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Bargains remain in this niche focused on producing income

  • Although discounts in closed-end funds are shrinking, many are still not far from their historical lows
  • Maury Fertig, chief investment officer of Relative Value Partners, says about 35 percent of the approximately 200 closed-end funds in the U.S. are still trading at discounts of 10 percent or greater
  • With markets stabilizing and discounts starting to narrow, investors with greater risk appetite who want share appreciation and income generation may want to start looking at the space

 

Read the rest of the article here.

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WSJ

Illustration by John S. Dykes

After years of rising prices for stocks and bonds, are there any bargains left?

Cheap securities aren’t easy to find, but some may be hiding in an obscure corner of the market: the closed-end fund universe. And some of the cheapest closed-end funds are those that invest in taxable bonds.

Here is a look at how closed-end funds work and how to find the ones that might be undervalued. Read the rest of the article here.

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Wall Street traders are circling a corner of the bond world they say is taking an unwarranted beating in anticipation of rising interest rates.  They are betting on closed-end funds, often-volatile structures that mostly cobble together risky collections of bonds and often employ leverage, or borrowed money, to try to boost returns…

Hedge-fund manager Boaz Weinstein is pitching investors on a new fund that will invest only in closed-end funds. Photo: Reuters

Read the article here: Hedge Funds Stalk Battered Corner of the Bond World

 

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In a recent Wall Street Journal article titled “Bond Market Bloodbath Is in the Math,” Richard Barley discusses the current state of the bond market and the extent to which duration can impact future fixed income returns.  After a very strong 2014 and January 2015, global interest rates have charged higher in recent weeks – particularly on the long end of the yield curve.  Since the short end of the yield curve in most countries remains anchored at very low levels, long rates moving higher has resulted in a steeper yield curve.  In terms of bond performance, this translates into relatively stable performance from short dated (or lower duration) fixed income and much more volatile (and recently negative) performance from long dated, long duration bonds.  For more on this topic, check out the article below.

 

WSJ – Bond Market Bloodbath Is in the Math

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Bloomberg recently ran a piece entitled, How ‘Safe’ Investments Could Destroy Your Portfolio, focusing on strategies investors have historically pursued for income that could lead them astray in the current market environment.  Broadly speaking, we agree with the sentiment here.  Due to the U.S. Federal Reserve’s zero interest rate policy, investors have been pushed out the risk curve in order to meet their income requirements or total return expectations.  Thus, a normalization in Fed policy could prove problematic for certain “yield” assets such as dividend equities, high yield bonds, and other sorts of alternative income strategies.  We are attempting to mitigate these risks in our clients’ portfolios by shifting away from dividend equities and not taking on excess credit and/or interest rate risk in order to reach for yield .

Bloomberg – How ‘Safe’ Investments Could Destroy Your Portfolio

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Over the 15 years since Hillview’s founding, we have witnessed many significant changes in the financial services industry. During that time, providing high quality, objective advice and personalized service has been, and remains, a top priority for us. As we continue to grow, we want to ensure that we have the ability to maintain that commitment while leveraging our infrastructure and resources to be operationally efficient. In our effort to continue on this path we have made the decision to expand our leadership team to include the role of Chief Operating Officer. Read More…

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Broadly speaking, activist hedge funds have been quite popular with investors of late; with total assets in the space rising from $36 to $112 billion over the last 5 years according to HFR.  Starboard Value is certainly not the largest activist fund out there, but CEO & CIO Jeff Smith has been making headlines recently amidst their increasingly high profile activist positions in companies like Darden Restaurants, AOL, and Yahoo.  Specific to Darden, Starboard recently waged a successful proxy battle to take over the board of directors and install Smith himself as chairman: all while owning less than 10% of the company.   For more on the specifics of their unprecedented success with Darden and much more, check out the Fortune article below.

Fortune – Starboard Value’s Jeff Smith: The investor CEOs fear most