QUARTERLY CLOSED END FUND & BDC REVIEW AND OUTLOOK

Transcription

1 QUARTERLY CLOSEDEND FUND & BDC REVIEW AND OUTLOOK 1st Quarter 2018 Review & 2nd Quarter 2018 Outlook Intermediate/Advanced CEF Skill Level April 12, 2018 John Cole Scott, CFS Chief Investment Officer ClosedEnd Fund Advisors, Inc. ClosedEnd Fund Advisors is a Registered Investment Advisory Firm Specializing in ClosedEnd 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: ClosedEnd Fund Report Discretionary Portfolio Management (SMA), Unit Investment Trust (UIT) & Model Portfolios CEF & BDC News/SEC Alert & CEFA s ClosedEnd 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 ClosedEnd Fund (CEF) / Business Development Company (BDC)? o 1940 Act Investment Company with FixedCapital, Active Management, and Daily Liquidity o CEFs have traded on The NYSE since 1893 o Taxadvantaged 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 closedend 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 closedend 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 March 31, 2008 March 31, 2018 NAV TR Price TR /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

9 2 Trad CEF Average Discount / Premium March 31, 2008 March 31,

10 BDC Debt Total Return March 31, 2008 March 31, 2018 NAV TR Price TR /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

11 BDC Debt Average Discount / Premium March 31, 2008 March 31, /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

12 Types of Loans Held By BDCs 1. First Lien Loans: 54% 2. Second Lien Loans: 20% 3. Unsecured Loans: 9% 4. Equity/Other: 17% Avg Portfolio Turnover: 43.8% Avg Variable Loans: 76% / Fixed: 24% Libor Floors: 41% at 1% Avg Level Avg Loan Size: $9.7M 73% of Loans Under $25MM Average Maturity 4.2 with a range of 2 Years to 6 years Avg No of Loans: 138 from 107 Companies Source: Data as of March 29, 2018 from CEFData.com 12

13 Municipal Bonds Total Return March 31, 2008 March 31, 2018 NAV TR Price TR /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

14 Municipal Bonds Average Discount / Premium March 31, 2008 March 31, /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

15 Municipal Bond ClosedEnd Fund Universe National Single State Muni Funds Muni Funds Total Number of Funds Net Assets (Total) $46,433 $18,011 $64,444 Net Assets $522 $222 $379 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 March 29, 2018 from CEFA s Universe Data 15

16 Municipal Bond ClosedEnd Fund Universe Source: Data as of March 29, 2018 from CEFA s Universe Data 16

17 Tax Equivalent Yield Comparison Married Couple with W2 Income of $1MM+ Federal TEY NYC Residents TEY Yield 14.00% 12.00% 10.00% 8.00% 8.17% 8.34% 8.83% 9.02% 6.00% 4.00% 3.93% 4.13% 6.15% 6.28% 3.54% 4.70% 5.08% 2.26% 2.00% 0.00% MUB (ETF Fund) Mk Yield Nat Muni (Tax Free) Lev Adj NAV Yield Nat Muni (Tax Free) NAV Yield Nat Muni (Tax Free) Mk Yield Sources: CEFA s Universe Data as of 3/29/2018 and tax rates from IRS and NY State. 17

18 MLP Total Return March 31, 2008 March 31, 2018 NAV TR Price TR /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

19 MLP Average Discount / Premium March 31, 2008 March 31, /1/2008 3/1/2009 3/1/2010 3/1/2011 3/1/2012 3/1/2013 3/1/2014 3/1/2015 3/1/2016 3/1/2017 3/1/

20 Broad Investable Universe Assets of Closed-End Funds/BDCs* $46, % 5.14% % 0.94 $522 $35, % 10.19% % 6.20 $762 $19, % 8.50% % 1.14 $688 $20, % 6.96% % 1.56 $707 $11, % 11.43% % 1.86 $413 $12, % 7.42% % 1.22 $366 $13, % 5.21% % 1.55 $256 $12, % 6.34% % 1.67 $457 $10, % 7.53% % 1.22 $658 $5, % 8.41% % 1.39 $517 $4, % 9.16% % 1.46 $383 $4, % 5.84% % 0.90 $312 in total CEF assets average discount exploitable undervaluation $275.2 Billion x 7.2 % = ~$19.8 Billion

