The NAVigator

Kimberly Flynn, President at XA Investments, discusses the recent executive order signed by President Trump that allows a dramatic expansion of alternative assets to be part of 401(k) and other retirement plans. While the headlines have made it seem like crypto bros will blow up their retirement plans with alternatives, Flynn discusses how many firms running life-cycle and target-date funds may decide to make allocations to more alternative asset classes, which could create opportunities for interval funds or closed-end funds. She also discusses when and if Bitcoin and other cryptocurrencies might be available in some from of closed-end offering.

Mitchel Penn, Managing Director of Equity Research for Oppenheimer & Co., says that business-development companies are now "fairly valued" by the market, which means that their biggest potential gains for the remainder of the year will come from simply capturing dividend payouts. In 2026, with the industry likely facing interest rate cuts, BDCs will see their return on equity shrink in line with rate declines, saying that for every 1% cut in rates, BDC payouts would be expected to shrink in step. In an interview from AICA's BDC Forum in June, Penn noted that he was worried about a spike in credit losses that BDCs experienced in the first quarter of 2025; he said that pressure has passed, dramatically reducing his concerns about the potential for BDCs to disappoint investors.

Matt Freund, Co-Chief Investment Officer at Calamos Investments, expects the Federal Reserve to make "a couple of cuts this year, followed by two or three cuts next year," and that those moves will be made while inflation stays at current levels or rise slightly. With those cuts, Freund thinks there will be a steepening yield curve, around 3 percent, creating more opportunities. Freund, whose team manages the Calamos Closed End Fund Income & Arbitrage ETF, says that the yield curve changes would bring borrowing costs down and "present a nice springboard" for closed-end funds, particularly among muni funds, the managed limited partnership space and funds with exposure to natural gas and small caps.

Kenneth Burdon, an attorney with Simpson Thacher and Bartlett, discusses the court case between Saba Capital and four closed-end fund sponsors that has wound its way to the U.S. Supreme Court and that is expected to force a change in the tactics of the industry's most prominent activist investor or in the way management companies protect themselves against aggressive shareholder actions. Saba challenged the four companies' actions in adopting a Maryland law that makes it more difficult for outside investors to gain control through a proxy fight. Burdon says Saba is the only company to challenge closed-end fund governance in federal court, and that the company could lose that tactic without significantly reducing its ability to pursue activist actions, just taking more common and traditional tactics used by others. Burdon says, based on precedents, that he expects the decision to come down in favor of the fund sponsors

John Cole Scott, President of CEF Advisors and Chairman of the Active Investment Company Alliance, digs into his firm's data to look at how many categories of closed-end funds are delivering double-digit yields now, in some cases doubling the average payouts in the underlying asset class. He talks about judging how real the big payouts are, and which areas of the market are delivering the best combination of yield and discount.

Jason Akus, Head of Healthcare Investing for Aberdeen Investments, says that current conditions for healthcare and biotech investing are making for "one of the most challenging, difficult and dislocated environments I've seen." While trades in technology, artificial intelligence and the Magnificent Seven stocks have driven the stock market back to record-high levels, Akus notes that healthcare has been flat in 2025 with biotech faring only slightly better; moreover, healthcare has been flat for two years, while the Standard & Poor's 500 was gaining about 40 percent. "It's not to say that healthcare is not growing earnings ... it's just been left behind" more attractive growth sectors. Akus says that creates a lot of opportunities and attractive valuations for healthcare and biotech investors, as he sees market conditions changing and "green shoots" emerging as long-term innovations and developments pay off.

Rob Shaker, Portfolio Manager of Shaker Financial Services, discusses "discount-capture investing," and how the market's wild moves around tariff announcements this year made the strategy particularly sensitive to the emotional changes of investors. Shaker says the overall trend for 2025 has been a "generic narrowing" of discounts — by roughly 2 percent on equities and 1 percent on fixed income — but there was a rapid, fear-based 'generic widening' when tariff policies were announced in April and there was excessive selling. Shaker says that discount fallout was particularly big and fast, though conditions normalized quickly, rewarding his clients for staying patient and opportunistic.

John Cole Scott, President of CEF Advisors, discusses how three areas that lagged during a strong first half of 2025 — municipal bonds, senior loans and master limited partnerships — are poised to be leading categories among closed-end funds for the remainder of the year. Scott, the chairman of the Active Investment Company Alliance, picks out funds that he thinks are poised for a good run in each category, and discusses refining asset allocation plans to deliver more-resilient income.

Kyle Brown, chief executive officer at Trinity Capital, sees the private-credit boom continuing, in part fueled by government efforts to generate business gains in the United States. That has created a new wave of capital expenditures — and a 20 percent year-to-date increase in demand for private credit — that is likely to power the private lenders for the foreseeable future. For Trinity, the company has doubled in size in roughly three years, but the current demand gives it room to grow further, and Brown says he believes business-development companies can handle the heightened demand without a significant increase in the default rate they are facing, adding that rate cuts could be another positive, reducing costs to stay profitable in the next phase of the rate cycle.

Mike Schueller, Co-Manager of the Allspring Income Opportunities fund, says that high-yield bonds are poised to be steady performers through the current wave of headline risks and market uncertainty because the economy is solid enough that there's no reason to expect a spike in defaults. With the potential for recession "having receded into the background," he's expecting a "muddle-through economy," with defaults remaining at current low levels, allowing high-yield to keep delivering "high, consistent income" and total returns at or above historic norms for the high-yield asset class.