In a changing fixed-income environment, investors are looking at alternative sources of yield to generate the income they have grown accustomed to, without negatively affecting their portfolios.
On the upcoming webcast, Closed-End Funds vs. ETFs: Why Not Both?, Leah Jordan, Vice President of Marketing and Investor Relations at Saba Capital, Paul Kazarian, Portfolio Manager at Saba Capital, and David Dziekanski, Portfolio Manager for Toroso Asset Management, will consider closed-end funds as a way for investors to potentially generate high income in a rising rate environment.
For example, the actively managed Saba Closed-End Funds ETF (BATS: CEFS) tries to generate capital appreciation and high income by investing in closed-end funds that trade at a discount to their net asset value while hedging the ETF’s risk to rising interest rates.
Closed-end funds or CEFs are a publicly traded investment company that raised a certain amount of capital once through an initial public offering. The price of the CEF can fluctuate like any other stock listed on an exchange. However, unlike ETFs, a CEF issues a set number of shares, so the CEF can trade at a high premium or discount to its underlying net asset value.
Saba Capital’s Investment Process
Saba Capital investment process includes proprietary models that dynamically rank closed-end funds across a variety of factors, such as yield, discount to NAV and quality of underlying securities through a combination of fundamental analysis, quantitative analysis and proprietary screens.
The majority underlying holdings will be comprised of lower-rated securities and unrated securities of equivalent investment quality, which tend to generate the highest yield opportunities.
CEFS shows an annualized distribution yield of 8.37%. The portfolio includes 19 CEF holdings with 73% in fixed-income assets and 27% in equities exposure.
Top holdings include Morgan Stanley Emerging Markets Debt Fund Inc 8.33%, WESTERN ASSET HIGH INC FD II 8.19%, PGIM SHORT DURATION HIGH YIELD 7.34%, NUVEEN CREDIT STRAT INC 7.28% and WESTERN ASSET GLOBAL HIGH IN 6.86%.
Financial advisors who are interested in learning more about closed-end funds can register for the Thursday, July 12 webcast here.