the of s and closed-end funds · (similar to reits and mlps) o limited to 200% asset coverage...
TRANSCRIPT
THE OF BDCS
AND CLOSED-END FUNDS
John Cole Scott, CFSChief Investment Officer
Closed-End Fund Advisors, Inc
Closed-End Fund Advisors is a Registered Investment Advisory Firm Specializingin Closed-End Fund & BDC Research, Trading and Management Founded in 1989
September 22, 2016
Important: The information should not be considered an offer, or solicitation, to deal in any of thementioned funds or sectors. 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, financialsituation or particular needs of any specific investor.
Any research or analysis used to derive, or in relation to, the information herein has been procured byClosed-End Fund Advisors (“CEFA”) for its own use, and may have been acted on for its own purpose. Theinformation herein, including any opinions or forecasts has been obtained from or is based on sourcesbelieved by CEFA to be reliable, but CEFA does not warrant the accuracy, adequacy or completeness of thesame, and expressly disclaims liability for any errors or omissions. As such, any person acting upon or inreliance of these materials does so entirely at his or her own risk. Any projections or other forward-lookingstatements regarding future events or performance of countries, sectors, markets or companies are notnecessarily indicative of, and may differ from, actual events or results. No warranty whatsoever is givenand no liability whatsoever is accepted by CEFA or its affiliates, for any loss, arising directly or indirectly, asa result of any action or omission made in reliance of any information, opinion or projection made in thispresentation.
The information herein shall not be disclosed, used or disseminated, in whole or part, and shall not bereproduced, copied or made available to others without CEFA expressed written permission. CEFA reservesthe right to make changes and corrections to the information, including any opinions or forecastsexpressed herein at any time, without notice. Data comes from our CEFData.com (formerly CEF Universe)service dated September 2, 2016 unless otherwise noted.
2www.CEFadvisors.com
Disclosures
What Is CEF Advisors?
• Investment Management, Research & Data
• Independent, Fee Only & Family Owned
• “Scott Letter: Closed-End Fund Report”
• Discretionary Portfolio Management (SMA),Unit Investment Trust (UIT) Portfolio Consultant
• Covestor Models (Robo Advisor) Muni & BDC
• CEF & BDC News/SEC Alert & “CEFA’s Closed-End Fund Universe”
• Consulting with Institutional Investors and CEF Fund Sponsors
• CEFData.com: CEF/BDC Web Modules with Daily Data
We seek to be the crossroads of BDC/CEF data, trends and news. We maintainstrong relationships with Managers, Peers, Analysts and Fund Sponsors.
www.CEFadvisors.com
Founded in 1989
What is a Closed-End Fund (CEF) / BusinessDevelopment Company (BDC) ?
www.CEFadvisors.com 4
o 1940 Act Investment Company with Fixed-Capital,Active Management, and Daily Liquidity
o CEFs have traded on The NYSE since 1893o Tax-advantaged and earnings are passed through to
investors in the form of dividends and distributions(similar to REITs and MLPs)
o Limited to 200% asset coverage (total assets / totaldebt) or “one turn” of leverage, excluding SBICfacilities (BDCs).
o The closed-end structure is not an asset class but aninvestment vehicle
o BDCs were created by Congress in 1980 to provide an opportunity for individual non-accredited investors to participate in private investments
o BDCs are closed-end funds that provide small, growing companies access to capitalo BDCs are Domestically focused and required to offer portfolio companies ‘managerial
assistance’.
