Top 10 Popular Taxable Investment Grade Bond Closed End Funds CEF

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Introduction

If you read my previous articles about Closed End Funds and Municipal Bond CEF, this article will be all about Investment Grade Bond Closed End Funds. Closed end fund are bought and sold in quantity, and some never seem to trade for what their investment real value or net asset value (NAV). This is why some traders will trade close end funds. I myself have bought and sold CEFs, I also think CEF is much more open in term of investment holding than mutual funds. Any investor or trader can check the Net Asset Value (NAV) at end of the day and compare the NAV to market value price. CEFs are similar to mutual funds; they also can be categorized into 2 main classes such as Equity Closed End Funds (stock CEF) and Fixed Income Closed End Funds (bond CEF). In this article, I will get into details about Fixed Income CEF or Bond CEF especially Investment Grade Bond CEF.

Bond CEF can be classified into two main categories such as taxable bond CEF and non taxable bond CEF. Taxable bond CEF can consist of short term bond, intermediate term bond, and long term bond CEF. Taxable bond fund income will be taxable in Federal tax and state tax. Depend on various States; some states may not have any income tax etc. One part of the taxable bond is Investment Grade bond. The term investment grade means most of the bonds in the fund have relatively low risk of default and have BBB credit rating or higher (AAA, AA, A, and BBB). The other bond CEFs are non taxable bond CEF or municipal bond cef.

Top 10 Popular Taxable Investment Grade Bond CEF

For the Top 10 Popular Taxable Investment Grade Bond Closed End Funds, I use the following criteria. The first one is by looking at the high yield or distribution rate of these funds. Please note, some of the fund distribution may include Return of Capital (ROC). The dividend is mostly paid monthly. Another criterion is the fund net asset value is more than 100 millions. This asset value is very important for liquidity (i.e. easily to trade). Also, the fund may be traded at slightly premium or discount from its net asset value (NAV). Finally, the expense ratio is reasonable, not higher than 3%. The data are compiled from cefa, cefconnect and closed-endfunds website. Please note: Some of the fund may leverage their asset to earn higher income or distribution.

The following is the Top 10 Taxable Investment Grade Bond Closed End Funds:

  1. Western Asset Premier Bond
  2. EV Limited Duration Income
  3. Federated Enhanced Treasury Income
  4. JH Income Securities
  5. PIMCO Corporate Opportunity
  6. Franklin Limited Duration Inc
  7. BlackRock Credit Alloc II
  8. Blackrock Credit Allocation IV
  9. MFS Government Markets Income
  10. BlackRock Credit Alloc III

Note: All information is as current as November 13, 2010

WEA Portfolio
WEA Portfolio

1. Western Asset Premier Bond

The Western Asset Premier Bond seeks current income and capital appreciation through investment in corporate, government and mortgage backed investment grade securities. This CEF is part of Western Asset Management offerings. The fund managers are Leech (2002), Walsh (2002), and Mass (2007). The top 3 sectors are Others, Consumer Cyclical and Transportation. The average maturity is 5.88 years. There are 381 bonds in its holding currently. The total expense is 1.40% per year which is high and it currently sells at 8.07% premium from its NAV (Nov 13, 2010).

2. EV Limited Duration Income

The EV Limited Duration Income objective is to seek high current income with capital appreciation through investment in mortgage backed securities, senior secured floating rate loans and non investment grade corporate bonds. This CEF is part of Eaton Vance management offerings. The fund managers are Scott H Page (2003), Michael W Weilheimer (2003) et al. The top 3 sectors are corporate bonds, Senior Loans and mortgage bonds. The average duration is 4.46 years. There are 1018 bonds in its holding currently. The total expense is 2.05% per year (include 1.03% interest expense) and it currently sells at -2.07% discount from its NAV (Nov 13, 2010).

3. Federated Enhanced Treasury Income

The Federated Enhanced Treasury Income fund seeks to provide current income, with total return as a secondary objective through investment in U.S. Treasury Securities and U.S. Government Agency Securities. This CEF is sponsored by Federated Advisers. This CEF was launched recently in 2010. The fund manager is Donald T. Ellenberger since 2010. The top 2 sectors are US Treasuries bonds, and other general bonds. The current total portfolio asset is 173 million as of October 2010. There are less than 20 bonds in its holding currently. There is not enough information for expense ratio and leverage asset at this time. It currently sells at -3.55% discount from its NAV (Nov 13, 2010). Also majority of the distribution is considered ROC (i.e. about 87.5% of distribution is ROC).

4. John Hancock Income Securities Trust

The John Hancock Income Securities Trust seeks high current income through investment in corporate and government debt securities. This CEF is part of John Hancock Advisers offerings. The fund managers are Barry H Evans (1988), Jeffrey Given (1993) and Howard E Greene (2006). The top 3 sectors are Financials, U.S. Government Agency, and Consumer Discretionary. The average maturity is 7.59 years. There are 385 bonds in its holding currently. The total expense is 2.20% per year include 0.84% interest expense and it currently sells at -0.81% discount from its NAV (Nov 13, 2010). The John Hancock Income Securities pays distribution quarterly instead of monthly like other bond CEFs.

