Yield Hunter CEF Report March 2019: Distribution Cuts Pick Up, But So Do Increases

This report was issued to members on March 7.
In March, we saw 17 funds boost their distribution by 2% or more while 30 funds cut their distribution by 2% or more. Of the increases, seven of the funds were munis while another seven were floating rate. We have been bullish on both of these spaces (though recently less so for the munis as discounts have tightened significantly).
Floating rate remains an unloved area but the corner may have been turned. For one, inflows are returning, meaning that money isn't flowing out of the sector any longer. We've been pushing these since December as we saw a significant opportunity and issued a report titled "Why Floaters Look Attractive Despite Lowered Rate Expectations." Essentially, there was a "double discount" opportunity whereby the underlying loans were priced at a significant (for the sector) discount to par plus the funds themselves were at a discount to NAV, with the average being right around -10%.
Floaters continue to be the larger pieces to our Core Portfolio with large allocations to Ares Dynamic Income (ARDC), KKR Income Opportunity (KIO), and Apollo Tactical Income (AIF). In addition, our high yield fund looks poised to break out with Ivy High Income (IVH) returning 8.64% on NAV and 13.7% on price year-to-date. IVH also has a corporate action kicker with Saba (CEFS) building a large position in it. They own 1.3M shares or approximately 8% of the outstanding shares. On the most recent filing, they put up an issuer... Read more