If you are an income-focused investor, you’re likely concerned about rising inflation because it can eat away at the value of your next egg and the buying power of your income. This article reviews an attractive closed-end fund (“CEF”) that provides a big monthly income payment, plus some protection against rising interest rates and inflation through its floating rate income (i.e. as rates go up, the payments this fund provides also go up). We provide a quick overview of the fund, review its nuts and bolts through 6 important charts, and then conclude with our opinion on investing.
A 7.6% Yield Contrarian Bet On Interest Rates, Trading at a Big Discount
There’s been plenty of discussion lately about where the Fed should be setting interest rates, especially considering over the last year expectations have changed from anticipating increases to cuts. The economy remains strong by many measures (e.g. strong GDP, low unemployment), yet the Twitter in Chief wants rate cuts to better compete internationally. And whilst this dramatic change in expectations has been occurring, one interesting 7.6% yield (paid monthly) floating rate closed end fund (“CEF”) has fallen very hard—perhaps significantly too hard. Specifically, not only have sinking rate expectations punished its floating interest rate holdings, but the pure selling pressure has caused the shares to trade at a very wide discount to the actual market value of its underlying holdings (it trades at an 11.6% discount to NAV). If you are an income-focused contrarian investor that likes to buy things at widely discounted prices—this one is worth considering.