QUARTERLY CLOSED END FUND & BDC REVIEW AND OUTLOOK

Transcription

1 QUARTERLY CLOSED END FUND & BDC REVIEW AND OUTLOOK 3rd Quarter 2017 Review & 4th Quarter 2017 Outlook Intermediate/Advanced CEF Skill Level October 10, 2017 John Cole Scott, CFS Chief Investment Officer Closed End Fund Advisors, Inc. Closed End Fund Advisors is a Registered Investment Advisory Firm Specializing in Closed End Fund & BDC Research, Trading and Management Founded in 1989.

2 What Is CEF Advisors? Investment Management, Research & Data Independent, Fee Only & Family Owned Scott Letter: Closed End Fund Report Discretionary Portfolio Management (SMA), Unit Investment Trust (UIT) & Model Portfolios CEF & BDC News/SEC Alert & CEFA s Closed End Fund Universe Report (w/ BDCs). Consulting with Institutional Investors and CEF Fund Sponsors CEFData.com: CEF/BDC Web Modules Daily Data: Est $1K $4K per quarter based on classification (Indv, RIA or FA / Fund Sponsor) Specializing in CEF/BDC Research, Trading & Portfolio Management Founded in 1989

3 What is a Closed End Fund (CEF) / Business Development Company (BDC)? o 1940 Act Investment Company with Fixed Capital, Active Management, and Daily Liquidity o CEFs have traded on The NYSE since 1893 o Tax advantaged and earnings are passed through to investors in the form of dividends and distributions (similar to REITs and MLPs) o CEFs can have debt and preferred shares as leverages o BDCs Limited to 200% asset coverage (total assets / total debt) or one turn of leverage, excluding SBIC facilities (BDCs). Higher fee structure w/ carry o The closed end structure is not an asset class but an investment vehicle wrapper o BDCs were created by Congress in 1980 to provide an opportunity for individual nonaccredited investors to participate in private investments o BDCs are closed end funds that provide small, growing companies access to capital o BDCs are Domestically focused. Required to offer companies managerial assistance 3

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8 Trad CEF Total Return September 30, 2007 September 30, 2017 NAV TR Price TR /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

9 2 Trad CEF Average Discount / Premium September 30, 2007 September 30, /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

10 BDC Debt Total Return September 30, 2007 September 30, 2017 NAV TR Price TR /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

11 BDC Debt Average Discount / Premium September 30, 2007 September 30, /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

12 Types of Loans Held By BDCs 1. First Lien Loans: 54% 2. Second Lien Loans: 19% 3. Unsecured Loans: 10% 4. Equity/Other: 17% Avg Portfolio Turnover: 37.2% Avg Variable Loans: 74% / Fixed: 26% Libor Floors: 41% at 1% Avg Level Avg Loan Size: $9.6M 73% of Loans Under $25MM Average Maturity 4.1 with a range of 2 Years to 6 years Avg No of Loans: 131 from 103 Companies Source: Data as of September 29, 2017 from CEFData.com 12

13 Municipal Bonds Total Return September 30, 2007 September 30, 2017 NAV TR Price TR /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

14 Municipal Bonds Average Discount / Premium September 30, 2007 September 30, /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

15 Municipal Bond Closed End Fund Universe National Single State Muni Funds Muni Funds Total Number of Funds Net Assets (Total) $47,630 $18,545 $66,175 Net Assets $529 $229 $387 Earnings Coverage Ratio % Premium / Discount % Total Mkt Yield % Leverage Adj NAV Yield % NAV Volatility Leverage % Leverage Cost % Duration Insured % Investment Grade % Credit Quality A A A Note: Volatility is a one year rolling calculation Source: Data as of September 29, 2017 from CEFA s Universe Data 15

16 Municipal Bond Closed End Fund Universe Source: Data as of September 29, 2017 from CEFA s Universe Data 16

17 Tax Equivalent Yield Comparison Married Couple with W 2 Income of $1MM+ Sources: CEFA s Universe Data as of 9/29/2017 and tax rates from IRS and NY State. 17

18 MLP Total Return September 30, 2007 September 30, 2017 NAV TR Price TR /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