www.CEFadvisors.com 5
BDCs Provide Access toPrivate Debt Investments
Retail andInstitutional
Investors
InvestmentDollars
Dividends toInvestors
DebtInvestments
(Primarily)
Interest andDividends
BDCs
Small andMiddle-MarketBusinesses
Shareholderstaxed ondividends
No tax paid atthis entity
$ $
$ $
6
Broad Investable UniverseCLOSED-END FUNDS | WHY CEFS / BDCs
Assets of Closed-End Funds*by type and end of period
# of Funds Q2 2013 Q4 2013 Q2 2014 Q4 2014 Q3 2015
Total Equity CEFs 222 $110,672 $118,784 $130,192 $124,963 $103,518
U.S. Equity 38 $20,698 $22,826 $23,608 $23,608 $20,600
Non U.S. Equity 63 $16,799 $17,884 $17,936 $16,758 $14,514
Special Equity 108 $73,176 $78,074 $88,327 $84,598 $68,404
REIT CEF 13 $5,370 $5,293 $6,100 $6,271 $5,933
Total Bond CEFs 345 $134,101 $132,840 $140,157 $137,108 $130,298
Taxable Bond 153 $71,420 $72,761 $74,636 $69,968 $64,592
National Municipal 103 $45, 008 $43,041 $46,981 $48,140 $47,088
Single State Municipal 89 $17,673 $17,038 $18,521 $19,000 $18,617
Total CEFs 567 $244,773 $251,624 $270,349 $262,072 $233,815
Debt-Focused BDC 44 – – $24,882 $28,936 $29,915
Equity-Focused BDC 9 – – $7,001 $7,377 $7,314
Total BDC CEF 53 – – $31,884 $36,312 $37,229
CEF GRAND TOTAL 620 – – $302,233 $298,384 $271,045
$260.85 Billion x 9% = ~$23.5 Billionin total CEF assets average discount exploitable undervaluation
8
• CEFs and BDCs are often known for their ‘infamous’ discounts.The discount is the feature built into the “closed-ended structure’that makes them unique & potentially lucrative.
• We believe that many CEFs historically trade at discounts becausethey can, and you have to price this into the value of the fund.BDCs often trade above NAV in normal markets because they are aunique way to own access to the sector.
Discounts / Premiums
www.CEFadvisors.com 10
-30
-20
-10
0
10
20
30
40
50
60
70
7/1/2006 7/1/2007 7/1/2008 7/1/2009 7/1/2010 7/1/2011 7/1/2012 7/1/2013 7/1/2014 7/1/2015
Trad CEF - Total ReturnJuly 1, 2006 - June 30, 2016
NAV TR Price TR
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-8
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-4
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0
2
6/1/2006 6/1/2007 6/1/2008 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 6/1/2014 6/1/2015 6/1/2016
Trad CEF - Average Discount / PremiumJuly 1, 2006 - June 30, 2016
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-60
-40
-20
0
20
40
60
7/1/2006 7/1/2007 7/1/2008 7/1/2009 7/1/2010 7/1/2011 7/1/2012 7/1/2013 7/1/2014 7/1/2015
BDC Debt - Total ReturnJuly 1, 2006 - June 30, 2016`
NAV TR Price TR
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-60
-50
-40
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0
10
20
30
40
6/1/2006 6/1/2007 6/1/2008 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 6/1/2014 6/1/2015 6/1/2016
BDC Debt - Average Discount / PremiumJuly 1, 2006 - June 30, 2016
www.CEFadvisors.com 14
-30
-20
-10
0
10
20
30
40
50
60
70
80
7/1/2006 7/1/2007 7/1/2008 7/1/2009 7/1/2010 7/1/2011 7/1/2012 7/1/2013 7/1/2014 7/1/2015
Municipal Bonds - Total ReturnJuly 1, 2006 - June 30, 2016
NAV TR Price TR
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-14
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-8
-6
-4
-2
0
2
4
6
6/1/2006 6/1/2007 6/1/2008 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 6/1/2014 6/1/2015 6/1/2016
Municipal Bonds - Average Discount / PremiumJuly 1, 2006 - June 30, 2016
www.CEFadvisors.com 16
-40
-20
0
20
40
60
80
100
120
140
7/1/2006 7/1/2007 7/1/2008 7/1/2009 7/1/2010 7/1/2011 7/1/2012 7/1/2013 7/1/2014 7/1/2015
MLP - Total ReturnJuly 1, 2006 - June 30, 2016
NAV TR Price TR
www.CEFadvisors.com 17
-15
-10
-5
0
5
10
15
20
6/1/2006 6/1/2007 6/1/2008 6/1/2009 6/1/2010 6/1/2011 6/1/2012 6/1/2013 6/1/2014 6/1/2015 6/1/2016
MLP - Average Discount / PremiumJuly 1, 2006 - June 30, 2016
www.CEFadvisors.com 18
19
Impact of Fund LeverageMunicipal (Tax-Free) Bond Funds
Credit Quality ranges from A to AAA.
