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CEFAdvisors // — Closed-End Funds & BDCs: Discounts, Dividend Risk & Leverage Limits: Putting recent market moves & actions into perspective w/ John Cole Scott (Webinar Replay & Transcript)

by on March 24, 2020

Market Trading ScreenGiven the recent market volatility and historically uncommon discount widening for closed-end funds and BDCs we wanted to share our opinions, experience, and near-term outlook for the CEF and BDC universe of listed funds. CEF Advisors’ CIO, John Cole Scott held a timely presentation for our clients, prospects, peers and strategic relationships on March 23rd, 2020 with 30 minutes of prepared remarks and 30 minutes to cover the pre-submitted and live Q&A.

Webinar Replay Registration URL

The transcript follows the information below on this blog article.

NOTE: As mentioned on the call, CEF Advisors /  has a daily news alerts email for listed CEFs / BDCs and weekly 285+ data point data sheet on CEFs/BDCs as well as daily API / FTP feeds for more active users of data. Both have tiered pricing for individuals, financial advisors and higher.

We will be offering four 50 minute consulting calls with John Cole Scott a week. Sessions will be available March 31st to April 30th for those in need of a personalized CEF / BDC portfolio check-up.

Consulting Call includes 60 minutes of portfolio review on, with 30 days access to the portfolio(s) & 20 minutes of phone / email support for 2 weeks post consultation + three months access to our Daily News Alerts. Cost is $689 and the value is approximated at $1600+. Pricing based on 2 portfolio and 40 combined holdings additional time $500 / hour. Schedule one of these limited calls with

Links mentioned on the webinar / call:

CEF Advisors 35+ Index Page:
CEF Advisors Index Performance: CEF/BDC Profile Page (Example):
CEF Analyzer Website (Heat Map)

AICA Member Nuveen has the following resource on Leverage:
Active Investment Company Alliance (AICA) website:
Check out The NAVigator AICA’s Weekly podcast:

BDC Links:
BDC Reporter:
BDC Buzz:
Direct Lending Deals:
National Securities March 17th BDC Research:

Webinar / Call Transcript:

Good afternoon. John Cole Scott with Closed-End Fund Advisors. We are still letting people log in. We have a couple of things point of order, we are recording this session, it’s worked ninety-eight times out of a hundred in the ten years we’ve been using GoToWebinar. We are also going to have our transcriber transcribe this session and get it out on our blog and available to all attendees and registrants after the fact.

 We did not develop an actual slide deck because it’s’ been a rather busy week in the office. We first thought of this presentation last Tuesday night and decided to give it the weekend to review the data and the trends. Gave me a chance to review our CEF Data system in those two days. I recognize there’s probably some new people on the phone or the web. I’m going to share my webcam to try to make this a little bit more personal. I am working from our disaster recovery location, which is my home office. Been here for two and a half weeks riding out the environment.

 I’m going to keep to the general structure of the overview in the email we sent you guys, and then I’ve loaded a bunch of the different pieces of our public system. I also have some charts from our weekly PDF files and have done a lot of digging, sorting, and analyzing of our weekly, very deep closed-end universe spreadsheet that our data clients would be familiar with.

 With that I’ll take about sixty seconds for those who may not know; Closed-End Fund Advisors is a thirty-year-old registered investment advisory firm, that’s our first and foremost effort in capital markets. We are owned by my family, the Scott family. I’ve been here just over nineteen years, in my twentieth year. We also have our data business I founded in 2008 with our partner, Fundamental Data. Went independent with the data business in 2012. We have ten analysts, two programmers, and it’s one of the things we do to differentiate ourselves in the market.

 Last summer we helped start a non-profit trade association, the Active Investment Company Alliance, as a more independent and unified platform to support the closed-end fund, BDC, both listed funds and non-listed funds ecosystem with a conference last November. We had intended to throw one in June of this year. Thankfully had not signed the contracts yet, and going to be navigating, like many businesses, to web based panels and so forth.

 I know we’re hoping about twenty to twenty-five minutes of working through some of our systems. I printed all of the questions from around noon today and organized them. I will go through those prepared remarks. During the session I’m going to break out the question box and I assume it will get larger. We did have to increase our webinar capacity. I was on hold, thankfully for this headset, with GoToWebinar for about an hour this morning to be able to handle, because otherwise we wouldn’t be able to have everyone on the line. We had almost three hundred people register for this. Usually expect a sixty percent show-up rate, and we already have about a hundred and fifty people logged in.

 With that, on the screen that you see, I want to remind you that there’s two parts of a closed-end fund investment. There’s the managers capital, these are the fourteen major sectors of opportunities or types of styles of funds available to investors and advisors like ourselves. The net assets are often levered; three fourths of funds are levered, about ninety percent of bond funds are levered. As you imagine right now, rates have come lower, so the cost of leverage is lower than what it was in all of history. In that short term will improve spreads and create a lower expense ratio for all credit funds and even equity funds have that employed leverage.

 Leverage is never perfect. It does magnify results on the up and downside. There have been some issuances of some funds breaching the 40 Act rules, so I want to make a couple of disclaimers because I am a registered investment advisory firm. I’m not a doctor. I’m not an economist. I’m not a portfolio manager that actually selects individual credits or individual equities for portfolios. I do not know what’s going to happen. We do specialize in the analysis of sectors, managers, and fund sponsors, and then that structural wrapper of the closed-end funded-ness for investors.

 I want to talk about the net asset value as piece one. Why do I like closed-end funds? You’ve got the net asset value on one side of the equation, and then you have for the listed funds, just the focus of this conversation, the ability to trade them in the market. About ninety-five percent of the funds plus are currently listed on the New York Stock Exchange, often handled by designated market makers or DMMs. Currently today’s the first day in its history that DMMs have not been involved in the open of the stock market. It worked out okay so far.

 You then have the NASDAQ which handles the Calamos funds and a lot of the BDCs. I’m sure we’ll be working to do more work in the space going forward. You then have assets. The managers are able to change their mind. Every closed-end fund essentially — there’s some commodity funds that are more just esoteric and older versions — but basically every new fund and every fund that we focus on for our clients is actively managed. I need investors to understand active management is never perfect. No human is perfect. But what I do appreciate about the closed-end fund structure is the human component to think about where we have been, where we are, and where we’re going. That’s one of the things we’ve used to give us comfort in this extremely hard time.

