was kind enough to share his experience and results. We continue to meet at a micro-brewery where I am bartending 2-3 days a week to satisfy my "people interaction needs", once every month or 6 weeks to compare notes and, more recently, talk each other off the ledge! If you run across that thread, please feel free to contribute!

Flieger

 

[COcheesehead]

i am so glad to have all of the new folks coming in, and to have a few more Income oriented investors to provide knowledge and insight like you, dickoncapecod, and others!

This (Income Investing, and retirement) is something I just recently embarked on after discussions with a former employee/engineer that retired about 2 years before me and was kind enough to share his experience and results. We continue to meet at a micro-brewery where I am bartending 2-3 days a week to satisfy my "people interaction needs", once every month or 6 weeks to compare notes and, more recently, talk each other off the ledge! If you run across that thread, please feel free to contribute!

Flieger

I worked at a winery a few days a month for the same reason, filled my social bucket. I left earlier this year. I was beginning to realize that I wanted more me time than they time.

 

[Flieger]

I worked at a winery a few days a month for the same reason, filled my social bucket. I left earlier this year. I was beginning to realize that I wanted more me time than they time.

Not to derail this thread, but if I could ask for either one more post or a DM. How long did you do it? What killed it?

I am finding that even though I am doing this for fun, my "work ethic" is driving the owners/management to schedule me more than I wanted. And no, I'm not bashing the other 15 or so people working there, they are great and fun people, but most have other jobs, are younger, and just have a different approach. I haven't been there 6 months yet and have already made it known a couple of times I want nothing to do with leadership. Just had a sit-down review with the owners (in some ways they are MUCH better at people management than some of the big Corps I worked for!) and expressed my desire to remain very part time and that when this starts to feel like a "job", I will have to move on. Hopefully they get the message. I do like doing this!

Flieger

 

[COcheesehead]

Not to derail this thread, but if I could ask for either one more post or a DM. How long did you do it? What killed it?

I am finding that even though I am doing this for fun, my "work ethic" is driving the owners/management to schedule me more than I wanted. And no, I'm not bashing the other 15 or so people working there, they are great and fun people, but most have other jobs, are younger, and just have a different approach. I haven't been there 6 months yet and have already made it known a couple of times I want nothing to do with leadership. Just had a sit-down review with the owners (in some ways they are MUCH better at people management than some of the big Corps I worked for!) and expressed my desire to remain very part time and that when this starts to feel like a "job", I will have to move on. Hopefully they get the message. I do like doing this!

Flieger

You can DM after this, but I did it for almost 4 years. I didn’t need the money. I did it strictly for fun, but I became a mentor to the owner. Got 5 star after 5 star reviews on Google. I was asked for by guests. I had my act together and then the other employees saw I was getting the better days, weekends, I could tell there was jealousy and pettiness. I ignored it for awhile. I turned 62 in January and began to realize my physical adventure years were limited. I really wanted to do more cycling events, hike more, etc. It was at that point I decided to re-retire. The longer I am away, the less I miss it. We like having our weekends back.

 

[IncomeOriented]

You can DM after this, but I did it for almost 4 years. I didn’t need the money. I did it strictly for fun, but I became a mentor to the owner. Got 5 star after 5 star reviews on Google. I was asked for by guests. I had my act together and then the other employees saw I was getting the better days, weekends, I could tell there was jealousy and pettiness. I ignored it for awhile. I turned 62 in January and began to realize my physical adventure years were limited. I really wanted to do more cycling events, hike more, etc. It was at that point I decided to re-retire. The longer I am away, the less I miss it. We like having our weekends back.

My father used to say, there’s no such thing as part time job for a stepper.

 

[Flieger]

My father used to say, there’s no such thing as part time job for a stepper.

Had to look that one up!

Flieger

 

[dickoncapecod]

I've become enthusiastic about several PIMCO taxable CEFs that significantly reduced leverage (and hence positions) BEFORE the Tariff Swoon. Examples include PCN at less than 1% leverage, PFN at about 8% and PDI at about 32%...and others except PDO and PAXS.
These position 15% to 20% reductions have given some CEFs the opportunity to add back leverage and positions at the new higher rates available after the swoon. I hope to see some leverage increases before Fed starts reducing policy rates (and leverage costs). PIMCO typically updates leverage stats at month end.
Regards, Dick

 

[Ozz]

I've become enthusiastic about several PIMCO taxable CEFs that significantly reduced leverage (and hence positions) BEFORE the Tariff Swoon. Examples include PCN at less than 1% leverage, PFN at about 8% and PDI at about 32%...and others except PDO and PAXS.
These position 15% to 20% reductions have given some CEFs the opportunity to add back leverage and positions at the new higher rates available after the swoon. I hope to see some leverage increases before Fed starts reducing policy rates (and leverage costs). PIMCO typically updates leverage stats at month end.
Regards, Dick

Dick
What document do you find the leverage stats in. I always look at the fund cards when revised to see leverage.
Thanks, Oz

 

[dickoncapecod]

Dick
What document do you find the leverage stats in. I always look at the fund cards when revised to see leverage.
Thanks, Oz

Hi oz. I took at the big summary page for each CEF on the PIMCO website.
Regards, Dick

 

[Ozz]

Hi oz. I took at the big summary page for each CEF on the PIMCO website.
Regards, Dick

Thanks Dick, brain freeze here.
Oz

 

[richardsok]

Concerned about some articles I've seen about its distribution sustainability, I just unloaded the majority of my very large position in PDO. In its place I bought a large block of PFN and a smaller block of RIV. Realized gains on 20% of my GLD.