5.40% 5.60%5.30% 5.20%
4.40%
3.10%
3.80% 3.90%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
NAV Yield
NPI NPM NMO NXZ MTT NIM NXP NXR
Leveraged Unleveraged
Source: CEFA’s Closed-End Fund Universe, May 8, 2018
Past performance is not indicative of future results. This presentation is not intended as an offer to sell any ofthe funds shown. Rather, funds shown are for illustrative purposes only.
*Currently leverage is giving muni CEFsan average of 1.6% higher distribution yield
7.60%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
NAV and Market Price Yield for LCM
Yield on NAV Yield on Market Price
20
Discount Yield Benefit
Advantage of Paying “90 cents for $1.00 of Assets”Example: AC Enh Gwth & Incm Fd (NYSE: LCM)
Market Price: $9.61NAV: $11.05Discount: -13.03%
As of May 81, 2015
8.74% Discount Yield Benefit = 1.14%
Source: CEFA’s Closed-End Fund Universe
Past performance is not indicative of future results. This presentation is not intended as an offer to sell any ofthe funds shown. Rather, funds shown are for illustrative purposes only.
21www.CEFadvisors.com
CEF/BDC Yield Comparison
BDC Data as of 6/24/2016, Index Data as of 3/31/2016MLP Index: Alerian MLP Index; REIT Index: Wilshire US REIT Index; Corporate Debt Index: S&P 500 Bond IndexUS High Yield Indices : BofA Merrill Lynch US High Yield (BB Rated, B Rated, CCC and Lower Rated )
Traditional Closed-End Funds: By Yield
22
29.2%
20.3%
15.0%
19.5%
16.1% Yield Under 5%
Yield 5%-6.5%
Yield 6.5%-8%
Yield 8% -10%
Yield Over 10%
Note: 548 Traditional CEFs; data as of 6/24/2016 , cefdata.com
4.7%
20.9%
37.2%
37.2%
Yield Under 6%
Yield 6%-8%
Yield 8% -10%
Yield 10% - 12%
Yield Over 12%
Note: 43 Debt Focused BDCs; data as of 6/30/2016 , cefdata.com
Debt Focused BDCs: By Yield
23
Tax Equivalent Yield ComparisonMarried Couple with W-2 Income of $1MM+
Sources: CEFA’s Universe Data as of 6/30/16 and tax rates from IRS and NY State.24
25
1. Discount Direction: CEFs/BDCs trade at prices in relation totheir net asset value (NAV). NAVs are the ‘anchor point’ formarket pricing. We seek generally funds where discountscan recover or are sustainable vs. potential to widendramatically. Small premiums can be healthy for a BDC.
www.CEFadvisors.com
2. Dividend Sustainability: Research the reoccurring earnings/income produced by a bondCEF/BDC as well as trends in the sector and past policies of the Sponsor/ Board. NAV TRlong-term should exceed the NAV Yield to make policy sustainable. Dividends arepolicies from the BoD are not promises like coupon payments on bonds or loans.
3. NAV Total Return: Manager performance after costs is important as poor results oftenimpact the price investors use as the ‘anchor point’ for Funds. This also helps confirmthat management can produce investment returns after their cost. Example: BDC loancreation is not typically a cheap and easy task, but shareholders need to know thatmanagement costs are in check with their results. Avg BDC NonLev Expense Ratio: 5.2%*
CEFA’s ‘Trifecta’ AnalysisSuggested CEF/BDC Research Process
CEFA feels that getting any of these items wrong can negate good investment research
*Data as of 6/24/16 CEFdata.com
26
Buy at aDiscount
Actively MonitorFunds
Track Relative Value/ Swap Funds
Anticipate DividendChanges
When to RaiseCash?