 The other thing is that closed-end funds have a fixed capitalization. That’s what actually has that net asset as one bucket and the listing as the other. Outside of breaking the 40 Act leverage terms, which is uncommon but has happened by press releases we’ve reviewed in the last two weeks. They are essentially never a forced seller of assets. That is very useful in periods like this.

 The active management, the ability for trading to happen — granted, that trading to be able to happen means that they can be very, very, very, very volatile. Volatility is something we talk about with every client before they become a client, but I can guarantee you every client we’ve brought on in my entire eighteen year career, including those I brought on pre-financial crisis, has not seen the current level of discounts that we have. We are going to go through all these questions. I’ll stay on the line longer if I have to. I’ll take the sentiment of success by how many people stay on the line. Let’s go through some of the web pages I’ve prepared to talk about, and we’ll work through it, and then we’ll dig into the questions as well.

 All right, so roughly half the funds are credit funds, half the funds are equity funds. Credit funds typically handle this environment better because they have regular reoccurring distributions, a pasture of income. I do want to point out that if you listen to any of our webinars, we do a quarterly research call. We’ll be doing it relatively soon in April because I’m sure people want a fundamental update of our slide deck at the least. Credit funds tend to handle these things better. But where are discounts going? Where are dividends going? Where are concerns for leverage? What sectors are we overweight for our clients in our opinion? And where do we highly make sense of what’s going on today? That’s basically the framework I have in front of me. I’ve printed the questions to go after, you’ll see me read through them in a moment.

 These are the major sectors and I just want to make sure people are aware of them. Not our website, but there’s a website that we eventually will program our version of it. CEF Analyzer is programmed by a previous Google programmer we know in the Bay Area, have not talked to him recently. It’s stale but it organizes closed-end funds on his website, It’s delayed, it’s not organized exactly the way CEF Data is, it does not cover BDCs, but it’s a heat map or a sense of where movements are. That’s a resource that I know we’ve talked about in the past, but I think it is a good additional resource if you’re not familiar with it.

 I then want to remind people in 2016 we started to develop our index — I’ll say, business. All of these indices were designed to be benchmarks. They’re not designed to be products. They were designed for me to use to analyze myself, our peers, and the overall sectors. We have four types of indices here. We have diversified indices which are kind of thematic, twelve major sectors. It’s kind of the seven most liquid funds in the twelve major categories. The rest are relatively self-evident. I’m not going to go into it. We then have equity sectors, taxable bond, and the tax-free, because it was really important to us to be able to understand that.

 I want to talk about the data that you’re seeing here. We can look at the average discount being fourteen for this index and just know the one-year average is almost eleven points higher. I think that suggests where we are. Ranges; three-year range, we’re in the thirties and forties as of Friday’s close. There was a nice balance because there was such a big pull back on Thursday, and we saw that similar pullback this morning. It looks like it is turning around a little bit, keeping an eye on the Bloomberg to my right. That’s a very big, important piece.

 When I think about the analysis of both sides. If discounts are volatile, which gives us reasons to buy into fear and sell into optimism, you would like to focus on funds and sectors where the discount volatility is very high and where the net asset volatility is lower. So here you can see like in muni bond funds, their net asset volatility, depends on the type of fund it is, between four and six. Credit funds, between seven. Converts, I’ve always said while they’re technically bonds, are more defensive than equities, but they tend to act and feel like equities. They tend to have — here they have a beta of 0.88 to SPY and a two-year weekly net asset value basis, which is relatively high.

 Then you’ve got preferred equity funds, which are more like bond funds. Here the net asset volatility is a fifteen, lowest in this peer group, and its beta is surprisingly still high because of the recent moves in net assets.

 Why are net asset values moving so much? In all of our reading and talking to fund sponsors, there’s a lot of non-trading in that market, a lot of very little bids. The credit side of the market, if you look at the ETF structure, which is the open-end fund structure that’s listed on exchanges, they’re discounting five, ten percent right now because there’s just no bids, there’s not a lot of liquidity, people are selling everything.

I’m keeping in a sense of the time. I want to go through some of these areas. With these indices, we then have performance for them. Just for perspective, the average closed-end fund through Friday is down forty percent. You can scan this list. is a shortcut to this list. I just want you to understand where that is.

 This is the index discount move. This was right here, February 20th. I actually recorded a podcast for The NAVigator, which is AICA’s podcast, on this day. Talking about that discounts were tight. Be careful. Be targeted. That preferred and munis looked a little expensive, but they hedged credit risk. We then saw a pullback, a balance, and then this pullback. We just recently produced on our system some long-term reporting capabilities for discount and then future other charts. We’ll get into that after this sector.

 I really want people to see that muni bond funds, NAVs and discounts. Discounts widen eighteen percent, but it was NAVs and market price falling too. You look at this, you can turn off the market price and just see the NAV. That’s the lack of liquidity in the muni market. Work by the Federal Reserve today was definitely helpful. These things will get through it. Remember, closed-end funds are not one position, they’re diversified, they’re actively managed.

 We build multi-sector, multi-manager portfolios. We focus generally on the income side, but there’s some growth components. If you don’t need the income, we just reinvest the income. Looking for where we have sustainable dividends, discounts that are more likely to narrow than widen, and net asset value in sectors that we can overweight/underweight.

 As you can see, even high-yield munis moved even more. It’s a little bit smaller of a market, we’re seeing twenty-two percent down on the year. Senior loan funds, again, recovery rates typically eighty percent, eighty cents on the dollar in a recession for every bad position. We’re basically seeing that market lock up as well. These are markets where I would not want to see or personally own an ETF because you have that forced redemption pressure.

 When people are selling like they are now, discounts widen and NAVs, which are marked daily for almost every fund with the fair market value committee, many assets are level 1 assets. There are accounting firms involved in auditing these results. Nothing is perfect, but it’s much better to have a daily NAV reporting vehicle in this market if you’re going to analyze that, than something you wait and not know.

BDCs, which are quarterly NAVs, are currently off fifty percent this year. People say, “What does that pricing mean?” Again, when I talk about closed-end funds, I often like to go back to munis and look at the leverage. There are couple that are not very much levered; NUV and EOT are the least levered liquid funds. Then going into this, these funds here had more leverage. In our weekly data, we have the dollar amounts of leverage in our system and we take the current net assets and we estimate the effective leverage. There were about twenty funds over fifty percent leverage in the system this morning. I do believe some of that leverage has been removed and we’ve not seen the press releases.