19 MLP Average Discount / Premium September 30, 2007 September 30, /1/2007 9/1/2008 9/1/2009 9/1/2010 9/1/2011 9/1/2012 9/1/2013 9/1/2014 9/1/2015 9/1/2016 9/1/

20 Broad Investable Universe Assets of Closed-End Funds/BDCs* by type, as of September 29, 2017 # of Funds Non Lev Total Net Premium / Market Average Beta Duration Leverage Expense Assets Discount Yield Net Assets Ratio Equity Funds 212 $113, % 6.71% % 1.48 $537 Taxable Bond 146 $65, % 7.27% % 1.41 $451 Municipal Bond 171 $66, % 4.74% % 1.01 $387 BDCs 50 $33, % 8.80% % 5.93 $669 Total CEFs 579 $279, % 6.45% % 1.71 $482 National Muni Bond 90 $47, % 5.01% % 0.93 $529 Debt Focused BDC 4 5 $32, % 9.66% % 5.84 $728 Covered Call 29 $20, % 8.15% % 1.14 $700 US Stock 29 $20, % 6.28% % 1.62 $703 MLP Funds 27 $13, % 9.69% % 1.87 $515 High Yield Bond 35 $13, % 7.25% % 1.22 $372 World Stock 56 $14, % 4.23% % 1.54 $253 Senior Loan 26 $11, % 6.31% % 1.62 $449 Preferred Equity 16 $10, % 7.06% % 1.24 $686 REIT Funds 10 $6, % 7.89% % 1.45 $606 Convertible Bond 11 $4, % 8.74% % 1.47 $391 Investment Grade Bond 1 3 $4, % 5.83% % 0.90 $316 in total CEF assets average discount exploitable undervaluation $279.4 Billion x 4.0 % = ~$11 Billion 20

21 CEF Universe Update Fund Grouping Discount / Premium Last Q NAV TR Last Q Price TR Discount Premium Positive Negative Positive Negative Equity Traditional CEFs 169 (80%) 43 (20%) 190 (90%) 22 (10%) 177 (83%) 35 (17%) Taxable Bond Traditional CEFs 109 (75%) 37 (25%) 146 (100%) 0 (0%) 129 (88%) 17 (12%) Municipal Bond Traditional CEFs 125 (73%) 46 (27%) 171 (100%) 0 (0%) 147 (86%) 24 (14%) BDCs 34 (68%) 16 (32%) 38 (76%) 11 (22%) 32 (64%) 18 (36%) ALL CEFs 437 (75%) 142 (25%) 545 (94%) 33 (6%) 485 (84%) 94 (17%) Data as of September 29, 2017 Source: CEFAData.com For BDC funds, we show 2Q17 NAV TR, as 9/29/2017 NAV hasn t been disclosed yet 21

22 Current Closed End Discounts Avg CEF Discount % as of September 29, % 0 % 5 % US Equity 7.83 Special Equity 2.54 Nat Muni Bond 2.32 BDC Debt Focused 5.86 Average CEF Discount 10 % 15 % 20 % 25 % Non US Equity 7.87 Taxable Bond 2.54 State Muni Bond % 35 % BDC Equity Focused % 45 % Source: CEFData.com 22

23 Closed End Discount Trends Traditional & BDC 2Q Ended with an average CEF Discount of 4.03% Main Peer Groups Average CEF Discount May 11, 2012 September 29, 2017 All Trad CEFs All BDC CEFs Av All Trad CEFs Av All BDC CEFs Q3 12 Q Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q Year Average Discount: 4.91% Source: CEFData.com 23

24 Closed End Discount Trends Average CEF Discount May 11, 2012 September 29, 2017 US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond BDC Debt Focused BDC Equity Focused Q3 12 Q Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q Source: CEFData.com 24

25 CEF Volume Trends 3Q 2017 Fund Grouping Avg Vol 2Q 2017 Avg Vol 1Q 2017 Volume Trend US Equity Funds 125, ,950 2% Non US Equity Funds 51,600 58,336 12% Specialty Equity Funds 125, ,310 6% Ave Traditional Equity CEF 103, ,984 6% Taxable Bond Funds 110, ,971 1% National Muni Bond Funds 66,924 66,584 1% State Muni Bond Funds 24,004 24,187 1% Ave Traditional Bond CEF 76,106 76,766 1% Average Traditional CEF 87,243 90,165 3% Debt Focused BDC Funds 278, ,856 9% Equity Focused BDC Funds 34,539 28,500 21% Average BDC 253, ,220 8% Average For ALL CEFs 101, ,208 4% Data as of September 29, 2016 Source: CEFAData.com 25