Pimco Corporate Opportunity Overview
Pimco Corporate Opportunity Overview

5. PIMCO Corporate Opportunity

The PIMCO Corporate Opportunity seeks high current income with capital appreciation through investment in corporate debt obligations and other corporate income producing securities. This CEF is sponsored by Allianz Global Investors Fund Management. This CEF was launched in 2002. The fund managers are Bill Gross since 2009 and Mark Kiesel since 2002. The current total portfolio asset is 1.63 billion (1.12 Billion total common asset) as of October 2010. The top 3 sectors are Banks, Non-Captive Consumer Finance, and Insurance Life. The average maturity is 10.35 years. There are 411 bonds in its holding currently. The total expense is 1.29% per year include zero interest expense. It currently sells at 5.03% premium from its NAV (Nov 13, 2010).

6. Franklin Limited Duration Income

The Franklin Limited Duration Income seeks high current income and capital appreciation through investment in high yield corporate bonds, floating rate bank loans and mortgage and other asset backed securities. This CEF is sponsored by Franklin Advisers. This CEF was launched in 2003. The fund is managed by several managers including Roger A. Bayston (2003), Eric G. Takaha (2003) et al. The current total portfolio asset is 465 million (375 million total common asset) as of October 2010. The top 3 sectors are Healthcare Services, Energy, and Chemicals. The average duration is 2 years. There are 369 bonds in its holding currently. The total expense is 1.15% per year include zero interest expense. It currently sells at discount of -6.63% from its NAV (Nov 13, 2010).

7. BlackRock Credit Allocation II

The BlackRock Credit Allocation II seeks current income consistent with capital preservation through investments in credit-related securities and securities with similar economic characteristics. This CEF is sponsored by BlackRock Advisors. This CEF was launched in 2003. The fund is managed by John D. Burger since 2003. The current total portfolio asset is 643 million (467 million total common asset) as of October 2010. The top 3 sectors are corporate bonds, preferred shares and short term debt. There are 170 holdings in its asset. The total expense is 1.40% per year include 0.07% interest expense. It currently sells at -10.66% discount from its NAV (Nov 13, 2010). 

8. Blackrock Credit Allocation IV

The BlackRock Credit Allocation IV seeks current income consistent with capital preservation through investments in credit-related securities and securities with similar economic characteristics. This CEF is sponsored by BlackRock Advisors. This CEF was launched in 2006. The fund is managed by John D. Burger since 2006. The current total portfolio asset is 1.03 billion (736 million total common asset) as of October 2010. The top 3 sectors are Long Term corporate bonds, preferred shares and Government bond. There are 182 holdings in its asset. The total expense is 1.57% per year include 0.34% interest expense. It currently sells at -9.77% discount from its NAV (Nov 13, 2010).

9. MFS Government Markets Income

The MFS Government Markets Income seeks to provide a high level of current income. The Trust will invest at least 65% of its assets in obligations issued by the US government, its agencies or instrumentalities. The trust may also invest 35% of its assets in obligations issued by foreign governments, agencies or instrumentalities. This CEF is sponsored by Massachusetts Financial Services. This CEF was launched in 1987. The fund is managed by Geoffrey L. Schechter since 2006. The current total portfolio asset is 232 million as of October 2010. The top 3 sectors are Mortgage bonds, government bond and treasury bonds. There are 201 holdings in its asset. The total expense is 0.80% per year include zero interest expense. It currently sells at a slight premium of 0.56% from its NAV (Nov 13, 2010).

10. Blackrock Credit Allocation III

The BlackRock Credit Allocation III seeks current income consistent with capital preservation through investments in credit-related securities and securities with similar economic characteristics. This CEF is sponsored by BlackRock Advisors. This CEF was launched in 2007. The fund is managed by John D. Burger since 2007. The current total portfolio asset is 296 million (225 million total common asset) as of October 2010. The top 3 sectors are Long Term corporate bonds, preferred shares and Government bond. There are 173 holdings in its asset. The total expense is 1.64% per year include 0.25% interest expense. It currently sells at -10.31% discount from its NAV (Nov 13, 2010). 

Where and how to buy these CEFs

You will need a brokerage to buy closed end funds (CEFs) such as:

  • Scottrade – You can trade stock, CEF, ETF for $7.00 per trade and there are 3,000 No load & No Transaction Fees (NTF) mutual fund for free and 15,000 mutual funds.
  • Fidelity – You can trade stock as well as CEF for $7.95 per trade. It also offers one stop shop for mutual fund or ETF as well as cash management banking.
  • Schwab - You can trade CEF for $8.95 per trade. It also offers one stop shop for mutual fund or ETF as well as cash management banking.
  • OptionsHouse - You can trade stock, CEF, ETF for $2.95 per trade. It also offers one stop shop for mutual fund or ETF as well as cash management banking.