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 176 (84%) 34 (16%) 37 (18%) 170 (81%) 51 (24%) 158 (75%) Taxable Bond Traditional CEFs 121 (81%) 28 (19%) 80 (54%) 67 (45%) 58 (39%) 91 (61%) Municipal Bond Traditional CEFs 160 (94%) 10 (6%) 7 (4%) 163 (96%) 7 (4%) 163 (96%) BDCs 44 (86%) 7 (14%) 37 (73%) 13 (25%) 17 (33%) 34 (67%) ALL CEFs 501 (86%) 79 (14%) 161 (28%) 413 (71%) 133 (23%) 446 (77%) Data as of March 29, 2018 Source: CEFAData.com For BDC funds, we show 4Q17 NAV TR, as 3/29/2018 NAV hasn t been disclosed yet 21

22 Current ClosedEnd Discounts Avg CEF Discount % as of March 29, 2018 Average CEF Discount 5 % 0 % 5 % 10 % 15 % 20 % 25 % Special Equity 3.71 Nat Muni Bond 7.4 US Equity 7.76 Taxable Bond 4.89 Non US Equity 8.73 State Muni Bond 9.88 BDC Debt Focused % BDC Equity Focused % 40 % Source: CEFData.com 22

23 ClosedEnd Discount Trends Traditional & BDC 1Q Ended with an average CEF Discount of 7.22% Main Peer Groups Average CEF Discount May 11, 2012 March 29, 2018 All Trad CEFs All BDC CEFs Av All Trad CEFs Av All BDC CEFs Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q Year Average Discount: 4.95% Source: CEFData.com 23

24 ClosedEnd Discount Trends Average CEF Discount May 11, 2012 March 29, 2018 US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond BDC Debt Focused BDC Equity Focused Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q Source: CEFData.com 24

25 Discount Trends & Tax Loss Selling 12 Major Sectors CEFs (Nov Feb) 4.6% 2.7% 2.0% 2.6% 2.8% 0.2% Source: CEFData.com Average Bounce: 2.5% 25

26 Discount Trends & Tax Loss Selling CEFs & BDCs with 1YR Price Return 5% or lower (Nov Feb) 4.6% 2.8% 3.0% 3.4% 3.3% 0.1% Source: CEFData.com Average Bounce: 2.9% 26

27 Discount Trends & Tax Loss Selling BOND CEFs 4.1% 3.6% 2.2% 3.7% 3.2% 0.1% Source: CEFData.com Average Bounce: 2.8% 27

28 Discount Trends & Tax Loss Selling EQUITY CEFs 4.7% 1.4% 1.3% 2.0% 2.0% 1.2% Average Bounce: 2.1% Source: CEFData.com 28

29 CEF Volume Trends 1Q 2018 Fund Grouping Avg Vol Last Q Avg Vol Prev Q Volume Trend BDC Debt 327, ,787 7% Convertible 155, ,056 31% Covered Call 200, ,538 41% High Yield Bond 128, ,691 9% Investment Grade 62,013 62,432 1% MLP 193, ,686 18% Municipal Bond 69,214 58,203 19% Preferred Stock 156,024 78,679 98% Real Estate / REIT 200, ,056 58% Senior Loan 154, ,211 1% US Stock 171, ,157 27% World Stock 61,416 54,361 13% Ave Traditional Equity CEF 149, ,371 21% Ave Traditional Bond CEF 101,348 90,070 13% Average BDC 305, ,550 6% Average For ALL CEFs 136, ,657 11% Data as of March 29, 2018 Source: CEFAData.com 29

30 4.8% 1.2% 6.0% under $ % 8.6% $100 - $250 $250 - $500 $500 - $1, % $1,000 - $2, % $2,500 - $5,000 $5,000 - $10, % $10,000 + Note: 580 closed-end funds; data as of 3/31/18, Source: CEFData.com 30

31 CEF/BDC Yield Comparison 12% 11.4% 10% 8% 6% 4% 10.2% 8.6% 6.2% 9.2% 6.7% 8.5% 8.4% 8.0% 6.5% 7.5% 7.4% 5.5% 5.6% 7.0% 6.2% 6.3% 4.6% 5.8% 4.8% 5.2% 4.8% 4.4% 4.4% 8.8% 3.7% 3.8% 5.1% 6.3% 10.6% 2% 0% Data as of 3/29/2018. 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 ) 31