26 2.4% 0.7% 8.1% 6.9% 12.4% under $100 $100 - $250 $250 - $500 $500 - $1, % $1,000 - $2, % $2,500 - $5,000 $5,000 - $10,000 $10, % Note: 579 closed-end funds; data as of 9/29/17, Source: CEFData.com 26

27 CEF/BDC Yield Comparison 12% 10% 9.7% 9.7% 10.3% 8% 6% 4% 8.7% 6.6% 6.4% 7.4% 7.9% 6.1% 8.2% 7.7% 7.3% 7.1% 6.3% 5.7% 5.5% 5.4% 6.3% 4.6% 5.8% 4.9% 4.7% 3.5% 4.2% 3.7% 7.7% 3.7% 3.1% 4.1% 5.5% 2% 0% Data as of 9/29/2017. MLP Index: Alerian MLP Index; REIT Index: Wilshire US REIT Index; Corporate Debt Index: S&P 500 Bond Index US High Yield Indices : BofA Merrill Lynch US High Yield (BB Rated, B Rated, CCC and Lower Rated ) 27

28 6.7% 2.2% 15.2% Yield Under 4% 19.2% Yield 4%-6% Yield 6%-8% Yield 8% -10% Yield 10% -12% Yield Over 12% 34.2% 22.5% Note: 579 CEFs; data as of 9/29/2017, cefdata.com 28

29 Relative UNII for Traditional CEF Municipal Bond Funds Nat Muni Bond Relative UNII May 11, 2012 September 29, 2017 Nat Muni Bond Av Nat Muni Bond 30 % 12 Q3 12 Q Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q % 20 % 15 % 10 % 5 % 0 % 5 % Source: CEFData.com 29

30 Return of Capital (90 Day) For CEFs Main Peer Groups Historical ROC May 11, 2012 September 29, 2017 US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond BDC Debt Focused BDC Equity Focused Q3 12 Q Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q Source: CEFData.com 30

31 Destructive Return of Capital (1YR DRoC) (Traditional) Fund Grouping # Funds with Destructive RoC % Funds with Destructive RoC Average Destructive RoC % 1Yr NAV TR vs NAV Yield 3Yr NAV TR vs NAV Yield US Equity Funds 2 7% 4% 160% 8% Non US Equity Funds 4 7% 15% 330% 12% Specialty Equity Funds 50 44% 49% 92% 87% Equity CEF 61 29% 42% 72% 57% Taxable Bond Funds 22 15% 19% 41% 35% National Muni Bond Funds 8 9% 2% 91% 2% State Muni Bond Funds 4 5% 4% 105% 3% Bond CEF 34 11% 13% 21% 19% Source: CEFA s Closed End Fund Universe 6/30/2015 ( Average CEF 95 18% 32% 20% 35% *Whitepaper 31

32 Closed End Fund Market Price volatility vs. NAV volatility (1 Year) U.S. Equity Funds Non U.S. Equity Funds Specialty Equity Funds Taxable Bond Funds National Muni Bond Single State Muni Bond Debt Focused BDC Equity Focused BDC Price Volatility NAV Volatility Source: September 29, 2017 CEFData.com 32

33 CEF Press Release SEC Filings Summary (2396 CEF PRs in 3Q17) Announcement Type 3Q Avg per Q since 2014 Rights Issue / Offering Secondary Offering (Trad CEF) Secondary Offering (BDCs) Tender Offer Distribution Policy Change(Trad CEF) Distribution Policy Change (BDCs) Filings (Trad CEF) New N 2 Filings Updated N 2 Filings Investment Manager / Advisor Change Portfolio Manager Change Leverage Amount / Type Change Source: Fund Press Releases / SEC Filings. 33

