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Pimco Has A Manager Who Tops Dan Ivascyn. His Name? Dan Ivascyn
Sven is right. Sorry for any misunderstanding. I am not an experienced trader but I would never buy a CEF at a premium to NAV. PIMCO even warned about the steep premium that one of the CEFs was trading at. PHY maybe, but the warning was on the PIMCO website if I am not mistaken.
@davidrmoran, like I said I am not an experience CEF trader. So here is my understanding. Unlike ETFs where there are mechanisms to keep the price price close to the underlying net asset value, CEFs do not. CEF shares typically trade well below (and sometimes well above) the underlying NAV. I think that is why is referred as widening relative to the NAVs. Most CEFs also borrow money to buy securities as leveraging, and that is why they provide higher yield relative to the equivalent ETFs without leveraging. Ideally, one wants to buy when the fund is traded well below their NAV. Today it is less attractive to buy with discount being smaller. Until I free more comfortable with CEFs, I will stay with PIMIX.
v sorry, in my (feebler and feebler) mind I turned discount into premium, duh and d'oh. My bad.
I can say from some long-ago experience that Lee's advice generally may be solid, sure, and absolutely on paper, but it is entirely possible for the super-valuable cef that you bought at a discount to nav to become even more super-valuable over time, while you wait and wait for the world to recognize its great value and how discounted it is.
@davidrmoran is correct about a discount or premium continuing to grow even though it seems to defy logic. M*'s quote page for any CEF provides a lot of information about current discount/premium, the historical d/p, and the 1-year Z-Statistic, a measure of how far from the past the current discount is. PDI has a Z-Statistic of .91, meaning the fund, at a current premium of +8.3%, is almost a standard deviation above the relatively modest premium the fund traded at in the past few years. Traders of CEFs often look for a Z-Statistic of -2.0 or greater when searching for a fund that may be a value. If you don't like to trade, you can buy the CEF trading skills of Patrick Galley at RiverNorth in various OEFs and CEFs.
I have looked at PONAX in the past and from what I can surmise it is believed to be a good fund although very agressive in its strategies due to its use of derivatives and short positions. Currently, my multi sector income funds are NEFZX, TSIAX and LBNDX. For me to add PONAX I'd have to give one that I currently own the boot inorder to replace it with PONAX. I better understand how the ones I currently own work and not so much so with PONAX. The use of derivaties and short positions makes it a very aggressive bond fund from from my perspective and one that I have chosen not to own because of this. However, one can not take issue with its good performance.
My thinking is to be more conserative in my income area (although some will argue I've got some agressive bond funds myself) and take more investment risk on the equity side of my portfolio.
@davidrmoran The way PIMIX held up in the GFC is very impressive... but there are lots of funds (I'm thinking of value funds back in the Internet bubble) who held up well in one crisis, then bombed in the next. Of course there are also some that always hold up well.
Ivascyn right now looks like the best there is, but if I invest with him someday, I'd consider it part of my risk-on portfolio.
The newer pimco funds (PDI, PCI) are trading at the highest premium/lowest discount in their limited histories. Older funds, such as PTY, are not at record premia, but are still fairly expensive. As a matter of fact, any decent offering in the CEF world is now too expensive for an entry. This will change, however. It always does. Opportunities usually come more than once annually. Some funds were cheap between april 2013 through february 2016.
@davidmoran historically, CEFs have been trading at a discount due to the higher fee structure. As a result, the language evolved to refer to widening or narrowing "discount". Much of the wrapper funds are still at a discount, especially equities or anything else that could be accessed cheaper via a competing wrapper, such as an ETF or OEF. The recent stampede into the wrapper will end badly for those who came late to the party. The best thing is to wait out in PIMIX or other cheaper alternative at NAV. The discounts will widen again.
This is not my conclusion thou. I am holding on to stuff purchased years ago either at a discount (pdi) or at par (pty). What keeps me in them is extraordinary and consistent NAV performance and reinvestment at a 5% discount. I wouldnt buy at these levels, but am not selling. I did sell PCI, DMO, DSL - DMO just insanely expensive provided its scheduled termination, the other two are just more volatile due to EMD exposures.
historical NAV volatility of PCI doesn't compare well with PDI; that's all... i still have it across some portfolios... nothing against the fund, Andy.