32 12.1% 5.5% 13.6% Yield Under 4% Yield 4%-6% Yield 6%-8% Yield 8% -10% 15.7% 32.4% Yield 10% -12% Yield Over 12% 20.7% Note: 580 CEFs; data as of 3/31/2018, cefdata.com 32

33 Relative UNII for Traditional CEF Municipal Bond Funds Nat Muni Bond Relative UNII May 11, 2012 March 29, 2018 Nat Muni Bond Av Nat Muni Bond 30 % Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q % 20 % 15 % 10 % 5 % 0 % 5 % Source: CEFData.com 33

34 Return of Capital (90 Day) For CEFs Main Peer Groups Historical ROC May 11, 2012 March 29, 2018 US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond BDC Debt Focused BDC Equity Focused Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q Source: CEFData.com 34

35 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 4 14% 19% 71% 20% NonUS Equity Funds 10 19% 43% 176% 16% Specialty Equity Funds 68 60% 50% 14% 98% Equity CEF 87 41% 47% 31% 65% Taxable Bond Funds 45 30% 12% 11% 29% National Muni Bond Funds 4 4% 0% 9% 29% State Muni Bond Funds 5 6% 1% 25% 30% Bond CEF 54 17% 10% 14% 30% Average CEF % 33% 22% 46% *Whitepaper Source: CEFA s ClosedEnd Fund Universe 6/30/2015 ( 35

36 ClosedEnd 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: March 29, 2018 CEFData.com 36

37 CEF Press Release SEC Filings Summary (2369 CEF PRs in 1Q18) Announcement Type 1Q Avg per Q since 2015 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 N2 Filings Updated N2 Filings Investment Manager / Advisor Change Portfolio Manager Change Leverage Amount / Type Change Source: Fund Press Releases / SEC Filings. 37

38 CEF & BDC Dividend Increases vs. Decreases Dividend Announcement 1Q 2018 Number of Announcements 1Q 2018 Average Change 1Q 17 4Q 17 Number of Announcements 1Q 17 4Q 17 Average Change Dividend Maintains 1142(86.4%) N/A 4777 (89.0%) N/A Dividend Increases 45 (3.4%) % 187 (3.5%) +6.05% Dividend Decreases 134 (10.1%) 8.85% 401 (7.5%) 8.93% Under 5% Increase 23 (51%) +2.05% 129 (69%) +1.55% Over 5% Increase 22 (49%) % 58 (31%) % Under 5% Decrease 47 (35%) 2.34% 168 (42%) 2.15% Over 5% Decrease 87 (65%) 12.36% 233 (58%) 13.83% 7% of announcements Big Cuts Source: Fund Press Releases 38

39 1Q 2018 ClosedEnd 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 Source: Fund Press Releases 39

40 CEF Recent Dividend Changes (Policies NOT Promises) 3 Year Dividend Growth 306 Funds (58%) had negative 3 year growth averaging 21.9% 71 Funds (13%) had positive 3 year growth averaging +16.2% 2 Year Lookback 347 Funds changed their dividend policy in the past 2 years (65% of funds) 279 Cut (80%) an average of 12% while 68 (20%) increased an average of +14 % 182 of these funds have level or managed distributions 143 of those were cut an average 12% 40 were increased an average of +12% 1 Year Lookback 99 increase vs. 234 decreases. 46 Funds had BOTH increases and decreases in the past year. Source: CEFAData.com, as of March 29,

41 CEF & BDC Historical IPOs (1Q 18) Number of IPOs Average Assets In $ millions Total New CEF IPO Assets in $ Billions $646 $225 $272 $511 $511 $442 $258 $371 $192 $134 $629 $8.4B $1.8B $2.4B $7.7B $14.8B $12.4B $6.7B $8.2B $2.7B $.4B $28.3B 10 Year Average: 17 Funds per year, $356MM Ave Fund, $6.6 Billion Per Year Source: SEC Filings, Press Releases 41

42 CEF & BDC Historical IPOs (1Q 18) Inception Assets (M) # funds Q'17 3Q'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 3Q'13 Source: March 29, 2018 CEFData.com Q'13 1Q'13 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0