 So going back to our data business, we can report on the data that we collect, which is fact cards, SEC filings, press releases, presentations, price NAV and divided files. We can only report what we know, but I can tell you that even though PIMCO doesn’t use only that 40 Act leverage, they have other leverage involved, I can’t prove it yet until after month end is over, but I suspect that a lot of these funds that were showing leverage over thirty-five percent going into this are the ones where there’s either some forced liquidation of assets for leverage or some risk reducing — not forced liquidation, but encouraged a liquidation to maintain the buffer that they have.

 How big of a deal is that? It’s obviously not preferred but it’s way better than an open-end fund wrapper around the guts. We did see that these funds thought about leverage risks during ’08-09, and they thought about leverage for energy sector in ’15-16.

 I want to go back to the BDCs. Remember, closed-end funds are like ninety plus percent retail owned. It is the exact place to experience high volatility but the highest levels of fear. BDCs came into the weekend showing an average nineteen yield and a forty-seven discount, and that’s for the liquid funds. It’s even worse for the funds that aren’t liquid. I can’t tell you what investments are appropriate for you because you’re not my client, but I can tell you quick and dirty ways to think about the data.

 When you see that the yield is lower — I hope that you can see this. I hope you have a big screen like I do. The lower yields, all else equal, is inferred less risk by investors. This current dividend policy by the board of directors, remember every presentation we’ve ever done, dividend policies are policies not promises, they can and will change in both directions. I think there’s a near-term respite for leverage. Cost, they can cushion a little bit of this. But if you weren’t covering your dividend, if you aren’t a good credit manager as a BDC, if you over-leveraged your portfolio, it’s going to be a rougher next sixty to a hundred and eighty days than if you weren’t in that bucket.

I won’t pick out individual names because that’s just challenging to do when I don’t know you guys. But just think about sorting the BDCs, looking for the lower yielding ones as generally safer, and the narrow discounts. The narrowest discount going into the weekend was just sub-twenty discount from TSLX. That is a billion-dollar fund. You had funds like Mainstreet that is down over a hundred percent going from an eighty premium to a twenty-five discount. Yet I think managers like that have the expertise.

Let’s go back and talk about the BDC structure. BDCs only have a quarterly NAV, but they are suited to work through middle market issues with investors. I know I could talk for an hour just on these particular debts, but the debt of BDCs, which is never had a loss on the principal, is off thirty percent this year. You’ve got yield to calls in huge numbers. Everything I’m showing you right now is part of our free resources. Currently you can even see annual results on a monthly and quarterly basis for every sector by clicking previous years.

Going to preferred equity, another area where there’s an area where there’s been a lockup in the market, a big pullback. Again, prices I think you can live with for three years and be happy with and how that’s working. If you were to click on any of the ticker symbols in the system, it loads our profile page.

 I’m showing you the sectors that we’re picking our spots in; utilities, infrastructure, contractual revenue has been our focus. MLP funds have definitely had a hard five plus years. People are wondering, “What are we going to do about that investment?” I’d say last week we’ve already been in generally lower beta, easier dividend policies, medium to lower leverage. Last week we refocused parts of portfolios we wanted to stay in, into lower levered, lower beta, easier dividend policies. Again, like anything else, the quick and dirty method is sort by yield. The lower the yield, the generally safer investors think that dividend is because they’re not requiring really high numbers.

If you’re currently an owner in the funds in the bottom tier of this list, the market at least is telling you they’re expecting a dividend cut, but we’re seeing discounts of thirty-five plus. Dividends can be cut, and you can still get through this. Our models right now are for eighty to eighty-five percent of diversified income through the next two years based on a negative twenty-five GDP next quarter, based on a twenty-to twenty-five percent unemployment rate, based on this being a really bad market. Those are our internal models and metrics.

 There is a chance with so much pessimism in the market that any good news could turn this quickly. It could end up being an eighteen into nineteen. It could be a fifteen to sixteen. Definitely a more significant event. But I think that you have a lot of shareholders that are washed out and if you want to tap into the inefficiency of the markets, closed-end funds are perfect.

 I am watching the time. REITs are another area where I think active managers can position their way through the current environment. This is the largest muni bond fund. I usually like to use muni bond funds to talk about closed-end fund structure because it’s very simple. It’s a bucket of assets; NET assets. There’s leverage in most cases. There’s an active manager. They invest in things that produce income and it pays out distributions.

 I don’t see any near-term issues for muni bond distributions at the sector level. I would say that I would be thoughtful later. If rates start to go up again, I think we’ll all be okay with that, that means things are healthier. But replacement bonds will delay that and there will be some challenges in having dividends maintained there. Maintained is preferred. That’s the working goal of our firm for our clients. But I think it’s balancing the fact we’re happy to be active and tactical. We are digging through the NAV data that we get. We have data updates intraday in our system, and those are by, have access to daily data as well as other news and other resources you’ll see in a minute.

 I could spend an entire hour talking about just the BDC structure. There are some free coverage, and we think worthwhile paid resources if you want to be in these waters, with two people that we know but we’re not affiliated with; don’t make a dollar if you give them your money. They are doing their best wading through this. But BDC Reporter spoke at our conference in November, he’s based in L.A. These are his free articles. You can do a trial for his premium service. There is a lot of granular information going on there if you want to read about the middle market loan market. Useful. He also put us in touch with Direct Lending Deals, which doesn’t have an easy webpage to show you, but Kelly spoke at our conference about that market. Useful.

 Another person we’ve not met personally but have used for consulting products in the past, BDC BUZZ. He has a Seeking Alpha environment platform as well as his website. Again, there is some light free, but worth digging in if you’re going to be in this space. This is Kelly’s website, Direct Lending,, covering the credit markets.

 I then want to remind people that the Active Investment Company Alliance has a weekly podcast with our wonderful host, Chuck Jaffe. We covered BDCs last weekend. I covered discounts two weeks ago. We had Ares on. Meant to be a collective place for users, creators, service providers, the ecosystem, to have their space. If you think you’ve got a good topic, we love it when member organizations are on the podcast, but we don’t limit it to that. We’re looking for the best content and the best speakers we can find in the ecosystem. We’ve recorded about thirty of these podcasts since last fall. The last piece, it’s a different market than last fall, but we put all of our content on this website here, on the AICA website for the conference.

