The NAVigator

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...

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 hig...

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 val...

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 fo...

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, g...

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...

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 t...

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 re...

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 manageme...

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 expl...

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 i...

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...

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 regulator...

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 h...

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, invest...

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 -- especi...

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...

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 gr...

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...

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 persisten...