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“Unloved” Senior Loan CEFs: Featuring John Cole Scott

by on December 19, 2014

2014-1219-SrLoan-Investius“Unloved” senior loan closed-end funds may appeal to CEF investors concerned that interest rates may rise, says John Cole Scott of CEF Advisors.

John Cole Scott, CEF Advisors:

They’re another group that had a very exciting 2013.  They’ve had a rather unloved 2014.

There’s not as many senior loan funds as municipal bond, but there’s almost 30 available to investors. A new one just came out this quarter.

But when you look at them, they’re right now trading at about 9 discounts on average to net asset value, which is considerably wide.  They’re yielding about 7.4%, which for loans that will generally rise with rising interest rates – which a lot of people think rates will rise at some point in the future – is a very favorable position to be in.

And you look at the guts.  The guts have been doing real well.  The guts are up about 6.5% on a one-year basis, but market price is up only one and change.  So definitely you can tell that discounts widened.

Again, the closed-end fund story… when things are disliked and they’re well-managed and they have a reason to be in long-term, it’s when you go in and you invest.

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