With that I’m going to switch now to our summary charts. If you’re a Data client, you’re familiar with this. They’ve been producing this thing since — gosh, with a partner since May of 2008. We go back that far. This is every week the number of ticker symbols in our universe; five hundred and twenty-four. Two hundred and twenty-two billion dollars in AUM, definitely down from its high. Discounts used to be all over the map about three months ago, they’re really in a relatively similar band here.

 I like this chart here because there’s no only one data point that’s important. Leverages, NAV yield, backs out discounts or premiums and leverages. What does a manager have to perform to hit the rate? U.S. equity funds are coming in, no leverage generally, nine and high change. Taxable bond funds, nine and change with the net asset value moves it doesn’t seem crazy. Muni bond funds, four. Three and change to produce these yields that are now over five for the whole sector. This is the perfect analysis of what’s going on. BDCs at the fundamental portfolio level, the managers work has to blend to just about six and change percent to fuel these yields. Does that mean that every dividend is safe? Absolutely not. I think you’ve got to go with quality, and I think you’ve got to be willing to rotate.

 These are absolute discount charts for some of the bigger sectors of funds breeching these levels here in ’15-16. This chart, we don’t have data rights for this data’s pricing. This is before 2012 easily because we switched over to self-sourcing then. But looking at relative discounts, relative discount is another really, really useful topic I think you need to understand. Current discount versus ninety-day average, it’s a discount momentum, we saw things moving down. In peer groups of a hundred funds moving down on average six percent.

 To me while your brokerage statements if you’re in closed-end funds looks scary and fearful, this is the stuff that should give you a sense of relief because this is not manager money going away, this is not dividends being reduced. This is sentiment going fearful, fearful, fearful. This should make people more comfortable and a little bit greedy. It doesn’t mean this is the bottom. We never know where the bottoms are or the tops, that’s not the nature of how we see capital markets. But muni bond funds going to a five-relative discount for a hundred and fifty ticker universe, these are the things that tell me oversold.

 Now I remember meeting clients over the phone and in person clients in ’08 and ’09, I remember one client in particular in February of ’09, we’re sitting in his office in California with my father, because I was still very early in my career, and trying to make a sense of the markets and going, “God, what can happen next?” We didn’t know it, but that was three weeks from the bottom. It turned around and we had the longest bull market ever.

 Going back to where do we see performance and dividends? I think the prices we’re seeing are like every bucket of funds loses sixty to eighty percent of their yield. Again, bucket of funds, I don’t see that happening. We’re seeing high yield in loans from the managers that we know in the space being priced seventy and change cents on the dollar, levels we just have not seen before.

 Going to the asset allocation piece, where do we like our money? We do like to never be in one sector because sectors are sectors, no sector is perfect. Preferred, utilities, REITs, munis, senior loan funds, the top ten to fifteen percent of BDC managers, and this is on a credit quality. Fairness to shareholder and historical results are where you want to be. We also like managers that can wander and be active because that’s the point of active management.

 They say when things go bad correlations go to one. This is a cool chart. We have this data available as a ticker symbol level in our system. But again, let’s just look here at the purple chart. This is muni bonds. Again, it was very retail owned obviously. This is a correlation of a fund’s market price to it’s net asset value over a ninety day rolling period. The metric we came up with to help sense how much is the current movement going with or against net asset value. It rarely gets above ninety. We are there. It sometimes drops to twenty. I think those are really useful things. When discounts are wide, correlations are up, it’s often the bottom. It doesn’t mean it’s volatility free, but it’s where the bottom can be formed. And even earnings coverage is looking solid for many of these sectors.

 These are charts that are just produced as part of our piece. I wanted to share some of the newest charts then I’m going to dig into all the questions that you guys offered. The new system that just came out, it takes a minute to load, it will show up. I just asked our team to program it last month in February, we got the first look at it last week. We’ve been working on it. This is a ten-year. We can go back, the challenge is as you might imagine, it’s a lot of data and a lot of funds. I’s going a little slower than I’d like. We are working on some ways to improve the speed.

 This is where muni funds ended Friday, a seven discount. The day before, they moved twelve percent in a day. That’s the type of day that we had on Friday, and we can see going forward. The average in the last ten years, as you can see here, is a 3.1 discount. You can see the peaks and valleys. Taxable bond funds, it’s a different chart but a similar sentiment. We ended the week at 13.6, but we’re at a twenty-five discount for taxable bond funds. Loan funds, the subsector of that that I think are really, really generally more secure than high-yield and others, a thirty discount. Because the guts are illiquid on that Thursday and bounced up on Friday to a 17.5. Still very, very, very wide. This is sector equity funds.

 Again, every graph is basically the same. There’s peaks and valleys, but there’s new rules being written. Even the most liquid underlying investments, U.S. Equity funds are very boring at twenty-two discount and then rallied six percent on Friday, last saw this in ’16 at an eighteen percent.

 Here is a three-year for the whole universe. Friday matched the low of Christmas season of 2018. This was a twenty-year chart for all the funds, this was run on the 18th. But just to see, we’re really here and this is only monthly at the time, we added daily since. It was at a fifteen discount and that’s where we were. That’s how wide these discounts are.

 Let’s close that out. This is the average for the year discounts. This is on our main website, Investor Resources, we do update this chart quarterly. Again, we update it in April. I’m going to first jump into the live questions, then I’m going to dig into the hundred and seventy-five questions you guys emailed me. We obviously have a lot of redundant ones here, but let’s see.

 Question 1: When do we know that leveraged in MLPs may be in a death spiral? Can you explain the leverage rules in detail? Robert, I would say I’m not a 40 Act attorney, but I’ll tell you how I understand the 40 Act as a non-attorney and someone that’s listened to attorneys, and sponsors, and analysts, and investors.

 There are two types of leverage. There’s portfolio leverage like derivatives, and TOBs, and things of that nature, then there’s structural leverage. The actual closed-end fund structure is the ability to offer preferred stock. That was originally the regular leverage used. Still common in many areas and there’s different versions of it since the financial crisis and even since. Again, leverages can be a little bit different in how it’s structured for munis versus taxable because of the dividend needed to be tax-free for munis and whatnot. But you can’t breach, generally speaking, at fifty percent. If you have a dollar fifty of investments, you have to have that dollar of net assets for that structural leverage.

