Rick Talks About Opportunities in Closed-End Funds
Amey Stone in Barron's talks about the opportunities in fixed income closed-end funds and quotes Rick on some specific ideas:
"Investors wringing their hands over higher interest rates might put that energy to better use by researching which closed-end funds to buy.
That may sound Pollyannaish as rates rise, causing punishing losses in bonds—$1.7 trillion globally in November alone, according to Bloomberg’s tally. Municipal bonds fell 3.46% last month, according to Standard & Poor’s, their worst monthly return since September 2008.
But from the rubble, opportunities will emerge, and closed-end funds are a good place to look. The funds, which issue a fixed number of shares and trade in the secondary market, are selling for larger-than-usual discounts to their net asset value as bonds fall out of favor. Plus, discounts on money-losing funds get even wider than normal during tax-loss-harvesting season, now underway.
Richard Daskin of RSD Advisors says investors could sell an exchange-traded or open-end corporate-bond fund and buy a similar closed-end fund. He likes BlackRock Credit Allocation Income Trust (BTZ) and BlackRock Limited Duration Income Trust (BLW), which trade at 13% and 10% discounts, respectively."