Sell at Premiumor Set Stops
CEF ManagerAnalysis &
Results
Adjust PortfolioAllocations
CEFA’s Investment Philosophy
27
1. First Lien Loans: 54.8%2. Second Lien Loans: 19.5%3. Unsecured Loans: 11.7%4. Equity/Other: 14.0%
www.CEFadvisors.com
Types of Loans Held By BDCs
Avg Portfolio Turnover: 23.4% Avg Variable Loans: 76% / Fixed: 24% Libor Floors: 42% at 1.07% Avg Level Avg Loan Size: $10.7M 74% of Loans Under $25MM Average Maturity 4.1 with a range of 2 Years to 6 years Avg No of Loans: 108 from 94 Companies
Source: CEFA’s CEF Universe 5/8/2015
0.0 5.0 10.0 15.0 20.0 25.0 30.0
U.S. Equity Funds
Non U.S. Equity Funds
Specialty Equity Funds
Taxable Bond Funds
National Muni Bond
Single State Muni Bond
Debt Focused BDC
Equity Focused BDC
Price Volatility NAV Volatility
Market Price volatility vs. NAV volatility(1 Year)
CEF & BDCDividend Increases vs. Decreases
29www.CEFadvisors.com
Source: Fund Press Releases
DividendAnnouncement
2Q 2016Number of
Announcements
2Q 2016AverageChange
2Q15 – 1Q16Number of
Announcements
2Q15 – 1Q16AverageChange
Dividend Maintains 1191(87%) N/A 3805 (91%) N/A
Dividend Increases 36 (3%) +6.8% 99 (2%) +4.9%
Dividend Decreases 134 (10%) -7.1% 292 (7%) -9.2%
Under 5% Increase 25 (69%) +1.9% 73 (74%) +2.0%
Over 5% Increase 11 (31%) +18.2% 26 (26%) +13.1%
Under 5% Decrease 53 (40%) -2.8% 139 (48%) -2.4%
Over 5% Decrease 81 (60%) -9.9% 153 (52%) -15.5%
0
20
40
60
80
100
120
140
160
180
U.S. EquityFunds
Non U.S.Equity Funds
SpecialtyEquity Funds
Taxable BondFunds
National MuniBond Funds
Single StateMuni Bond
Funds
Debt FocusedBDC
EquityFocused BDC
Major CEF Groups: Number of dividend decreases / increasesLast Quarter & Previous 1 Year Rolling
Last Q Decreases
Previous 1 Yr Rolling Decreases
Last Q Increases
Previous 1 Yr Rolling Increases
2Q 2016 Closed-End FundDividend Increases vs. Decreases
30www.CEFadvisors.com
Source: Fund Press Releases
Traditional Closed-End Fund90 Day NAV – Market Price Correlation
31www.CEFadvisors.com
Source: March 31, 2016 - CEFA’s Closed-End Fund Universe Report
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
Q3-14
Q4-14
Q1-15
Q2-15
Q3-15
Q4-15
Q1-16
-20
0
20
40
60
80
100
120
Trad CEFs Groups - 90 Day NAV/Price CorrelationJune 22, 2012 - June 30, 2016
All Trad CEFs All Equity All Bond US Equity Non US Equity
Special Equity Taxable Bond Nat Muni Bond State Muni Bond
Premiums: A ‘Worst Case’ Scenario
32www.CEFadvisors.com
AGD AOD
6/18/10 – Monthly Dividend $0.11 $0.12
6/18/10 – Premium +38.5% +31.5%
6/19/10 – Monthly Dividend $0.06 (-45%) $0.055 (-54%)
6/25/10 - Premium +2.96% - 4.25%
Relative Pricing Change -35.5% -35.8%
Source: Telemet
Traditional Closed-End FundHistorical IPOs (2Q 16)
33www.CEFadvisors.com
Source: SEC Filings, Press Releases
YTD 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Number ofIPOs
3 8 9 25 23 19 17 13 2 40 21
AverageAssets
In $ millions$172 $291 $469 $580 $517 $316 $451 $200 $131 $690 $506
Total NewCEF IPO
Assets in $Billions
$0.5B $2.3B $4.2B $14.5 $11.9 $6.0 $7.7 $2.6 $0.3 $27.6 $10.6
10 Year Average: 18 Funds per year, $415M Ave Fund, $10 Billion Per Year
BDC Historical IPOs
34www.CEFadvisors.com
Source: SEC Filings, Press Releases
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Number ofIPOs
1 6 4 5 7 5 1 1 5 1
AverageAssets
In $ millions$120 $575 $78 $96 $101 $98 $87 $141 $138 $203
Total New CEFIPO Assets in $
Billions$0.1 $3.5 $0.3 $0.5 $0.7 $0.5 $0.1 $0.1 $0.7 $0.2
10 Year Average: 3.6 Funds per year, $164M Ave Fund, $0.7 Billion Per Year
