The NAVigator

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, wi...

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...

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, particul...

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 educ...

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...

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 lik...

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 fo...

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 cr...

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 pers...

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 c...

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 pla...

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 di...

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,...

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...

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 c...

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...

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...

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 stro...

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 i...

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 mar...

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-ra...

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 we...

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 curren...