43 $140 $130 $80 $165 Debt Focused BDC $1,363 Loan Participation High Yield Bond Funds Multisector Bond Funds $5,163 Emerging Market Income REIT Note: Inception Assets in millions ; data as of 3/29/2018, cefdata.com 43

44 2017 IPO Details 4Q 2017 (No IPOs in 2018) DA Glbl Cr Incm 2024 Tgt Trm (DCF) Taxable Bond Funds IPOed on October 27, 2017 IPO Price: $10.00 IPO Assets: $140M Price as of 9/29/17: $9.40 Disc/Prm as of 12/31/17 : 3.98% Highland Flt Rt Opp Fd (HFRO) Taxable Bond Funds IPOed on November 6, 2017 IPO Price: $15.50 IPO Assets: $1080M Price as of 9/29/17 : $15.50 Disc/Prm as of 12/31/17 : +2.51% Corporate Capital Tr (CCT) Debt Focused BDCs IPOed on November 14, 2017 IPO Price: $17.60 IPO Assets: $4400M Price as of 9/29/17 : $15.98 Disc/Prm as of 12/31/17 : 20.14% Invsc Hi Incm 2023 Tgt Trm Fd (IHIT) Taxable Bond Funds IPOed on November 27, 2017 IPO Price: $10.00 IPO Assets: $80M Price as of 9/29/17 : $9.79 Disc/Prm as of 12/31/17 : 2.68% Source: Fund Press Releases 44

45 IPOs during 2Q Q 2017 Current Discount / Premium IPO Date Ticker Current Disc/Prm Current Price IPO Price Curr vs IPO 2Q 2017 CBH -5.33% $9.22 $ % CGBD -1.21% $17.90 $ % EFL -4.61% $9.32 $ % 3Q 2017 XFLT -3.18% $9.45 $ % JEMD -6.65% $8.99 $ % DCF -2.81% $9.33 $ % 4Q 2017 HFRO 5.82% $15.99 $ % CCT % $16.90 $ % IHIT -1.50% $9.86 $ % Data as of March 29, 2018 Source: CEFAData.com 45

46 ClosedEnd Fund Mergers ClosedEnd Funds Merged into Other ClosedEnd Funds (March 2018) 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. 19 per year 27 Last 5 Yrs, 15 previous 9 Yrs 46

47 ClosedEnd Fund Deaths CEF Funds OpenEnded, Liquidated or Converted to ETF Converted to ETF Liquidated Openended Source: Fund Press Releases Causes: Openending, liquidation & conversion. (9 per year on average) 47

48 Traditional ClosedEnd Fund 90 Day NAV Market Price Correlation Trad CEFs Groups 90 Day NAV/Price Correlation June 22, 2012 March 29, 2018 All Trad CEFs All Equity All Bond US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond 120 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q Source: March 29, 2017 CEFData.com 48

49 Traditional ClosedEnd Fund NAV Market Price Correlation Fund Grouping Correlation 1Q 18 Correlation 4Q 17 Correlation Trend US Equity Funds NonUS Equity Funds Specialty Equity Funds 82.94% 69.71% 13.23% 89.40% 70.35% 19.05% 91.04% 69.01% 22.03% Ave Equity CEF 88.46% 68.63% 19.83% Taxable Bond Funds National Muni Bond Funds State Muni Bond Funds 63.45% 65.81% 2.36% 88.26% 49.50% 38.76% 91.02% 53.58% 37.44% Ave Bond CEF 77.37% 58.11% 19.26% Average CEF 81.77% 62.29% 19.48% Data as of March 29, 2018 Source: CEFAData.com 49