Closed-End Fund Mergers(Traditional)
35www.CEFadvisors.com
Source: Fund Press ReleasesReasons to Merge:1. Reduce expense ratio2. Increase liquidity3. Reduce bid/ask spread4. Improve cost of future leverage
Avg. – 21.1 per year
0
10
20
30
40
50
60
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Nu
mb
ero
fC
lose
d-
End
Fun
ds
Closed-End Funds Merged into Other Closed-End Funds (June 2016)
Closed-End Fund Deaths(Traditional)
36www.CEFadvisors.com
Source: Fund Press ReleasesCauses: Open-ending, liquidation & conversion
0
2
4
6
8
10
12
14
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
CEF Funds Open-Ended, Liquidated or Converted to ETF
Converted to ETF
Liquidated
Open-ended
Common CEF Mistakes
37www.CEFadvisors.com
1. Buying a CEF on the IPO2. Only buying a CEF at a discount3. Only buying a CEF because of yield4. Buying a selection of CEFs and holding
them “forever” (not swapping funds over time)
5. “I have lost so much, I just want to get back to even”6. “I have made so much, I am happy with whatever
happens” (I don’t care if I lose 10-15% b/c I am up 70%)
7. Unknowingly buying a CEF at a high premium or highrelative premium
38
1. Poor Management, Credit Risk2. Discount & Dividend Risk3. Poor Fee / Shareholder Alignment4. Quarterly NAV (BDC), subjective fair
value estimates could take suddenand quick losses
5. Liquidity, Bid/Ask Spread Risk6. Market Prices can be volatile, especially during earnings season,
dividend changes, corporate actions or on ‘headline risk’ and‘risk off’ trading.
7. Libor floors, variable leverage, spread widening,8. Irrational trading behavior of retail shareholders
www.CEFadvisors.com
Risks of CEF/BDC Investing
How Have CEFs/BDCs Faired ina Rising Rate Environment?
39
40www.CEFadvisors.com
CEF Institutional Holdings(Traditional CEFs 2Q 16)
Source: CEFA’s Closed-End Fund Universe (www.cefuniverse.com)
InstitutionalHoldings Trends
Increase: 332 fundsDecrease: 102 funds
Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16
0.0 %
5.0 %
10.0 %
15.0 %
20.0 %
25.0 %
30.0 %
35.0 %
40.0 %
Trad CEFs Groups - % Shares Owned by InstitutionsJanuary 18, 2013 - June 30, 2016
All Trad CEFs All Equity All Bond US Equity Non US Equity
Special Equity Taxable Bond Nat Muni Bond State Muni Bond
CEFA’s Outlook for 2016
41www.CEFadvisors.com
• US Equity Funds• Non-US Equity Funds• Specialty Equity (Sector) Funds
• Taxable Bond Funds
• National Municipal Bond (Tax-Free) Funds• State Specific Municipal Bond (Tax-Free) Funds
• Debt-Focused Business Development Companies (BDCs)• Equity-Focused Business Development Companies (BDCs)
• Total Return (Yield Driven)
• Diversification
• Professional Management
• Leverage Used by Fund
• Free Leverage of The Discount
• Control: Limit & Stop Orders
• Fixed Capitalization: No Redemption Pressures
• Capitalize on Market Inefficiencies
• Low Active Institutional Ownership / Mostly Retail
42
In Summary:Why We Like Closed-End Funds
• Professional Tactical Separate Account Management: $1MMHousehold Minimum, 1% Fee by CEFA
• Model Access: View access to current portfolio with emailnotice for changes with rationale. $1,050 per quarter (1 Model)
• SmartTrust UIT “CEFA Select BDC Trust Series 7”: $1000minimum purchase, 0.50% creation & development fee for non-commission cusip.
www.CEFadvisors.com 43
CEF Advisors’ Servicesand Portfolio Options
• Covestor “Yield Animal” BDC Model and Municipal Bond Opportunity: $10,000minimum account size, 0.50% fee (Muni) 1.0% (BDC).