If you are interested you can check my other online brokerages review for trading stock, cef, etf and mutual funds.

Table Comparison of Taxable Investment Grade CEFs

(click column header to sort results)
No  
Fund Name  
Ticker  
Type  
Distribution Rate  
Market Cap  
Lipper Rating 1-YR  
Effective Leverage  
Baseline Expense  
Premium / Discount  
Closing Price  
NAV  
1
Western Asset Premier Bond
WEA
Investment Grade
8.72%
$177M
4
30.54%
1.40%
8.07%
$15.13
$14.00
2
EV Limited Duration Income
EVV
Limited Duration
8.44%
$1932M
26
29.87%
1.02%
-2.49%
$16.47
$16.89
3
Federated Enhanced Treasury Income
FTT
Government
8.23%
$167M
NR
NA
NA
-3.26%
$17.49
$18.08
4
JH Income Securities
JHS
Investment Grade
7.76%
$174M
23
31.75%
1.38%
0.94%
$15.04
$14.90
5
PIMCO Corporate Opportunity
PTY
Investment Grade
7.75%
$1201M
4
30.79%
1.20%
6.01%
$17.81
$16.80
6
Franklin Limited Duration Inc
FTF
Limited Duration
7.49%
$356M
15
19.33%
1.15%
-5.20%
$13.30
$14.03
7
BlackRock Credit Alloc II
PSY
Multi-Sector
7.34%
$424M
34
27.34%
1.33%
-9.82%
$10.38
$11.51
8
Blackrock Credit Allocation IV
BTZ
Multi-Sector
7.31%
$672M
19
28.82%
1.23%
-9.24%
$12.96
$14.28
9
MFS Government Markets Income
MGF
Multi-Sector
7.25%
$235M
89
 
0.80%
0.69%
$7.26
$7.21
10
BlackRock Credit Alloc III
BPP
Multi-Sector
7.21%
$204M
49
23.71%
1.39%
-9.78%
$11.07
$12.27
11
Transamerica Income Shares
TAI
Investment Grade
7.14%
$143M
30
7.01%
0.71%
-0.13%
$22.70
$22.73
12
BlackRock Credit Allocation I
PSW
Multi-Sector
7.12%
$99M
12
28.08%
1.43%
-9.85%
$9.61
$10.66
13
Rivus Bond Fund
BDF
Investment Grade
6.26%
$159M
41
 
0.85%
-8.75%
$18.36
$20.12
14
Fort Dearborn Income
FDI
Investment Grade
6.25%
$140M
45
 
0.84%
-6.87%
$16.00
$17.18
15
BlackRock Core Bond
BHK
Multi-Sector
6.04%
$360M
38
24.14%
0.95%
-4.03%
$13.32
$13.88
16
BlackRock Income Opportunity
BNA
Multi-Sector
6.01%
$351M
52
28.46%
0.86%
-5.57%
$10.18
$10.78
17
Western Asset Income Fund
PAI
Investment Grade
5.86%
$125M
67
 
0.84%
-5.47%
$13.30
$14.07
18
AllianceBernstein Income Fund
ACG
Government
5.85%
$1994M
93
30.41%
0.69%
-8.98%
$8.21
$9.02
19
Western Asset IG Defined Opp
IGI
Investment Grade
5.84%
$228M
63
 
0.36%
-1.29%
$21.47
$21.75
20
BlackRock Enhanced Gov Fund
EGF
Mortgage Bond
5.82%
$194M
97
 
1.01%
-1.20%
$16.50
$16.70
21
MS Income Securities
ICB
Investment Grade
5.62%
$159M
60
 
0.66%
-4.45%
$17.60
$18.42
22
Invesco VK Bond Fund
VBF
Investment Grade
4.87%
$223M
78
 
0.59%
-3.38%
$19.70
$20.39
23
Montgomery Street Income Secs
MTS
Multi-Sector
4.21%
$168M
56
 
0.76%
-7.97%
$16.16
$17.56
24
Western/Claymore Infl-Lnk Opps
WIW
Government
3.72%
$790M
75
5.23%
0.85%
-5.97%
$12.91
$13.73
25
Western/Claymore Infl-Lnkd Sec
WIA
Government
3.49%
$380M
86
7.78%
0.87%
-4.04%
$13.05
$13.60
26
Western Asset Inflation Manage
IMF
Government
3.39%
$125M
71
11.08%
0.98%
-5.86%
$17.68
$18.78
Table Comparison

Disclosure: I have no affiliation with any of these funds. I also have no position in any of these funds. Please do your own research for additional details. Please trade and invest responsibly. Past Performance is No Guarantee of Future Results.

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Comments 2 comments

LillyGrillzit profile image

LillyGrillzit 6 years ago from The River Valley, Arkansas

Excellent Hub! Very Professional, doing well my Friend! I love the sound financial advice you give! Thank you.


chan0512 profile image

chan0512 6 years ago from Camarillo, CA Author

Lilly,

Thanks! Glad you like the hubs.

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