The NAVigator Active Investment Company Alliance

Stephen Minar, Managing Director and Head of Closed-End Funds at BlackRock, discusses a contemporary conundrum in the closed-end fund industry: How discounts drive money flows into closed-end funds but also attract activist investors whose actions may be harmful to long-term individual investors. To address this, Minar notes that BlackRock has launched initiatives in a series of new funds that can reduce discounts, thereby making a fund less likely to attract activists, while increasing consistency in distributions.

Charles Lewis Sizemore, chief investment officer at Sizemore Capital Management, says that while short-term rates are as high as they are likely to be, the "massive discount" created in closed-end funds while rates were on the rise have not dissipated. That means closed-end funds remain a compelling value now, and Sizemore said he is finding particularly strong values in REIT-oriented funds and term funds. However, he noted that he's not a big fan of most equity-based funds now because with the market looking frothy "you probably don't want to be adding leveraged exposure to the stock market."

Clayton Triick, Head of Portfolio Management, Public Strategies at Angel Oak Capital Advisors — part of the team running the Angel Oak Strategic Credit Fund — says that fundamentals and valuations seldom get aligned the way they have right now for the U.S. housing market and American homeowners. He notes that valuations are "cheaper than they should be" given the strength of the market and mortgage holders, creating opportunity. Triick says homeowners "did a really good job of locking in low mortgage rates," making them the big winners of the rising rate environment and making mortgages look more attractive than other bond types — particularly corporates where valuations have gotten rich relative to the economy's strong fundamentals.
 
 

Christian Munafo, Chief Investment Officer at Liberty Street Advisors, which runs the Private Shares Fund, discusses how late-stage private venture companies are generating a huge chunk of economic power off most investors' radar. He says now is the time for many investors to pursue the opportunity, coming off of two years in which private shares struggled and markets for taking those companies public stalled. Munafo believes the recent pickup in IPOs is a positive sign. He also discusses Destiny Tech 100, an exchange-traded closed-end portfolio that has been trading like a meme stock, with massive gains — but also nosebleed losses — since its debut in March.  
 

Jonathan Mondillo, head of North American fixed income for abrdn says that record discount levels for municipal bond closed-end funds, coupled with attractive yields on those funds, are creating real opportunities for investors, though he warns about the middle of the yield curve, noting that the most compelling values are at the two ends of the barbell -- the short-term and long-duration paper -- which he expects to continue even as the rate cycle plays out and the Federal Reserve finally moves to cut rates.

John Cole Scott, President of Closed-End Fund Advisors and Chairman of the Active Investment Company Alliance, drills into the first-quarter data for closed-end funds.  He notes that while municipal-bond funds still couldn't break out of their long-running slump, the first three months were a strong time for most closed-end funds (more than 90 percent were up for the period).