34 CEF & BDC Dividend Increases vs. Decreases Dividend Announcement 3Q 2017 Number of Announcements 3Q 2017 Average Change 3Q 16 2Q 17 Number of Announcements 3Q 16 2Q 17 Average Change Dividend Maintains 1183(89.1%) N/A 4835 (89.4%) N/A Dividend Increases 42 (3.2%) +4.24% 175 (3.2%) +5.56% Dividend Decreases 102 (7.7%) 5.89% 398 (7.4%) 9.58% Under 5% Increase 29 (69%) +1.65% 117 (67%) +1.70% Over 5% Increase 13 (31%) % 58 (33%) % Under 5% Decrease 47 (46%) 1.82% 157 (39%) 2.62% Over 5% Decrease 55 (54%) 9.38% 241 (61%) 14.12% 4% of announcements Big Cuts Source: Fund Press Releases 34

35 3Q 2017 Closed End Fund Dividend Increases vs. Decreases Major CEF Groups: Number of dividend decreases / increases Last Quarter & Previous 1 Year Rolling Last Q Decreases Previous 1 Yr Rolling Decreases Last Q Increases Previous 1 Yr Rolling Increases 20 0 U.S. Equity Funds Non U.S. Equity Funds Specialty Equity Funds Taxable Bond National Muni Funds Bond Funds Single State Muni Bond Funds Debt Focused BDC Equity Focused BDC Source: Fund Press Releases 35

36 CEF Recent Dividend Changes (Policies NOT Promises) 3 Year Dividend Growth 303 Funds (60%) had negative 3 year growth averaging 19.9% 73 Funds (14%) had positive 3 year growth averaging +18% 2 Year Lookback 360 Funds changed their dividend policy in the past 2 years (68% of funds) 288 Cut (80%) an average of 11% while 72 (20%) increased an average of +8% 180 of these funds have level or managed distributions 144 of those were cut an average 9% 36 were increased an average of +7% 1 Year Lookback 54 increase vs. 202 decreases. 50 Funds had BOTH increases and decreases in the past year. Source: CEFAData.com, as of Sep 29,

37 CEF & BDC Historical IPOs (3Q 17) YTD Number of IPOs Average Assets In $ millions Total New CEF IPO Assets in $ Billions $242 $225 $272 $511 $511 $442 $258 $371 $192 $134 $629 $1.9B $1.8B $2.4B $7.7B $14.8B $12.4B $6.7B $8.2B $2.7B $.4B $28.3B 10 Year Average: 19 Funds per year, $350MM Ave Fund, $8.5 Billion Per Year Source: SEC Filings, Press Releases 37

38 CEF & BDC Historical IPOs (3Q 17) Inception Assets (M) # funds Q'17 2Q'17 1Q'17 4Q'16 3Q'16 2Q'16 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 4Q'14 3Q'14 2Q'14 1Q'14 4Q'13 5 3Q' Q'13 1Q'13 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Source: September 29, 2017 CEFData.com 38

39 $130 Debt Focused BDC $163 $210 $216 $390 $763 $608 Loan Participation High Yield Bond Funds Mortgage Bond Funds Global Income Funds Prefered Equity Leveraged Emerging Market Income Note: Inception Assets in millions ; data as of 9/29/2017, cefdata.com 39

40 2017 IPO Details 3Q 2017 EV Flt Rt 2022 Tgt Trm Tr (EFL) Taxable Bond Funds IPOed on July 27, 2017 IPO Price: $10.00 IPO Assets: $210M Price as of 9/29/17: $9.95 Disc/Prm as of 9/29/17 : +1.32% Nuv Emg Mrkts Debt 2022 Trg (JEMD) Taxable Bond Funds IPOed on September 26, 2017 IPO Price: $10.00 IPO Assets: $130M Price as of 9/29/17 : $10.04 Disc/Prm as of 9/29/17 : +2.14% XAI Octagon FR & Alt Inc Term (XFLT) Taxable Bond Funds IPOed on September 27, 2017 IPO Price: $10.00 IPO Assets: $72.5M Price as of 9/29/17 : $10.70 Disc/Prm as of 9/29/17 : +9.74% Source: Fund Press Releases 40

