Given how extended valuations have gotten in the credit space many investors want to take some chips off the table, without moving into the open-end fund space.
A CEF that offers a lower-octane choice is the BlackRock 2022 Global Income Opportunity Trust (BGIO).
The fund has a number of attractive features in the current market environment.
First, its leverage is on the lower side at around 15%.
Secondly, its rating profile is relatively strong for a credit CEF with nearly 30% in investment-grade credits.
Thirdly, the fund’s effective duration is on the low side at 3.2 which means that it is less impacted by broad-based market sell-offs than funds with a longer duration footprint, all else equal.
Apart from these features, the fund is attractive on other fronts.
First, its fee of 0.60% on total assets is on the low side across credit CEFs.
And secondly, the fund’s term structure not only provides a measure of discount control but also adds a potential tailwind of around 3% at current levels into the Feb-2022 termination. This means that if the fund indeed terminates it should deliver a total yield of around 8.5% (portfolio YTW yield of about 5.5% plus discount amortization of around 3%). This figure is well above many higher-octane credit CEFs, meaning investors get a higher yield for taking less risk. What’s not to love?
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