{"id":23219,"date":"2023-06-15T20:53:31","date_gmt":"2023-06-16T00:53:31","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/the-quality-closed-end-fund-report-may-2023\/"},"modified":"2023-06-15T20:53:32","modified_gmt":"2023-06-16T00:53:32","slug":"the-quality-closed-end-fund-report-may-2023","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=23219","title":{"rendered":"The Quality Closed-End Fund Report, May 2023"},"content":{"rendered":"
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This article was released to CEF\/ETF Income Laboratory members on June 2nd, 2023. Please check latest data before investing.<\/em><\/p>\n

“Quality” Closed-End Fund Report<\/h2>\n

Quantitative screens help to rapidly narrow down attractive candidates from the database of 500-plus closed-end funds for further due diligence and investigation.<\/span><\/p>\n

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Author<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Based on feedback from members, it seems that a very many number of investors, understandably, place a great emphasis on coverage and return of capital. While I’m not going to rehash the entire ROC argument here (it is suffice to say that the issue is much more complicated than “ROC = bad”), some investors may consider a fund with over 100% coverage to be attractive simply because they know that the distributions are being covered by earnings. Such a fund may be at lower risk of a distribution cut, which can cause devastating impacts to a fund’s market price and may even afford to raise its distribution in the future.<\/span><\/p>\n

What does the “quality” label indicate? Simply put, it means that the distribution coverage is greater than 100%. However, please note these caveats: Firstly, coverage ratios are calculated using earnings data from CEFConnect. Although there are sometimes discrepancies with CEFConnect’s data, this allows us to automate the calculation process for the entire universe, and we consider it to be sufficient for a preliminary screen anyway. Before buying or selling any fund, it’s recommended to independently verify the coverage ratios from the individual fund annual\/semi-annual reports themselves. Secondly, having a coverage ratio >100% does not guarantee that the fund’s distribution is secure. Many funds reduce their distributions periodically in line with market conditions in order to maintain good coverage. Thirdly, a coverage cut off ratio of 100% is, ultimately, an arbitrary number. A fund with 99.9% coverage will be excluded from the rankings, whereas funds with 100.1% coverage will be considered, even though only a sliver of coverage separates the two.<\/p>\n

The coverage ratio is calculated by dividing the earnings\/share number provided by CEFConnect on the “distributions” tab by the distribution\/share. CEFdata also provides earning coverage numbers as well.<\/p>\n

I hope that these rankings of quality CEFs will provide fertile ground for further exploration.<\/p>\n

Key to table headings:<\/p>\n

P\/D = premium\/discount<\/p>\n

Z = 1-year z-score<\/p>\n

Lev = leverage<\/p>\n

BE = baseline expense<\/p>\n

Cov = coverage<\/p>\n

Data were taken from the close of May 30th, 2023.<\/strong><\/p>\n

1. Top 10 widest quality discounts<\/strong><\/h2>\n

The following data show the 10 CEFs with the highest discounts and coverage >100%. Yields, z-scores and leverage are shown for comparison.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n
CEF<\/strong><\/td>\nCategory<\/strong><\/td>\nP\/D<\/strong><\/td>\nYield<\/strong><\/td>\nZ<\/strong><\/td>\nLev<\/strong><\/td>\nBE<\/strong><\/td>\nCov<\/strong><\/td>\n<\/tr>\n
(HFRO)<\/td>\nSenior Loans<\/td>\n-36.78%<\/td>\n10.87%<\/td>\n-2.3<\/td>\n13%<\/td>\n1.28%<\/td>\n102%<\/td>\n<\/tr>\n
(CAF)<\/td>\nAsia Equity<\/td>\n-19.80%<\/td>\n0.02%<\/td>\n-1.9<\/td>\n0%<\/td>\n1.79%<\/td>\n977%<\/td>\n<\/tr>\n
(NXJ)<\/td>\nSingle-state Munis<\/td>\n-16.29%<\/td>\n3.19%<\/td>\n-1.4<\/td>\n41%<\/td>\n0.95%<\/td>\n164%<\/td>\n<\/tr>\n
(NQP)<\/td>\nSingle-state Munis<\/td>\n-16.27%<\/td>\n3.11%<\/td>\n-1.4<\/td>\n40%<\/td>\n0.97%<\/td>\n155%<\/td>\n<\/tr>\n
(HYB)<\/td>\nHigh Yield<\/td>\n-15.67%<\/td>\n7.26%<\/td>\n-1.7<\/td>\n31%<\/td>\n1.34%<\/td>\n109%<\/td>\n<\/tr>\n
(DMF)<\/td>\nNational Munis<\/td>\n-15.55%<\/td>\n2.87%<\/td>\n-1.7<\/td>\n36%<\/td>\n0.83%<\/td>\n180%<\/td>\n<\/tr>\n
(VPV)<\/td>\nSingle-state Munis<\/td>\n-15.34%<\/td>\n4.20%<\/td>\n-1.2<\/td>\n40%<\/td>\n1.11%<\/td>\n118%<\/td>\n<\/tr>\n
(BNY)<\/td>\nNew York Munis<\/td>\n-15.25%<\/td>\n3.61%<\/td>\n-1.6<\/td>\n39%<\/td>\n1.03%<\/td>\n115%<\/td>\n<\/tr>\n
(MIO)<\/td>\nNational Munis<\/td>\n-15.24%<\/td>\n4.83%<\/td>\n-1.5<\/td>\n30%<\/td>\n1.11%<\/td>\n101%<\/td>\n<\/tr>\n
(CXE)<\/td>\nNational Munis<\/td>\n-15.22%<\/td>\n4.45%<\/td>\n-1.3<\/td>\n40%<\/td>\n1.30%<\/td>\n110%<\/td>\n<\/tr>\n<\/table>\n

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