Scott Letter Update and 1Q 2012 CEF Review & Outlook
We are excited to release the March/April 2012 Scott Letter: Closed-End Fund Report. If you are not a current subscriber for email notifications, please sign up on our website: www.scottletter.com. A short exert follows as an introduction to the interview:
“Invesco’s VVR Senior Loan Fund: A Favorable Way To Generate Income in a Rising Rate Environment”
On March 9, 2012, John Cole Scott interviewed portfolio managers, Thomas Ewald and Philip Yarrow of Invesco Fixed Income, via telephone.
SL: Why do you think the closed-end structure is the best format for a senior loan investment company?
Ewald: Let me start off by saying it isn’t necessarily the best format.
SL: Interesting, I wasn’t expecting that answer.
Ewald: However, it may be the best format for certain investors. You have a wide range of investors within this asset class. The way I think about it is that on the retail side you have three product choices. First, you can invest in a daily liquidity fund which should have the lowest level of volatility. These funds allow you to redeem and get your money back on a daily basis. Then there are interval funds which allow investors to redeem their money on a periodic (normally monthly) basis. These funds are going to have higher levels of volatility but should have higher levels of current income than the daily liquidity funds.
And, then finally, you have the closed-end funds which you would expect to have the highest level of volatility. They should offer the greatest long-term returns whether that’s a combination of, in today’s environment, capital appreciation plus interest earnings, or in a more traditional environment, primarily just interest earnings.
SL: When you say closed-end funds have higher volatility, are you talking about market price volatility or NAV volatility?
Ewald: Both. Because the equity in a closed-end fund (“CEF”) trades on an exchange, the market price can and normally does vary from the NAV. There is market price volatility in CEFs compared to daily liquidity…
Continued in the newsletter … www.scottletter.com
First Quarter 2012 CEF Review & Outlook
It has been another fascinating quarter for closed-end funds. We welcome you to sign-up to attend our quarterly CEF review & outlook next week on April 3, 2012 at 4:30pm EST. We will record the session and post it to our Webinar On-Demand Page on our website later in the week.
Link to register: https://www2.gotomeeting.com/register/631967730