 Now let’s go back to MLP funds. MLP funds I still think are a fascinating investment. I’m glad that we have not been an only MLP manager, I have friends that are and I’m just glad I’m not in their seat right now. There’s a smaller pool of underlying positions for MLP funds. They are retail, they can be liquid but they’re not like stocks on the S&P 500, not that type of liquidity. Then there’s only really forty really regular liquid ones.

I believe the first press release we saw was from Goldman deleveraging the portfolio and then they became a forced seller of their assets, it then turned NAVs down and hurt other coverage levels. The simple way, without having access to our data or doing your own work, is to sort those funds by leverage. On our website the indices page is probably a public place to do it. The fund screener on, you can sort by sector and leverage. CEF Connect has some data. The Closed-End Fund Association has some data from Lipper. But our spreadsheet, again, we have daily exports available for those that need that granularity, our weekly is the most common view. We both have individual investors that buy lower price point and hedge funds and larger groups that obviously pay more.

 Sorting by that number can help identify, the quick and dirty approach, Robert. But when it happens, its a forced sell-down and it actually creates a lot of challenges. We did some rotating during that and feel like it’s pricing will be okay three years from now, but that doesn’t mean we’re going to hold everything for three years. We do take tax losses as part of our total return commitment to our clients in taxable accounts, which are generally where MLP funds are held. Then we also are willing to look for excess upside and relief rallies through this. Hopefully that’s helpful.

 The phoneline is jammed. Okay, I just saw that. I should have watched the notes earlier. Hopefully it’s better now, but hopefully it’s on the replay. I’m on a landline, which hopefully keeps recording high-quality, but thank you Eric for that note half an hour ago.

 Where else do we see deleveraging issues? I’d say I haven’t seen the press releases. My guess, and it’s not just them, in our thoughts and opinions on PIMCO, great credit manager, good brand name. They tend to use a lot of leverage. they tend to do good hedging, they tend to use diversified leverage in their portfolios if you dig in. But we saw such big movements that when you are a PIMCO muni fund at a forty to forty-three percent leverage ratio, and you had a BlackRock or Nuveen sitting there at thirty-three to thirty-seven, you can imagine who was more comfortable in the last two weeks with their assets. Doesn’t mean it can’t happen in the other environments, but that’s a place we’ve seen it.

 David, you had a question about how the CEF wrapper is supposed to help managers through a liquidity crisis, not having to redeem. Yes. Is that holding up to its period for bond and muni predictors? Like I said, this is the best structure to be in right now. I think that no structure is perfect.

 I’ll tell you how we run our portfolios. For BDCs, they tend to be one to three percent, and three is relatively high, two, two and a half is more common. For traditional funds, two to six percent. We typically have currently forty-two or forty-three positions in a portfolio. Sometimes when a portfolio is taxable and an IRA, we might be in fifty positions in a combined block of money that we’re managing. We tend to think about risk by sector level and fund sponsor level, and also when dividends are likely to be announced. What I loved about closed-end funds is we’re allowed to be diversified and to take positions and review normal. Everyone in this space that I’ve talked to has a had a rough month and they’ve lost money, but we’ve got to pick our spots.

 Ron, you left. People on the phone line. We’re still high attendance, so hopefully everyone can hear me. I’m going to make sure the overview — I’ll do a summary at the end. Let me just go through some of these questions because there were some good ones. I’ve covered a lot of it in my prepared remarks for this.

Is there a risk of MLP funds going bankrupt? No closed-end fund has ever gone bankrupt. No BDC debt has ever gone unpaid. I would say that this market is a healthcare issue that has scared everyone and forced us to shut down the global economy. Where I see this as good is, number one, once we can find a way to solve this problem, it can recover faster. And we did this to save lives and the fixed capital structure of the closed-end fund does help. Like I said, nothing’s perfect. The discounts we’ve seen in ETFs have been dramatic and that’s an open-end structure.

 Oh, I totally forgot. Second question here. Last week, despite all the other issues of MLPs, and energy, and equity markets, and everything, there were two 2x levered ETNs. I’m not going to go into the difference between an ETN and an ETF. I will just say that I’ve never liked ETN structure because it’s not actually holding investments.

One was in the BDC space; BDCL. One was in the closed-end fund space; CEFL. They had rules in their prospectus that if they dropped below five dollars a share, or I believe negative eighty percent, they had a forced redemption. BDCL, I believe redeemed on Tuesday, and CEFL redeemed on Wednesday. Forced selling in a sector that already was having forced selling pressures.

 I would say going back to the portfolio construction, stay diversified, stay active. If you’re an income investor, the yields are immense, and even with twenty percent haircuts, it’s still a lot of cashflow that can survive the future, in my opinion, better than the open-end fund ETF wrapper.

 Accurate NAVs in meltdown? For daily liquid closed-end funds, generally level 1 assets, I have high confidence in their net asset values. Again, I always say like with anything, any data point that feels crazy weird, double check with the fund sponsor. We did have a handful of net asset values that had to be updated two weeks ago, and even I think two or three last week in our system when I got that intraday alert. That does happen. Generally, ninety five percent confidence these things are going well. Look at pure NAV movements, especially the sister fund, same sponsor, great way to double check that. Or look at BlackRock versus Nuveen, or this versus that, and get a sense of what’s happening in the market.

Are closed-end funds forced to sell assets, bank covenants? Not from bank covenants, it’s the 40 Act that causes the forced selloff, which we have covered.

 Someone says they’re about to be sixty-five in April, should they weather the storm or cash out? I don’t know how far we can go. We’ve probably gone eighty percent to the downside of the financial crisis on the discounts and the market price total return, and we’ve seen more locking up of net asset values and the pricing of the portfolio. I think that as long as you stay diversified, stay active, and understand the fear you feel in this situation is often positive. Because other people feel that fear and when there’s no one left to sell, things can recover. But also know that we could have some positive news in two weeks, or in two months, or in the fall.

 I think the longer that goes, the harder it is. But remember the active managers are going to be doing their job along the way. I’ve never found someone able to call tops and bottoms. If you can, good luck to you. I would say as long as you’re staying diversified, you’re not margining your portfolio, you are not a forced seller of your own assets. These are the things that keep us, our guideposts for our management of our clients.

 Where do we like bargain hunting in this environment? I’ll say that, like I said earlier, preferred equity funds, and muni, and multi-sector bond fund managers that we know what they’re doing, as long as you have a handle on the leverage piece, great places to shop. Fixed income tends to bounce back way faster than the equity funds. Because there’s a floor, the income payments coming in.