41 IPOs during 4Q Q 2017 Current Discount / Premium IPO Date Ticker Fund Name Type Current Disc/Prm Current Price IPO Price Curr vs IPO 4Q 2016 IHIT Invsc Hi Incm 2023 Tgt Trm Fd Traditional 0.30% $10.12 $ % FIV FT Sr Flt Rt 2022 Tgt Trm Fd Traditional -0.92% $9.69 $ % JPT Nuv Pref & Incm 2022 Trm Fd Traditional 0.00% $25.49 $ % 1Q 2017 BGIO 2022 Glbl Incm Opp Tr Traditional 0.20% $10.05 $ % JCO Nuveen Cr Opp 2022 Tgt Trm Fd Traditional -1.01% $9.85 $ % 2Q 2017 CBH AG Convt & Incm 2024 Tgt Trm Traditional 1.02% $9.95 $ % CGBD TCG BDC BDC 3.75% $18.82 $ % Data as of September 29, 2017 Source: CEFAData.com 41

42 Closed End Fund Mergers 60 Closed End Funds Merged into Other Closed End Funds (September 2017) 50 Number of Closed End Funds Reasons to Merge: 1. Reduce expense ratio 2. Increase liquidity 3. Reduce bid/ask spread 4. Improve cost of future leverage Source: Fund Press Releases Avg. 18 per year 36 Last 5 Yrs, 10 previous 7 Yrs 42

43 Closed End Fund Deaths CEF Funds Open Ended, Liquidated or Converted to ETF Converted to ETF Liquidated Open ended Source: Fund Press Releases Causes: Open ending, liquidation & conversion. (8.8 per year on average) 43

44 Traditional Closed End Fund 90 Day NAV Market Price Correlation Trad CEFs Groups 90 Day NAV/Price Correlation June 22, 2012 September 29, 2017 All Trad CEFs All Equity All Bond US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond Q3 12 Q Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q Source: September 29, 2017 CEFData.com 44

45 Traditional Closed End Fund NAV Market Price Correlation Fund Grouping Correlation 3Q 17 Correlation 2Q 17 Correlation Trend US Equity Funds Non US Equity Funds Specialty Equity Funds 69.73% 78.71% 8.98% 81.09% 86.50% 5.41% 74.89% 79.97% 5.08% Ave Equity CEF 75.24% 81.06% 5.82% Taxable Bond Funds National Muni Bond Funds State Muni Bond Funds 52.73% 62.13% 9.40% 48.15% 67.50% 19.35% 42.53% 59.05% 16.52% Ave Bond CEF 48.81% 62.87% 14.06% Average CEF 59.42% 70.21% 10.79% Data as of September 29, 2017 Source: CEFAData.com 45

46 3Q17, YTD and 2Q17 Closed End Fund NAV / Market Price Performance Fund Grouping 3Q 2017 NAV 2Q 2017 Mkt Pr YTD NAV YTD Mkt Pr 3Q 2017 NAV 2Q 2017 Mkt Pr US Equity Funds 4.2% 5.4% 13.7% 19.6% 3.4% 5.7% Non US Equity Funds 4.8% 5.9% 20.9% 26.9% 5.4% 6.9% Specialty Equity Funds 2.0% 2.2% 6.7% 11.8% 0.3% 2.0% Avg Traditional Equity CEF 3.1% 3.8% 11.8% 17.5% 1.9% 4.1% Taxable Bond Funds 2.3% 2.9% 8.5% 11.4% 2.5% 3.5% National Muni Bond Funds 1.8% 1.9% 6.7% 8.5% 2.8% 3.7% State Muni Bond Funds 1.3% 1.3% 5.8% 6.8% 2.7% 3.5% Avg Traditional Bond CEF 1.9% 2.2% 7.3% 9.4% 2.6% 3.6% Average Traditional CEF 2.4% 2.9% 9.1% 12.7% 2.3% 3.8% Debt Focused BDC 2.2% 0.4% 5.0% 4.9% 2.3% 2.1% Equity Focused BDC 1.7% 6.4% 0.3% 9.2% 0.2% 0.0% Average BDC 2.2% 1.0% 4.5% 5.3% 2.1% 1.9% Data as of September 29, 2017 Source: CEFAData.com 46

