IntroThere two main types of income closed end funds: tax-free income closed end funds and taxable income closed end funds. Tax free bond CEFs mainly invest in municipal bonds while taxable bond CEFs include taxable corporate and government bond funds, and senior loan funds.
Corporate bonds are issued by companies to finance their business activities and usually being rated by credit agencies such as S&P’s, Moody’s, and Fitch. There are two main types of corporate bonds such as investment grade corporate bond and high yield corporate bond. High Yield bonds typically have lower credit ratings or not rated. These bonds usually have a higher risk of default than investment grade bonds. It also provides high yield to its investor as well.
Best High Yield CEFs
Based on its performance for the past 5 years, the 10 best high yield bond closed end funds of 2012 are:
- PIMCO High Income (PHK)
- Dreyfus High Yield Strategies (DHF)
- Pioneer High Income Trust (PHT)
- AllianceBernstein Global High Income (AWF)
- Invesco High Yield (MSY)
- BlackRock Strategic Bond (BHD)
- Western Asset High Income II (HIX)
- Helios High Yield (HHY)
- Western Asset Global Partners Income (GDF)
- MFS Intermediate High Income (CIF)
Note: You may find my previous article top performer high yield closed end funds 2011.
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| PIMCO High Income |
This PIMCO fund has a 5 year annualized return of 16.74%. The fund has returned 40.14% over the past 3 year, and 12.84% since its inception. Morningstar analysts have rated this fund with neutral rating. It also receives 3 stars rating.
This high yield closed end fund has an average duration of 7.07 years and average maturity of 8.05 years. The top 5 sectors in its holdings are: Non-Captive Cons. Finance (17%), insurance life (17%), banks (14%), electric utility (8%), and Non-Captive div. Finance (4%). Top 4 country allocations are: USA (69.43%), United Kingdom (11.54%), Ireland (3.97%), Spain (2.78%), and Bermuda (0.89%).
2. Dreyfus High Yield Strategies (Ticker: DHF)
The Dreyfus High Yield Strategies fund utilizes its assets to purchase US and foreign issued non-investment grade bonds and defaulted securities. The current yield is 10.34% per year. The total net assets are $401 million. This Dreyfus fund market price is traded at 19% premium to its fund net asset value. It has an expense ratio of 2%. The portfolio managers are: Chris Barris, Dean Graves, and Stephen Sylvester.
This high yield bond closed end fund has returned 10.97% over the past 1 year, 35.27% over the past 3 year, and 10.37% over the past decade. The year to date return is 7.65%. This top closed end fund is ranked 3 stars by Morningstar.
As of January 2012, the fund’s average duration is 6 years and the fund’s average maturity is 5.04 years. The top 3 holdings are: Forward Exchange Contract Usd, Biomet 11.625% 11.63 15 Oct 2017, and Severstal Columbus Escrow 10.25% 10.25 15 Feb 2018. The top 5 sectors include: Diversified Financial Services, Media, Telecommunications, Com & Pro Services, and Healthcare.
3. Pioneer High Income Trust (PHT)
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| Pioneer High Income Trust |
Andrew Feltus is the fund’s manager since 2005. The current distribution rate is 9.73%. This CEF also has $571 million total net assets. It also has 33.93% effective leverage. The expense ratio is 1.11% per year (including 1.11% baseline expense and 0.00% interest expense).
This best high yield CEF has a 5 year annualized return of 13.84%. It is rated with 5 stars. The fund assets are allocated as follows: corporate general bonds (72.36%), short term debt (7.9%), convertibles (4.79%), loans (4.71%), and municipal bonds (3.89%).
4. AllianceBernstein Global High Income (AWF)
Rated with silver rating by Morningstar Analysts, this AllianceBernstein Global High Income fund uses its assets to buy high yielding government and corporate fixed income debts. It is managed by Paul J. DeNoon and Doug Peebles. Its total net assets are $1.39 billion. This AWF fund market price is traded at 2.47% premium to its fund net asset value. It doesn’t use any leverage currently.
This high yield bond closed end fund has returned 30.01% over the past 3 year, 14.63% over the past 10 year. Morningstar has given this AllianceBernstein fund 3 stars. It also has a yield of 7.91%. This yield is distributed on monthly basis.