I see a new question, doing live questions in addition. Rakesh has asked about what has happened to the PIMCO funds. I’ll know more later, and I have a call-in to them to learn more, and I’ll try to follow up more with this presentation going around the world. I do believe it was some pre-emptive selling and probably some forced selling, but I won’t know until I read a press release or get a monthly update from the fund sponsor.

 Underexposure risks for BDCs? I’d say if you are a manager, there’s a lot of BDCs that actually have wiggle room cash and buffer on their balance sheets, and capacity to buy back their debt if they need to, to work out deals with portfolio companies that they choose to. I think it’s fair to say that in an average year nonaccrual are two percent, they were turning one and a half percent going into this quarter. If we saw a five to ten percent in nonaccruals, it wouldn’t be the end of the world. The thing to me is BDCs are priced like a fifty to seventy percent nonaccrual, which nonaccrual in BDC land is a portfolio company not paying on its loan commitments.

 I would say that a quality BDC is one of the best structures to work through the uncertainty of this environment, but I would say sifting to top tier and high-quality. And those that handle the structure of the BDC historically better, are better places to ride this out. There’s also not a very liquid fund, but there’s a closed-end fund of mostly BDCs; FGB. It’s fees on fees and leverage on leverage, but also discount on discount. It’s an active fund, so I think it navigates these waters better than the ETF that’s currently in the space.

 Michael has asked a question about how much the average monthly dividends dropped by. I wish the answers were perfect, but I’d say it’s going to be sector and fund sponsor specific. It could go back down. If you try to think about this logically, look at the leverage levels and lean into lower leverage. Great way to stay invested and be more comfortable as an investor. Again, you can get this information on a profile page for free off our website or you can do the math yourself if you want. But leverages and NAV yield to me is a very good way to sort sectors and understand the current dividend policy and how easy or hard it is.

 What that means is, if you were to sort a group of funds from leverages to NAV yield and the lowest number was five and the highest number was ten, what that means is that the one at five, the manger has to economically return five to fuel a dividend. If it’s ten, the manager has to return ten. Some people have felt that the higher number there was a favorable number. The higher number there means the manager has to produce more return to fuel the policy set by the board.

 If you were going to navigate this storm on your own, I would overweight the sectors I mentioned. I would do the lower half, the lower third by leverage amounts that’s publicly available. You can get intramonth updates to our system or do the work yourself if you like. All the data we work is public information, we just organize it and have organized it for a long, long time.

 Where do I worry about dividends? I’d say MLP funds that haven’t cut. We stepped into a deep cut that we think can ride out as a slice of a portfolio, very thin slice. Equity funds. Equity funds generally pay out long-term performance in their distributions, so imagine where would we want to be there? It’s going to be bumpy and there are going to be dividend changes in equity funds because net asset values are down and that’s what fuels their dividends. Imagine –* and I’ll give you an example, an average equity closed-end fund goes from a ten-dollar NAV to a $7.50, there’s twenty-five percent less stuff to produce the distribution. If they don’t cut the distribution, that NAV will drop to five. Can’t guarantee it, but that’s what we’ve seen in ’08-09.

 The market’s pricing, like these dividends are being cut eighty percent. I think, like I said earlier, we’re modelling fifteen percent cuts for our portfolios. Average fund I’d say easily twenty percent cut for the average closed-end fund in the next year. But there will be sectors that are hit worse and sponsors that get hit worse. Another question?

 Thank you, Steve. I’m going to dig into some more questions. Again, I’ll tell you we did want to cover discounts crazy wide. Leverage cheap, useful, but watch the upper limits. Dividends, I think I’ve covered that in the piece.

 There was a question about collateralized loan obligation funds, so CLO funds. There are funds like ECC, OXLC, that are monthly or quarterly NAV, generally more on the equity side of CLO. Then there’s funds like XFLT that has a daily NAV and more commonly shifted towards the debt side of CLOs. Then there are funds like ARDC run by Ares, which it can be overweight, but a piece of CLO in the portfolio based on their outlook and where value is.

 I would say that you’re going to see a bumpier ride in ECC and OXLC because they actually act more like a BDC, because they have monthly and quarterly NAVs and similar updates. I don’t think dividends will be suspended for those structures, that’s an opinion and a calculated guess. But I think NAVs are going to be around a lot, and distributions, some change more often than the others. I think you need to, like I said, just pick your spots, be willing to sell on rebound, and reallocate into carnage.

 Closed-end fund risks versus overall stock market risks? This one I can say is less, because it’s over half bond investments. Again, like I said, this is a five hundred ticker symbol universe, 525 if you include the BDC sector. Then there’s even non-listed fund structures that could be of interest if you don’t mind not getting out quickly but having less volatility. These things, a lot of them are parts — senior loans, high recovery rates, where I want to be, preferred equity, more stable, higher on the capital structure than regular equity. Doesn’t mean you avoid equity. Equity is a hedge against inflation and is a bet on economies. REITs, utilities, contractual cashflow, I think that’s where it needs to be.

 Then when you do the work — I couldn’t imagine buying a fixed-income ETF, especially a global fixed-income. You really need human capital to navigate through this. We’re getting close to where I think we’d like to end it. If you’re on the phone and you have a specific question, I’m going to keep looking through this.

Does it mean I think about premiums in the next year? Probably not. This is a lot of pain. This is a whole lot of pain. I think that pain is going to build the base of where NAVs can stabilize as that market gets more liquidity, and discounts can come back towards normal levels. But I would look at it like we did ’08-09 into the future years. We saw a slow narrowing of discounts over time as things healed.

 I organized this by first word in people’s things. I guess I’ll go back to MLPs. One last thing, there’s one more thing that’s useful for MLP funds. Again, it no longer is really available, but going into these issues, differed tax liabilities or DTLs would cushion the NAV falls for funds that have it. Then there are some funds that have a lower beta. We use two-year weekly NAV beta in our beta calculations. If you have the pricing data, you can run those calcs yourself or you can get our data. Lower beta, lower leverage, lower leverages to NAV yield are the types of funds I’d be searching for. It’s what we’re doing for our clients. Not what I would be, what we are doing.