• Daily CEF/BDC News & SEC Filings Alerts: $156 per year (10 Day Trial)
• Weekly CEF/BDC Universe Data: $387.50 per quarter (14 Day Trial)
• CEFData.com: Daily Access to Modules for Fund Screening and Portfolio, Model andWatch List Monitoring: $1K - $4K per quarter depending on subscriber classification.
• One-Time & Ongoing Consulting: Cost varies with $500 minimum.
Closed-end Fund Advisors, Inc. ("CEFA") is a Commonwealth of Virginia registered investment adviser located in Richmond, VA. Registered investment adviser does not imply a certain level of skill or training. CEFAmay only transact business in those states in which it is registered or has completed the appropriate notice-filing requirements. Prospective clients should consult with a financial consultant to review their investmentobjectives and financial situation before determining whether any investment, security, or strategy is suitable. A copy of CEFA’s Form ADV Part 2A & 2B providing information regarding CEFA’s services, fees, and otherimportant disclosure items is available on this website and/or from CEFA upon request. Any opinions expressed in this email or in any CEFA authored documents are subject to change without notice and, due to therapidly changing nature of the security markets, may quickly become outdated. No information should be interpreted to state or imply that past results are an indication of future performance. The discussions andopinions in this email are for general information only and for use of the recipient, and are not intended to provide investment advice. All materials presented are compiled from sources believed to be reliable andcurrent, but accuracy cannot be guaranteed.
Performance data and other information contained herein are estimated and unaudited. Actual yields will vary from one investor to the next depending on their tax bracket. No portion of the email should beinterpreted as legal, accounting or tax advice and is not to be reproduced or copied or made available to others. All investments involve risk including the loss of principal. The Market Price and Net Asset Value TotalReturn Performance referenced in the attached PDF files for each of CEFA's Models does not reflect composite performance for CEFA's clients. It is shown to allow investors to compare the current model allocationsperformance differences between Market prices and Net Asset Value for comparable rolling time periods. If a fund in the model does not have a trading history for the entire period shown (usually the 3 Year figure), itis not included in the results. Investors cannot invest in CEFs' net asset values, but it is considered the best judge of a funds management team after cost for comparison purposes. CEFA also seeks funds with aboveaverage NAV performance and recent market price underperformance so we may have the opportunity to experience discount narrowing, and it traded properly, general out performance of the funds NAV returns.
Current CEF Advisors Composites• Diversified Growth (1/1999)
– 80% Equity / 10% Bond / 10% BDC: Tactical and wide mandate w/ 4%-7%+ est. yield
• Growth & Income (1/1999)
– 72% Equity / 16% Bond / 12% BDC: Diversified, tactical and wide mandate w/ 6%+ est. yield• International Opportunity (11/2002)
– Primarily equity oriented funds w/ little direct US exposure 3%+ est. yield• Hybrid Income (12/2006)
– 50% Equity /30% Bond / 20% BDC: Diversified, tactical and wide mandate w/ 9.5%+ est. yield• Foundation/Balanced (10/2009)
– 55% Equity / 37% Bond / 8% BDC: Diversified and tactical w/ 6%-7.5% est. yield• Conservative Diversified (5/2009)
– Primarily CEF-based with 37% Equity / 24% Bond / 5% BDC: Diversified & tactical. Exposure to Non traditional equity/bondETFs & OEFs (34%) seeking to reduce portfolio volatility
• Special Situations (6/2013)
– A focused portfolio of 4-7 CEFs & BDCs looking for ideas in three areas: 1. Activist Involved Funds 2. Severe Discount Arbitrage3. CEFA’s Best Fundamental Ideas
• Managed Municipal Bond (8/2014)
– Actively managed municipal bond portfolio comprising of both National and State Muni funds. Constantly monitoring fordiversified, high quality blended tax free yield while seeking to protect principal
• Diversified Tax-Sensitive Income– 25%-50% exposure to Municipal Bond CEFs and 20%-40% exposure to low correlation and tax sensitive sectors: MLP and
Covered Call Funds. Seeking 7%-7.5% after tax income.• Business Development Company (BDC) Funds (1/2015)
– Diversified selection of BDCs seeking consistent income & positive growth of principal and exploiting the increasedinefficiencies from a group of funds that trade 5X the liquidity and 20%+ more yield than traditional taxable CEFs. BDCs aregenerally liquid venture debt exposure to private US companies. www.BDCuniverse.net
Note: When the percentage allocations above do not add up to 100%, thebalance is cash exposure for the portfolio model. Account CEFA manages under$100K in value can have allocation variance's due to a smaller number of fundsheld in the account. Model allocations are as of 3/31/2016.
