We are always on the lookout for opportunities that offer attractive and asymmetric risk/reward.
On our service we highlighted TEAF as a baby-with-the-bathwater type of CEF which was unfairly trading around the MLP discount even though it was not primarily an MLP fund. In fact, the fund has a mostly renewables focus but is tarred with the MLP brush due to its placement in the CEFConnect MLP sector. You could write a whole book of taking advantage of various data issues of the CEFConnect website and this is one of them.
When we added the fund to our Tactical Ideas tab it was trading wider of the sector average. We didn’t expect that it would go on to outperform the sector in such short order – the chart on the right shows that the fund moved from a 10% wider discount relative to the MLP sector to trading at a nearly 10% tighter discount. Clearly, this is not the kind of move that’s always going to happen in such short order but being on the right side of it was the right thing to do.
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