 Where will we be in the next six months? I think we have a lot of people working on a really hard problem, and in the past, we’ve solved hard problems. I think the pricing is like we don’t solve these hard problems, and that we live in caves and no longer can ever go to the office again. I don’t know how bad the economy will get. It will be bad. Unemployment will be hard, and governments will have to step in globally. But the reading I’ve done, and this is digesting other people’s work, is that we’ve been through rough periods and countries are more collectively working together on problems.

ETF discounts and its implications for the closed-end fund industry? Exactly. As I said earlier, five to ten discounts with an ETF wrapper, just reminds you with a redemption mechanism in place, how insanely volatile the market is for everything.

 Expectations for NAV recovery? There are sectors I’m more comfortable owning as I’ve said, and those NAVs can recover faster. I think if you avoid being focused in one sector, one sponsor, if you’re thoughtful on leverage limits, it’s the same message. We have always suggested people keep six months cash on hand, so if that they want to, they don’t have to pull money from the portfolio if they choose. We also say some people that are currently not yet retired, if it makes them feel better, we’ll pay you out the cash distribution being produced by your portfolio.

 If you can avoid panic selling, whatever that takes, the worst thing you can do is the forced sell to pay yourself or to sell because you can’t handle the pressure. I know the pressure is immense out there. I’m truly sorry for how many people are not sleeping well, but we can get through this. I tell you; this is the right structure to do it. It may not feel so in this moment, but the rear-view mirror will look a lot better down the road.

 Good question. Does it make sense with not a lot of cash on hand to sell riskier positions to buy higher quality? I like to sell on green days and buy on red days. Now that doesn’t mean I always follow my rules. That’s why I’m a human, I’m allowed to break my rules. But I like to think about it. Things seem like they can handle this and it’s just silly selling pressure that’s emotional, I don’t want to be the next emotional seller. I don’t care what I paid for anything. Obviously, we can capture losses and it’s better for taxes if we can avoid deferred gains, it helps for taxes. But I don’t care for up or down ten percent. If I like something, I buy it. If I dislike something, I sell it. That has always been our approach.

High yield preferred, I would say. Every credits different. Like I said, we’re not a credit analyzer, that’s why I’m glad the managers in the preferred equity space, all the sponsors there have good expertise and can handle this storm in my opinion.

 How does a closed-end fund fare in this environment versus a mutual fund? Again, the thing to focus on, while mutual funds don’t have price volatility, if you look back to what the internet stock funds did in 2001, the locking in bad performance and forcing to buy into a very high market. If you look what happened to energy funds in ’15-16, again forced. I don’t like to be a forced seller as the investor or have the managers be forced sellers or forced buyers. I liked managers that choose to buy and sell, and portfolio constructors like myself or yourself, to choose and buy and sell. Like I said, I’ll stay on because we still have eighty percent who logged in still on the line.

 How do you avoid getting badly hurt in a leveraged closed-end fund when the market goes down ten percent in one day, or keep going? We saw thousand point moves in the Dow for last almost two weeks straight, how do you avoid getting hurt? I think I’ve already said it, I’ll keep saying it. We were planning for a recession for the future in January, in December two years ago. In my head I’ve been thinking this is not what we expected, but it’s never what you expect. We’ve been thinking about, where can we stay diversified? Where can there be places to make money on the downside? I think that there are people that were only buying the highest yielding, disregard to discounts, disregard to leverage, disregard to logic. Sadly, those people’s pain drives medium term NAV pullbacks, and generally short-term discount widening. Coming through that is really what the benefit can be.

 As I said earlier, for those that remember the financial crisis, the discounts were wider on Thursday morning than they ever got any single day of October of ’08. There were twenty-five discounts for muni bond funds selectively in November of ’08, I remember buying them for myself and other younger clients in Roth IRA. I think if you think of that sentiment, there was some of that same sentiment for the past.

 How to analyze a closed-end fund beyond net investment income and distribution rates? How do you identify a strong closed-end fund? I would say that strong closed-end funds are those where you have a faith, you like the sector, you like the manager, you’re not worried about leverage. As an income investor, you don’t have to be worried about the price movement of your investment. What you have to be worried about is the direction of your income. Now there’s other managers in the space, like Rob Shaker, a pure quantitative discount capture guy. Yield is secondary, not part of his process. He tends to trade very actively in periods like this. We have accounts with him, so I can watch his stuff daily. Very active in that work. It tends to bounce back very well, but the yield is the happenstance. I would say that can handle this.

 I would say, as you build your portfolio or as you re-think your current portfolio, being in that thirty to fifty ticker position. We just launched Series 18 of our UIT of BDCs, and for the first time ever we had I believe fourteen ticker symbols in there. We years ago, only had ten, then we realized with the UITs — if you’re not familiar with it, they are passively held for an expected twenty-four months (in our product). I go, “We’re getting closer to a recession. Let’s keep up with quality, but let’s try to reduce any one thing sinking our battleship per se.”

 IPO market? Yes, there was a very full calendar and it’ll be curious to see whether those funds come to market. Newer IPOs are generally a twelve-year term. So if you like a sector and a manager, and the discount is fifteen plus and it’s a twelve-year term, again you may sell later, but you know at least discounts will converge in the future. The new structure will have a shareholder vote generally in the twelfth year to liquidate. If enough people want to stay, it becomes a perpetual, more traditional closed-end fund.

 I think that it’s going to be a third of what we saw in the calendar, some funds will get out the door. I believe there’s a RiverNorth muni fund closing on Thursday. I would say it would probably be hard for investors to allocate to that. It is a very good time to have an opportunistic buyer like RiverNorth be picking investments. They are large but they have a lot of experience here. We’ve known them — gosh, I met Patrick Galley at a TD Ameritrade conference in February of ’09. We talked for a couple of hours and have known each other since.

I would say know what you’re owning and why you want to own it, but I think the new structure will definitely help because net asset buy is anchored and there’s no load paid by investors or whatnot.

 Is it likely dividends will stop? Again, I can’t speak for the future, but like I said, if you’re in five funds and two sponsors in three sectors, the lower number of sponsors and sectors in funds you’re in, the more concerned I would be unless you picked well. And it’s hard.

 Is this an opportunity for buying bond closed-end funds? I would like to say in the next period of time, ideally between a week and two months, this will bottom out in my opinion and guess. The clients I have that were buying those bond funds in ’08 and early ’09 were still bragging about them ten years later. I think we’ll get there.