47 CEF / BDC Index Performance Fund Grouping 3Q 2017 NAV 3Q 2017 Mkt Pr 1Year NAV 1 Year Mkt Pr 5Year NAV 5Year Mkt Pr 12 Major Sectors Index 2.3% 2.5% 9.9% 13.3% 7.9% 7.6% High Income Index 2.6% 2.9% 11.4% 16.0% 6.5% 6.2% Tax Sensitive Income Index 1.4% 1.7% 4.7% 6.7% 3.5% 3.1% 60/40 Balanced Index 3.5% 4.1% 13.8% 18.9% 8.5% 8.7% Global Equity Index 4.7% 5.6% 19.1% 26.1% 9.7% 10.7% Equity Income Index 3.6% 4.2% 13.0% 19.0% 7.7% 8.4% Taxable Bond and BDC 2.6% 2.4% 9.4% 11.6% 6.4% 5.6% National Municipal Bond 1.9% 1.9% 0.7% 0.9% 5.1% 3.7% Preferred Equity Index 1.6% 1.7% 10.5% 12.6% 9.6% 9.1% Convertible Bond Index 3.0% 3.8% 12.9% 20.0% 7.5% 7.5% High Yield Bond Index 2.3% 3.6% 11.1% 12.8% 6.9% 4.3% Sr. Loan Index 1.3% 1.1% 7.5% 10.7% 5.5% 4.4% MLP Index 0.9% 1.1% 1.8% 2.0% 1.3% 2.2% REIT / Real Asset Index 2.0% 3.5% 5.3% 10.8% 9.5% 9.4% Debt BDCs Index 2.4% 0.7% 10.5% 12.3% 8.8% 8.1% Source: CEFAData.com 47 Data as of September 29, 2017, Annualized over 1 year

48 CEF Institutional Holdings (Traditional CEFs 3Q 17) Institutional Holdings Trends Increase: 212 funds Decrease: 295 funds Trad CEFs Groups % Shares Owned by Institutions January 18, 2013 September 29, 2017 All Trad CEFs All Equity All Bond US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond 45.0 % Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q % 35.0 % 30.0 % 25.0 % 20.0 % 15.0 % 10.0 % 5.0 % 0.0 % Source: CEFData.com 48

49 BDC Institutional Ownership Largest Institutional Holder (%) Approved Below NAV Offering (3Q) BDC Shares Owned by Institutions (%) Note: Data as of 9/29/2017, cefdata.com 49

50 CEF/BDC Activist / Institutional Investors Activist: 1. Ancora Advisors 2. Bull Dog Investors 3. Special Opportunities Fund (SPE Bulldog) 4. City of London 5. Ironsides Partners 6. Karpus Investment Management 7. Western Investment 8. Elliott Associates (BDCs) 9. Wynnefield Capital (BDCs) Followers: 1. Punch & Associates Investment Management 2. Relative Value Partners Capital Partners LLC 4. Rivernorth Capital Management 5. Saba Capital Management 6. SIT Investment Associates 7. DG Capital Management (BDCs) 8. Sims Capital Management (BDCs) Total Assets at work 12/31/16 $1.5 Billion Activist // $6.5 Billion Followers & Activist Source: CEFAData.com 50

51 Month Filed Sep Closed End Fund Corporate Actions / Activist Update 3Q 2017 Filing Closed End Fund/BDC Investor/Who Notes 13D/A BR Dbt Stgs Fd (DSU) Saba 13.53% Discussion regarding trading on discount Sep 13D/A Lzrd Glbl Tot Rtn & Incm Fd (LGI) Bulldog Dec(5.31%) Sep 13D/A China Fund (CHN) City of London 24.9% Investment Agrmnt Termination proposal Sep 13G/A Fed Prmr Imd Muni Incm Fd (FPT) Karpus 8.69% Conversion from Active to Passive Sep Proxy Highland Floating Rate Opportunities Fund Public Source: SEC Filings, Press Releases Proposal of OEF to CEF conversion Sep 13D/A Madison Stgc Sctr Prm Fd (MSP) Karpus 24.1% Fund reorganization of MSP into MCN not approved Source: SEC Filings, Press Releases 51

52 Month Filed Closed End Fund Corporate Actions / Activist Update Source: SEC Filings, Press Releases Filing Closed End Fund/BDC Investor/Who Notes August Tender AC Convt Sec & Incm Fd (AVK) AC Convt Sec & Incm Fd II (AGC) Western Investement Up to 98% of NAV August 13D/A Abd Singapore Fd (SGF) Bulldog Inc (5.09%) Self Tender proposition August Repurch ase Boulder Growth & Incm Fd (BIF) Discount to NAV July 13G Capitala Finance Corp (Preferred) Karpus 12.72% New July 13D Clough Glbl Eq Fd (GLQ) Bulldog 6.34% Tender Offer July 13G Oxford Lane Cap Corp (Preferred) Karpus 19.12% New 52

