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Volatility breeds opportunity: Closed-end fund income ideas at a discount

Peter Chamberlain / Unsplash
Peter Chamberlain / Unsplash

2018 can be summed up in one word-volatility. To some, that word may have negative connotations. At BlackRock, we embrace volatility and look for opportunity. In our view, leveraged credit focused closed-end funds ("CEFs") may present a opportunity for income investors seeking attractive yields. Recent economic data confirms that the global growth is slowing, inflation remains moderate, and financial conditions have tightened. As a result, the Federal Reserve may be nearing its neutral policy rate. This Fed "pause" should benefit leveraged credit focused CEFs that have been adversely impacted by higher borrowing costs in addition to the confluence of geopolitical tensions, growth fears and overall negative market sentiment for risk assets.

Patience can pay with a long-term income strategy

Vital Component for Bond Market Total Return

High income opportunities at a discount

net asset value
High Yield Bond CEF Premium/Discounts

Not all discounts are equal-use z-scores to identify potential value traps

Z-score
Z-scores and yield
Stephen Minar, is a Director on the Closed-End Funds team at BlackRock.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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