 Are BDCs going to provide capital to portfolio companies in financial distress? That is part of their goal. Here’s what I like about the BDC structure. They don’t have to, they choose to. They can save the companies that they want to salvage. They can write off the companies that they need to write off. It’s not going to be a one-size fits all by holding and by BDC.

 Leverage in this market condition? Leverage is so cheap; it has never been more useful in a closed-end fund structure than we’re seeing. Today is the best time, right now, to have prudent use of leverage in a closed-end fund. You can mark this day, March 23rd, the day before my nephew’s birthday, 2020 is one of the best times to ever be in a levered closed-end fund as long as it’s prudent use of leverage. Prudence is important in all management of assets in my opinion.

 Okay, how can I talk about different types of leverage? There’s a lot of different types of leverage. I know on the Nuveen website, and I’m going to take a note, they’ve done a very good job historically of leverage. I will find their leverage material, touch base with our contacts there, and with their permission, I hope they’ll say yes. They’re members of AICA, glad to have them on board. We’ll get that out to you.

Two types — structural leverage, portfolio leverage; 40 Act leverage, non-40 Act leverage. Munis, I think are very, very, very attractive now. I was on a Nuveen call and I expect that some of these will have trouble paying some of their debt clear, but muni funds are the most diversified investments I see, so I’m less worried about them.

 One person says my impression is that the quality within most BDCs is so poor that they’re untouchable in a period of economic stress. I think one thing that I think benefits us as secondary buyers of closed-end funds and BDCs is that people believe that. People blanket sectors and even sponsors and structures with one color of paint, and to me it’s much more diverse than that. I’ll say what we told the advisors we worked with for our BDC product. If you’re having trouble getting quality performing business out of your portfolio in 2019, then I don’t want to be your common stock shareholder when we actually have a problem. And by the way, we actually have a problem. This is a significant problem, not one to bring light to, but one that I know good BDCs can work through.

BDCs are typically an asset class where five, to ten, eleven are high income modeled, they do provide higher income. Was higher in that level, twelve, thirteen percent. The average, there’s twelve major sectors, that’s eight and a half roughly, eight and a third per each sector. Eight and change in our universe is an equal weight. We’re on either side of that for all of our sectors that we focus on.

 How can custodians assist closed-end funds? I think so. What we need is the ability to connect our trading resources to a custodian, we need the ability to export to our data systems, we need the ability to use a block trade desk, step-out trading. I don’t need personally, I don’t care for other people’s research, and stars, and diamonds, and bars, and numbers. We do our own research like a lot of you guys do; I just need a good custodian that deals with paperwork issues. One that makes my clients happy, my team happy, and allows me to trade as much as I choose to, as efficiently as possible, with as good of execution as possible. Which I think is the most important thing.

 I don’t see any that I highlighted that I wasn’t sure I’d cover. Larry has asked me — I do accept questions on ticker symbols, I just tell you they’re hard to answer because I don’t know you Larry. But Larry has asked me, “Is ARCC the best managed BDC? And what do you think about it?” I’ll tell you what I know about it. Ares is a very large credit platform that made it through the great recession. They are a more diversified BDC than others, so any one position has less weight on its overall portfolio. There’s a lot of human capital on that platform that can do well for it.

 That’s not to say that smaller BDCs can’t also be amazing during this issue. There’s some very good smaller BDCs that know where to be in their lane. That is one that it would be hard for me to think three years from now not to be happy owning that one with the information that I have now. Not knowing the future, I could be wrong, and I don’t know your situation so I can’t give you advice Larry. But I think in this environment, when some BDCs are trading ten to twenty cents on the dollar, I may not bottom fish, but I’d definitely look for dislocations that are significant and where liquidity is not going to be an issue.

 NAV spreads? NAV spreads and trade spreads are next to each other here. I think that trading closed-end funds, we saw a lot of wide spreads in the last week when we were doing some positioning. There are times where we don’t like that, and we wait until we get the better pricing. Then there are times that we decide that five cents of spread to be out of a position that we just want out of. Again, not forced seller, but with an open bid or good-till cancel, or not held, or limit can get there.

 Z scores? That’s basically volatility adjusted discount versus average discounts. Like the relative discounts numbers as wide as we’ve ever seen in my career. My daughter is nine years old and when I was nine years old it was 1987. Which felt like a bad day at the time, but the market was up that year, that was purely structural. I’d say in the way we interpret this event; it is fundamental and a real problem that we have to address. But again, because of the closed-end funded-ness of the portfolio, we both are seeing wide discounts, NAV inefficiency. As long as the manager is not forcing to sell, as long as you’re not forcing to sell, if you’re in a diversified quality portfolio, then that’s something I think you can get through.

 As we work, right now we’re very busy as you can imagine with reading, communicating with our clients, trading our portfolios. When that settles down, we do expect to offer maybe some consulting spots a couple times a week for people that aren’t our client but need a checkup as an opportunity for those that still like to be at the helm. We’ve done that in the past before, but I think there’s a greater need for that.

 We are working on a schedule of webinars through the Active Investment Company Alliance with both our members and just people in the sector, because it is meant for everyone to be a united voice. If you have strong opinions to be involved in that, please let us know. We’d be entertained to have content as well as a seat at the table. Whether it’s a product manager, people like me that build things of closed-end funds, analysts, a fund sponsor, someone in the sector, a service provider. If you’ve got a good story or good research, if you’re a professor, we want to hear about it. Go to and let us know.

 That’s just about it. I will say I think some people writing in here that wanted to alleviate some comedy into the presentation with what they wrote in their question. If I’ve missed something, email, and we’ll organize it and get it out to you. Again, as I’ve said at the start of this call, we’re going to wind this down now because we’ve been going on for seventy minutes. We will transcribe this. This has been recorded. Like I said, I don’t know the future. These are my opinions. I do represent Closed-End Fund Advisors and the work we do for our data clients, our separate account clients, our investors with our UIT of BDCs with Smart Trust up in New Jersey. We would be happy to do more granular conversations with you if you’d like.

 If you’re a client, you hopefully got the email last week with my cellphone number, most of you already had it. Feel free to text, call, or email anytime if you are a client. If you’re not a client, then please email first and we’ll answer as we can.

 With that, I do thank you for logging in today. This is a week and a period that I’ve told my daughter will be a marking of time we will never forget. So with that, I’d just like to say God bless, be well, be safe, and we will get through this together. Expect not quite as thorough as this, but regular updates from us to keep this sane and rational. Thank you for your time. Goodbye.


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.

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