50 1Q18, 2017 and 4Q17 ClosedEnd Fund NAV / Market Price Performance Fund Grouping 1Q 2018 NAV 1Q 2018 Mkt Pr 2017 NAV 2017 Mkt Pr 4Q 2017 NAV 4Q 2017 Mkt Pr US Equity Funds 1.7% 1.9% 19.4% 25.9% 4.8% 5.7% NonUS Equity Funds 0.4% 0.0% 25.2% 30.3% 3.6% 2.7% Specialty Equity Funds 5.6% 6.2% 8.8% 13.5% 1.9% 1.5% Avg Traditional Equity CEF 3.5% 3.7% 15.0% 20.3% 2.9% 2.5% Taxable Bond Funds 0.1% 0.7% 9.7% 11.2% 1.2% 0.3% National Muni Bond Funds 1.3% 4.5% 7.8% 7.7% 1.2% 0.7% State Muni Bond Funds 1.7% 5.3% 6.7% 5.2% 0.9% 1.6% Avg Traditional Bond CEF 0.7% 2.9% 8.4% 8.6% 1.1% 0.8% Average Traditional CEF 1.8% 3.2% 11.0% 13.3% 1.8% 0.5% Debt Focused BDC 2.1% 1.5% 5.6% 2.2% 2.3% 2.5% Equity Focused BDC 0.3% 9.3% 1.5% 14.0% 0.4% 4.4% Average BDC 1.9% 0.4% 5.2% 3.4% 2.1% 1.8% Data as of March 29, 2018 Source: CEFAData.com 50

51 CEF / BDC Index Performance Index 1Q 2018 NAV 1Q 2018 Mkt Pr 1Year NAV 1 Year Mkt Pr 5Year NAV 5Year Mkt Pr 12 Major Sectors Index 1.88% 2.43% 5.43% 4.98% 5.70% 5.22% High Income Index 3.49% 3.75% 3.20% 1.65% 4.49% 3.71% TaxSensitive Income Index 6.19% 7.00% 3.64% 3.24% 2.03% 1.58% 60/40 Balanced Index 1.19% 1.62% 8.33% 8.58% 6.78% 6.50% Global Equity Index 0.59% 0.26% 12.59% 15.41% 7.72% 8.38% Equity Income Index 3.67% 3.44% 4.96% 7.89% 5.30% 5.66% Taxable Bond and BDC 0.19% 0.84% 7.30% 5.09% 5.10% 3.96% National Municipal Bond 1.67% 5.25% 4.49% 0.04% 4.57% 3.16% Preferred Equity Index 1.67% 4.35% 6.02% 5.15% 7.91% 7.19% Convertible Bond Index 0.63% 0.35% 8.68% 10.76% 5.98% 6.52% High Yield Bond Index 0.40% 2.18% 4.68% 2.97% 5.43% 3.39% Sr. Loan Index 1.97% 3.77% 5.25% 4.07% 4.86% 3.17% MLP Index 13.45% 12.52% 21.26% 19.23% 7.12% 8.05% REIT / Real Asset Index 6.73% 7.53% 1.43% 3.32% 6.18% 5.64% DebtBDCs Index 1.48% 4.19% 9.00% 9.44% 8.40% 3.04% Source: CEFAData.com 51 Data as of March 29, 2018, Annualized over 1 year

52 CEF Institutional Holdings (1Q 18) Institutional Holdings Trends Increase: 298 funds Decrease: 219 funds Main Peer Groups % Shares Owned by Institutions January 18, 2013 March 29, 2018 All Trad CEFs All Equity All Bond US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond All BDC CEFs Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q Source: CEFData.com 52

53 CEF / BDC Institutional Investors (1Q 18) All 13 Filings = $43 billion. Top 40 = $29 Billion Source: CEFData.com 53

54 BDC Institutional Ownership Largest Institutional Holder (%) Approved Below NAV Offering (1Q) BDC Shares Owned by Institutions (%) Note: Data as of 3/29/2018, cefdata.com 54

55 CEF/BDC Primary 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 3/31/18 $2.8 Billion Activist // $21.7 Billion Followers & Activist Source: CEFAData.com 55

56 Month Filed March March ClosedEnd Fund Corporate Actions / Activist Update 1Q 2018 Filing ClosedEnd Fund/BDC Investor/Who Notes 13D/A Proxy Mgd Dur Inv Grd Muni Fd (MZF) Fidus Investment Corp (FDUS) Karpus Public Investment Agrmnt Termination / Trustee Proposal Proposal to sell up to 25% shares below NAV March 13D/A Dlw Enh Glbl Div & Incm Fd (DEX) Saba 12.1% (Inc) Nominees Proposal March 13D/A Swiss Helvetia Fd (SWZ) Bulldog 8.4% (Inc) Selftender offer request NAV) March Announ cement Source: SEC Filings, Press Releases Medallion Fin Corp (MFIN) Public withdrawal of BDC regulation ("debdc") approved Feb 13G/A Tmp Emrg Mkt Fd(EMF) City of London 5% (Dec) Source: SEC Filings, Press Releases 56

