FIV: PTN Yield Hits Post-Drawdown High

Subscribers to our service know that we are fond of term CEFs. Term CEFs are funds with a scheduled termination date. And although the termination date can be eliminated by a shareholder vote, this type of CEF does have a number of advantages such as discount control, typically low duration and a tailwind in its price relative to the NAV which we quantify in a metric called the pull-to-NAV Yield.

Recently, the First Trust Senior Floating Rate 2022 Target Term Fund (FIV) has seen its PTN Yield reach a post-drawdown high of 7%. This means that if the fund terminates as expected, its price will appreciate by 7% per annum relative to its NAV – a tremendous tailwind.

Don’t forget that the fund also generates an earnings yield on the order of 4%. In a world of low yields, the sum total of 11% for what is a higher-quality loan fund and one with a low duration at that is hard to beat.

Thanks for reading.

Check out more of our analysis, portfolios and tools at Systematic Income.