Thanks, fundalarm, didn't think you had anything against it, just checking on composition per your earlier post. It does have a bit more HY and non-U.S. developed than PDI. (Still have a relative lot of PDI here, less of PCI.)
It's looking a bit more reasonably priced now. The div reinvestment will be at the NAV or 5 % of market price.. not a bad deal..... funny how leveraged CEF prices climb by the escalator, but use an elevator on the way down.
CEF wrapper is dependant on VIX. As volatility is subdued, CEFs trade on fundamentals (based on NAV performance) and some investor sentiment (discount/premia). With quiet VIX and outstanding NAV performance, pimco (and other) CEFs attracted more and more new investor money. When VIX spikes, the fundamentals (NAV) become less relevant, and investor psychology dominates trading and discounts widen.
The best example is not even pdi and pci. Look at closed end muni fund performance yesterday. All NAVs were predictably up, due to yields being down, MUB up, and the whole "flight to safety" story. Prices were down though, some significantly.
This is why i dont usually use these in clients accounts. One needs to be either very patient or very tactical with the wrapper.
PCI is still retains a discount although. Narrower than in the past. Separate question: Do folks regard PONDX/PIMX/PONAX as a core holding or a high yieldly satellite? Just curious what folks like @junkster, @davidsnowball, @mikem, @oldskeet think?
Regards,Mike
Mike I can't help you because of the short term nature of my methodology. I was in PONDX in 2012 and a few months in early 2013 but not again until this year. Its returns from 2013 through 2016 were not inspiring. Much of this year's returns are from its exposure to rmbs primarily non agency. I read somewhere PIMCO and Ivascyn are buying all the legacy non agency rmbs from before the crash they can get their hands on. I am 55% IOFIX and 45% DPFNX now which is primarily all non agency but with a heck of a lot less AUM. How long this ultra steady rise in that market can continue there I have not a clue. But the strong housing market has helped immensely.
It was a huge month for non agency RMBS bonds. But have been paring back IOFIX because of its exposure to Houston. If last month's high is taken out (adjusting for the ex div date) will ramp back up.
Comments
I can say from some long-ago experience that Lee's advice generally may be solid, sure, and absolutely on paper, but it is entirely possible for the super-valuable cef that you bought at a discount to nav to become even more super-valuable over time, while you wait and wait for the world to recognize its great value and how discounted it is.
He said when the discount widens, not the premium, and PCI trades at a discount, no?
yes, though less and less:
http://www.morningstar.com/cefs/xnys/pci/quote.html
I misread, completely.
Sorry for the delayed reply on PONAX.
I have looked at PONAX in the past and from what I can surmise it is believed to be a good fund although very agressive in its strategies due to its use of derivatives and short positions. Currently, my multi sector income funds are NEFZX, TSIAX and LBNDX. For me to add PONAX I'd have to give one that I currently own the boot inorder to replace it with PONAX. I better understand how the ones I currently own work and not so much so with PONAX. The use of derivaties and short positions makes it a very aggressive bond fund from from my perspective and one that I have chosen not to own because of this. However, one can not take issue with its good performance.
My thinking is to be more conserative in my income area (although some will argue I've got some agressive bond funds myself) and take more investment risk on the equity side of my portfolio.
Skeet
this sounds wise, but is not what I am doing, so I have to ponder it more seriously
In other words, is Pimco helping many of us defeat the purposes of bonds?
Ivascyn right now looks like the best there is, but if I invest with him someday, I'd consider it part of my risk-on portfolio.
@davidmoran historically, CEFs have been trading at a discount due to the higher fee structure. As a result, the language evolved to refer to widening or narrowing "discount". Much of the wrapper funds are still at a discount, especially equities or anything else that could be accessed cheaper via a competing wrapper, such as an ETF or OEF. The recent stampede into the wrapper will end badly for those who came late to the party. The best thing is to wait out in PIMIX or other cheaper alternative at NAV. The discounts will widen again.
>> time to bail
>> must chew
Since I wrote the above, a only few days ago, PDI is down significantly; don't believe the dividends are going to make it up.
The best example is not even pdi and pci. Look at closed end muni fund performance yesterday. All NAVs were predictably up, due to yields being down, MUB up, and the whole "flight to safety" story. Prices were down though, some significantly.
This is why i dont usually use these in clients accounts. One needs to be either very patient or very tactical with the wrapper.