5. Invesco High Yield (MSY)
This Invesco High Yield fund objective is to provide high income and capital appreciation to its investors by investing in high yielding bonds. The distribution rate is 8.44%. Its expense ratio is 0.27%. The fund has total holdings of 327 bonds.
Top Performer Real Estate Closed End Funds July 2011
The fund performance (market price) for the past 5 years:
- Year 2011: 13.25%
- Year 2010: 17.57%
- Year 2009: 66.23%
- Year 2008: -26.97%
- Year 2007: 4.57%
This BlackRock Strategic Bond fund invests most of its assets in a diversified portfolio of bonds including corporate bonds. The total net assets are: $122 million, which is relatively smaller than the previous funds. The expense ratio is 1.51%.
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| Western Asset High Income II |
The Western Asset High Income II fund is ranked bronze rating by Morningstar Analysts. It currently has market value of $844 million. The total leverage ratio is 25.29%. The current market price is traded 14.34% premium to the fund NAV. This high yield bond fund has a yield of 9.84%.
The annual portfolio turnover rate of this best CEF is 84%. The average UNII per share is $0.0598 (as of November 2011). The fund has returned 33.21% over the past 3 year, and 10.85% over the past decade.
8. Helios High Yield (HHY)
This Helios High Yield fund has total net assets of 97 million. It also has an expense ratio of 2.06%. The effective leverage is 30.08%. This taxable bond fund has an average duration of 5.88 years. The current top 3 sectors in its holdings are: high yield corporate debt (96%), investment grade corporate debt (3%), and cash (1%). This fund is part of Brookfield Investment Management Inc fund.
9. Western Asset Global Partners Income (GDF)
This Western Asset Global Partners Income fund is rated with 3 stars rating by Morningstar. The total distribution rate is 9.03%. The fund market value is $194 million. In 2008, this high yield fund has an annualized return of -37.72%.
10. MFS Intermediate High Income (CIF)
This MFS Intermediate High Income fund focuses its investment in high yield bonds, unrated bond and zero coupon securities. It has total net assets of $85 million. The fund managers are John Addeo and David P. Cole.
This high yield bond closed end fund has a year to date return of 11.76%. It has returned 34.90% over the past 3 year, and 10.14% over the past decade.
Investment risk
Similar to mutual funds, investing in closed end funds involves risks such as market risk, premium/discount risk, leverage risk, management risk, investment style risk, etc.
Disclosure: No Position
Other Funds article:
Fund Performance
| No | Fund Name | Ticker | Market Return % | Lipper Rank | Premium / Discount | Leveraged | Expense Ratio | Yield |
|---|---|---|---|---|---|---|---|---|
| 1 | PIMCO High Income | PHK | 16.74% | 3 | 65.52% | 21.42% | 1.11% | 11.39% |
| 2 | Dreyfus High Yld Strat | DHF | 13.84% | 6 | 18.97% | 28.93% | 2.00% | 9.98% |
| 3 | Pioneer High Income Tr | PHT | 13.84% | 8 | 26.43% | 28.69% | 1.11% | 9.90% |
| 4 | AllianceBernstein Gl HI | AWF | 13.39% | 11 | 2.43% | 0.04% | 1.01% | 10.13% |
| 5 | Invesco High Yield | MSY | 11.86% | 14 | 3.23% | 15.02% | 1.52% | 8.49% |
| 6 | BlackRock Strategic Bond | BHD | 10.91% | 16 | 3.10% | 18.78% | 1.51% | 7.69% |
| 7 | Western Asset Hi Inc II | HIX | 10.66% | 19 | 13.67% | 24.85% | 1.61% | 10.04% |
| 8 | Helios High Yield | HHY | 10.56% | 22 | 6.22% | 28.25% | 1.95% | 9.00% |
| 9 | Western Asset Gl Prt Inc | GDF | 10.24% | 24 | 6.28% | 23.24% | 1.66% | 8.84% |
| 10 | MFS Intmdt Hi Inc | CIF | 9.86% | 27 | 5.63% | 41.52% | 1.81% | 8.99% |
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