The NAVigator

John Cole Scott, chief investment officer at Closed-End Fund Advisors and the executive chairman of the Active Investment Company Alliance, says that with strong recent performance, 'getting big fat discounts continues to be hard,' but he says that shouldn't dampen enthusiasm for closed-end funds and business development companies. He cites opportunities in energy, real assets and real estate funds and notes that narrower discounts make this a time to consider non-listed funds, which tend to be less levered and volatile in the choppy market conditions we're likely to see moving forward.

Tom Dinsmore, chairman and chief executive at Dinsmore Capital Management, which manages the 50-year-old Bancroft Fund and several other issues that specialize in convertible securities, says that investors looking to increase yields with a 'bond-like equity' will be hard-pressed to create a portfolio of currently available convertible issues that do the job. He notes that many new convertible issues -- coming from health-care and technology companies -- require the underlying common stock to do well, and don't carry big coupons, so that investors should use them as a lower-volatility equity alternative.

Michael Spatacco, director at Bancroft Capital, discusses how ESG investing -- for environmental, social and governmental factors taken into consideration -- is starting to gain a foothold in the closed-end funds with the opening of a new issue from Nuveen that he has been an adviser to. He expects the trend to continue, as the closed-end fund space more fully reflects the rest of the world, which has seen tremendous movement of monies into 'social investments.'

With many experts questioning the validity of classic investment allocations, Patrick Galley of RiverNorth Capital Management discusses how closed-end funds fit into the standard 60-40 stocks/fixed-income mix as a way for investors to get more from the bond side of the equation without actually changing their broad asset plan. He also discusses how current market times -- with the threat of rising interest rates and inflation mixing with lingering discounts from the market meltdown of early 2020 make for interesting opportunities now as both a closed-end fund investor and for fund sponsors.

Keith Ashton, portfolio manager for the Ares Dynamic Credit Allocation Fund (ticker ARDC), talks about why he likes collateralized loan obligations and other credits as a way of adding low-duration, high-yielding income instruments to a portfolio, and discusses what investors should expect from adding these alternative credits for the income-generating side of their portfolio.

Michael Naughton, chief operating officer for U.S. retail at Lord, Abbett and Co., says the interval-fund structure -- which limits shareholder redemptions -- has given managers of the Lord Abbett Credit Opportunities Fund the ability to pursue the firm's best ideas, including illiquid investments, and discusses how the liquidity risk of interval funds can balance out other risks faced by fixed-income investors in today's challenging interest-rate environment.

Craig Packer, co-founder, Owl Rock Capital Partners and chief executive officer at Owl Rock Capital Corp., says that business-development companies held up well through the pandemic -- noting that his own company has been making loans at rates that are twice the cost of the financing -- with better-than-expected performance which should only get better as the economy re-opens. He also discusses the impact of interest rates and inflation and more on lending activity, and whether booming activities in SPACs -- special purpose acquisition companies -- is having any impact or fallout on BDCs.

John Miller, head of municipals at Nuveen, says that the combination of the American Recovery Act and the progress towards recovery and the growing vaccination numbers, have made it so that state and local governments that had been crying poverty are now seeing a boom. He notes that municipal tax revenues have held up better than expected through the pandemic, and now are poised to increase; coupled with stimulus monies, he believes conditions are right for improved credit quality which should help muni bonds thrive for at least the next few years.

Will Rhind of GraniteShares talks about balancing high yields against risk in the GraniteShares High-Income Pass Through Securities ETF, a fund that invests entirely in business development companies and closed-end funds. Rhind discusses why the fund currently favors closed-end funds slightly, how he believes it is miscategorized by the 'stack-and-rank services' like Morningstar and talks about a few investments and why they pass muster with the fund's methodology.

Nick Holmes, portfolio manager for the Tortoise Essential Assets Income fund, discusses how investing in water infrastructure is mostly lumped in with other infrastructure plays, which he considers a mistake, noting that water is viewed differently as an asset class around the world than it is in the United States. He explains why his fund gets involved in private investments, how it was hit harder than most closed-end funds during the market';s 2020 decline and why he thinks both the fund and water assets are poised for success moving forward.