www.CEFAdvisors.com
CEF Advisors’ Portfolio Composites
Disclosure: See full portfolio disclosures at the end of this presentation
CEFA Portfolio CompositesSummary Performance
54
CEFA’s CEF/BDC Fund Profiles: www.cefdata.comBDC List and Summary Data: www.BDCuniverse.netCEFAnalyzer LLC: http://CEFanalyzer.com
The Closed-End Fund Association: www.Closed-EndFunds.com
CEF Connect (Nuveen Sponsored): www.CEFconnect.com
Morningtar's CEF Site:http://www.morningstar.com/Cover/CEF-Closed-End-Funds.aspx
Investment Company Institute: http://www.ici.org/research#fact_books
CEFNetwork (Pristine Advisers): www.CEFnetwork.com
CEF Insight (Activist Info from AST Fund Solutions): www.CEFinsight.com
Capital Link's CEF Portal: http://cef.capitallink.com/
Morningstar Discussion Board:http://socialize.morningstar.com/NewSocialize/forums/100000006.aspx
Yahoo CEF Discussion Board: https://groups.yahoo.com/neo/groups/closedendfunds2/info
The CEF Network on LinkedIN: www.CEF-Network.com
Seeking Alpha: http://seekingalpha.com/articles?filters=closed-end-funds
More Useful Links at: www.cefadvisors.com/investRes.html
For Your InformationFree CEF/BDC Resources
55
John Cole Scott, CFS
EXPERIENCE
CIO of Registered Investment
Advisor Focused Exclusively on CEFs
and BDCs since 2001
EDUCATION
College of William & Mary
Bachelor of Science in Psychology
2000
John Cole Scott, CFS
Chief Investment Officer ofClosed-End Fund Advisors
Mr. Scott has worked at Closed-End Fund Advisors since 2001. He sits onthe firm’s investment committee and holds the FINRA 66 License and theCertified Fund Specialist designation (CFS). He is a graduate of The Collegeof William and Mary and has been quoted and interviewed widely in thefinancial press and presented at conferences and for investment groups onmore than 40 occasions.
In 2008 John founded CEFA's Closed-End Fund Universe, a comprehensiveweekly data service covering 240+ data points for all US listed closed-endfunds and 210+ for BDCs. He also founded and manages The CEF Networkgroup on LinkedIn and is editor of the firm’s blog. John is a past boardmember of The Richmond Association for Business Economics (RABE), andserves on the Investment Committee for The New York State Society of TheCincinnati.
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Speaker’s Biography
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Additional DisclosuresCEFData.com makes data for the universe of closed-end funds (CEFs) and business development companies (BDCs) available to its users. This material is notintended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be consideredspecific legal, investment or tax advice. This site does not list all the risks associated with each fund. Investors should contact a fund’s sponsor for fund-specificrisk information and/or contact a financial advisor before investing.
Distribution type sourced from CEFdata.com. For specific information about a fund's distribution sources, visit the fund sponsor's website. The followinginformation applies to closed-end funds and business development companies in general: Fund shares are not guaranteed or endorsed by any bank or otherinsured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation (FDIC). Shares of closed-end funds (CEFs) and businessdevelopment companies (BDCs) are subject to investment risks, including the possible loss of principal invested. There can be no assurance that fund objectiveswill be achieved. Closed-end funds and business development companies frequently trade at a discount to their net asset value. NAV returns are net of fundexpenses, and assume reinvestment of distributions.
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SmartTrust “CEFA Select BDC Trust” Series 7 UIT https://www.smarttrustuit.com/trust/smbdgx/Investors should consider the trust’s investment objective, risks, charges and expenses carefully before investing. The prospectus contains this and otherinformation relevant to an investment in the trust. Please read the prospectus carefully before you invest. If a prospectus did not accompany this literature,please contact SmartTrust at (888) 505-2872 to obtain a free prospectus.
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