The Western Asset Global Corporate Defined Opportunity Fund (GDO) has been on our radar for quite some time for a few reasons. First, it’s a 2/3 investment-grade fund which appeals to our higher-quality tilt. And secondly, it is a term fund which means that it provides a measure of discount visibility and control since its discount would move to zero on its termination date.
Apart from this, the fund has offered a number of tactical opportunities as well over the past few months. A key metric we look at is the fund’s Pull-to-NAV or PTN Yield which is simply the fund’s discount divided by the number of years from termination. Currently, the fund is trading at a 2% PTN Yield which should provide a 2% tailwind relative to the fund’s NAV into its termination – a very attractive figure.
Over the last few months the PTN Yield has moved between 1% and 2% creating great entry and exit points for more tactical investors. Some investors don’t like to approach investing from a tactical perspective, however, in our view there is another way to look at it. We look at it from a value-based perspective. At a 2% PTN Yield GDO presents a very attractive value proposition while below 1% it is much less compelling.
No doubt, the fund will continue offering some fat pitches in the months to come as well.
Thanks for reading.
Check out more of our analysis, portfolios and tools at Systematic Income.