53 CEF Activist Holdings (Traditional CEFs 3Q 17) Activist Holdings Trends Increase: 79 funds Decrease: 99 funds Trad CEFs Groups % Shares Owned byactivists January 25, 2013 September 29, 2017 All Trad CEFs All Equity All Bond US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond 40.0 % Q3 13 Q Q3 14 Q Q3 15 Q Q3 16 Q % 30.0 % 25.0 % 20.0 % 15.0 % 10.0 % 5.0 % 0.0 % Source: CEFData.com 53

54 15 Premium / Discount (%) Shares owned by Activists / Followers(%) Note: Data as of 9/29/2017, cefdata.com 54

55 $225 $553 $376 $89 $31 Non U.S. Equity BDC Taxable Bond U.S. Equity Hybrid / Balanced Specialty Equity $1,499 National Muni Bond CEF Activist Ownership $3,866 $1,094 Top 5 Peer Groups BDC Debt $1,058 Asian Equity $1,023 General Equity $376 US Government Bond $297 Hybrid / Balanced $225 Note: millions of dollars, data as of 9/29/2017, cefdata.com 55

56 $578 $517 $1,270 $1,534 $3,161 $6,344 Taxable Bond Non U.S. Equity Specialty Equity BDC U.S. Equity National Muni Bond Single State Muni Bond Hybrid / Balanced $3,802 $4,345 Note: millions of dollars, data as of 9/29/2017, cefdata.com CEF Activist Ownership $21,550 Top 5 Peer Groups BDC Debt $3,021 Asian Equity $2,290 High Yield Bond $1,482 Covered Call $1,474 General Equity $1,244 56

57 CEFA s Outlook for 4Q and 2018 US Equity Funds Non US Equity Funds Specialty Equity (Sector) Funds Taxable Bond Funds National Municipal Bond (Tax Free) Funds State Specific Municipal Bond (Tax Free) Funds Debt Focused Business Development Companies (BDCs) Equity Focused Business Development Companies (BDCs) Sustainable CEF Portfolio Distribution Yields, Beta, Correlations, Duration and After Tax Income, Gross Asset Exposure, Leverage 57

58 Possible Trump Impact to BDCs and CEFs (Sectors / DOL / Trends and Products) CEF / BDC Sectors Municipal Bond CEFs / QDI MLP / Infrastructure Typical Equity Funds Duration Bonds/Preferred Sr. Loans / BDCs Market Trends Taxes Regulations Market Risk Interest Rates Cost & Type of Leverage Products of BDCs/CEFs Index Inclusion? Acquired Fund Fees Banks competing with BDCs? ETFs, CEFs, OEFs, A ETFs DOL CEF / BDC IPOs & Secondary s CEF Products UITs in IRAs? Pushed back How far? Ever? Fiduciary vs. Suitability Kill or fix BDC/CEFs IPOs? Source: CEFAData.com 58

59 Closed End Funds & BDCs in a Rising Rate Environment (March 2004 to September 2007) Full article on our blog: Blog.com 59

60 CEFData.com CEFDATA.COM Data Updates Daily and Live with Analysis Updates Free Public CEF/BDC Profiles & 33 CEF/BDC Indexes Watchlists, Models, Portfolio, Screener, PR/News ad SEC Filings Database Show how portfolio/model changes with swaps or allocation changes View and Summary Reports Fund Sponsor Modules Compare a Fund to Dynamic Peer Groups and Selected Peers Expecting to add 1-2 modules per month: List on 30 Day Free Trial and free CEFU/DA while in development with guaranteed renewals at 25% off through October 31, 2018 for Q Webinar Attendees (Promo code CEFD2017) that sign up by November 30, Pricing per Quarter is $1K (Individual) $2K (Small RIA/FA) $3K Large RIA/Hedge Fund, $4K Fund Sponsor/Product Sponsor. We always offer prorated refunds and include 30 minutes per quarter free consulting time with John Cole Scott for paid subscribers. 60