57 Month Filed ClosedEnd Fund Corporate Actions / Activist Update Source: SEC Filings, Press Releases Filing ClosedEnd Fund/BDC Investor/Who Notes Feb 13D/A Putnam Hi Incm Sec Fd (PCF) Bulldog 15.3% (Inc) Selftender offer request NAV) Feb Proxy Asia Tigers Fd (GRR) Public Merger (into CH) proposal Jan 13D/A Alp Tot Dyn Div Fd (AOD) Saba 9% (Inc) vote against Investment Adv Agreement Jan 13D/A BR Enh Govt Fd (EGF) Sit Investment 39.8% (Inc) Jan Proxy FS Investment Corp (FSIC) Public Investment Adv Agreement proposal Jan 13G/A Abd Emrg Mkt Sml Co Opp Fd (ABE) Lazard 14.4% (Dec) 57

58 CEF Activist Holdings (1Q 18) Activist Holdings Trends Increase: 201 funds Decrease: 159 funds Main Peer Groups % Shares Owned byactivists January 25, 2013 March 29, 2018 All Trad CEFs All Equity All Bond US Equity Non US Equity Special Equity Taxable Bond Nat Muni Bond State Muni Bond All BDC CEFs Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q Source: CEFData.com 58

59 Premium / Discount (%) Shares owned by Activists / Followers(%) Note: Data as of 3/29/2018, cefdata.com 59

60 $112 $90 $25 Non U.S. Equity BDC $357 Taxable Bond U.S. Equity Hybrid / Balanced $401 $479 $1,367 Note: millions of dollars, data as of 3/29/2018, cefdata.com Specialty Equity CEF Act ivist Ownership $2,803 Top 5 Peer Groups Asian Equity $807 BDC Debt $444 General Equity $357 US Government Bond $295 Global Equity $215 60

61 $1,185 $414 $323 Taxable Bond Non U.S. Equity $2,814 $1,646 $7,068 Specialty Equity BDC U.S. Equity National Muni Bond $3,947 $4,279 Note: millions of dollars, data as of 3/29/2018, cefdata.com CEF Act ivist Ownership $21,675 Top 5 Peer Groups BDC Debt $2,660 Asian Equity $2,208 Senior Loan $1,710 High Yield Bond $1,560 Covered Call $1,430 61

62 CEFA s Outlook for 2Q and 2018 US Equity Funds NonUS Equity Funds Specialty Equity (Sector) Funds Taxable Bond Funds National Municipal Bond (TaxFree) Funds State Specific Municipal Bond (TaxFree) Funds DebtFocused Business Development Companies (BDCs) EquityFocused Business Development Companies (BDCs) Sustainable CEF Portfolio Distribution Yields, Beta, Correlations, Duration and AfterTax Income, Gross Asset Exposure, Leverage 62

63 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, AETFs 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 63

64 ClosedEnd Funds & BDCs in a Rising Rate Environment (March 2004 to September 2007) Full article on our blog:

65 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, Correlation Engine and Reporting 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 April 30, 2019 for Q Webinar Attendees (Promo code CEFD2018) that sign up by May 15, 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. 65

66 CEF Advisors Links CEF Advisors Website: CEF/BDC Index Data: CEFA s Blog: / CEF/BDC Research Sites: Published Articles Seeking Alpha: WealthManagement.com: 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

67 For Your Information CEF Resources CEF/BDC Fund Profiles: The ClosedEnd Fund Association: CEF Connect (Nuveen Sponsored): Morningtar's CEF Site: 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: Seeking Alpha: More Useful Links at: 67

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

69 Current CEFA Portfolio Modes

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

72 Speaker s Biography John Cole Scott, CFS Chief Investment Officer of ClosedEnd Fund Advisors Mr. Scott has worked at ClosedEnd Fund Advisors since He holds the 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 ClosedEnd Fund Universe, a data service covering all US listed closedend 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.

73 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 December 31, 2017 unless otherwise noted. 73

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