61 CEF Advisors Links CEF Advisors Website: CEF/BDC Index Data: CEFA s Blog: Blog.com / CEF/BDC Research Sites: Published Articles Seeking Alpha: cole scott/articles WealthManagement.com: scott Vimeo Channel: Weekly CEF Data (14 Day Trial), Daily News Alerts (10 Day Trial), CEF Universe Data Definitions: CEFA s Form ADV Part 2A and 2B II Form.pdf 61

62 For Your Information CEF Resources CEF/BDC Fund Profiles: CEFAnalyzer LLC: The Closed End Fund Association: EndFunds.com CEF Connect (Nuveen Sponsored): Morningtar's CEF Site: Closed End Funds.aspx Investment Company Institute: CEFNetwork (Pristine Advisers): CEF Insight (Activist Info from AST Fund Solutions): Capital Link's CEF Portal: Morningstar Discussion Board: Yahoo CEF Discussion Board: The CEF Network on LinkedIN: Network.com Seeking Alpha: end funds More Useful Links at: 62

63 View online: Disclosure: See full portfolio disclosures at the end of this presentation

64 Current CEFA Portfolio Modes

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66 Disclosure: See full portfolio disclosures at the end of this presentation

67 Speaker s Biography John Cole Scott, CFS Chief Investment Officer of Closed End Fund Advisors Mr. Scott has worked at Closed EndFundAdvisorssince2001.Heholdsthe FINRA 66 License and the Certified Fund Specialist designation (CFS). He is a graduate of The College of William and Mary and has been quoted and interviewed widely in the financial press and presented at conferences and for investment groups on more than 50 occasions. John Cole Scott, CFS EXPERIENCE CIO of Registered Investment Advisor Focused Exclusively on CEFs & BDCs since 2001 EDUCATION College of William & Mary Bachelor of Science in Psychology 2000 In 2008 John founded CEFA's Closed End Fund Universe, a data service covering all US listed closed end funds and BDCs. Currently supported by an internal 9 member analyst team with a data manager/ programmer covering the 575+ ticker universe of CEFs/BDCs. They regularly do consulting and projects for CEF/BDC Sponsors, Hedge Funds and Institutional Investors. Portfolio Consultant with over a quarter billion deposits into a fund focused on BDCs with a fund sponsor partner. He developed 33 CEF/BDC based indexes; 9 diversified portfolio objective, 9 Equity and 15 Bond sector. John is a past board member of The Richmond Association for Business Economics (RABE), and serves as Assistant Treasurer and on the Investment Committee for The New York State Society of The Cincinnati. Board member and Finance & Investment Committees for The William & Mary National Alumni Board. 67

68 Important: The information in this presentation is not for general circulation and should not be considered an offer, or solicitation, to deal in any of the mentioned funds. The information is provided on a general basis for information purposes only, and is not to be relied on as advice, as it does not take into account the investment objectives, financial situation or particular needs of any specific investor. Any research or analysis used to derive, or in relation to, the information herein has been procured by Closed-End Fund Advisors ( CEFA ) for its own use, and may have been acted on for its own purpose. The information herein, including any opinions or forecasts have been obtained from or is based on sources believed by CEFA to be reliable, but CEFA does not warrant the accuracy, adequacy or completeness of the same, and expressly disclaims liability for any errors or omissions. As such, any person acting upon or in reliance of these materials does so entirely at his or her own risk. Any projections or other forward-looking statements regarding future events or performance of countries, markets or companies are not necessarily indicative of, and may differ from, actual events or results. No warranty whatsoever is given and no liability whatsoever is accepted by CEFA or its affiliates, for any loss, arising directly or indirectly, as a result of any action or omission made in reliance of any information, opinion or projection made in this presentation. The information herein shall not be disclosed, used or disseminated, in whole or part, and shall not be reproduced, copied or made available to others without CEFA expressed written permission. CEFA reserves the right to make changes and corrections to the information, including any opinions or forecasts expressed herein at any time, without notice. Data comes from our CEF Universe service dated September 30, 2017 unless otherwise noted. 68

69 Thank You For Attending Questions? Closed End Fund Advisors, Inc 7204 Glen Forest Drive, Suite #105 Richmond, Virginia U.S.A (800) / (804) JCS@CEFadvisors.com