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| Mortgage Bond CEFs |
One of the taxable bond closed end fund sectors is mortgage bond CEF. This bond CEF invests mainly in mortgage backed securities, commercial loan, other asset backed securities, etc. It also provides high income for investors.
Note: Some of these funds market price trade either above (premium) or below (discount) their NAVs. It may also use leverage to enhance its performance. Please do your research before investing in these bond closed end funds.
The best U.S. mortgage bond closed end funds of 2012 are:
- PCM Fund (PCM)
- First Trust Mortgage Income (FMY)
- BlackRock Income Trust (BKT)
- American Strategic Income (ASP)
- American Income Fund (MRF)
- American Select Portfolio (SLA)
- Helios Total Return (HTR)
- American Strategic Income II (BSP)
1. PCM Fund (Ticker: PCM)
This PCM fund objective is to provide high current income and capital appreciation. It utilizes its assets to purchase commercial mortgage backed and non-investment grade bonds. Daniel J Ivascyn is the fund manager since 1998. This taxable bond fund has an annual expense ratio of 2.44%. The current distribution yield is 8.28%.
More: Best Government Bond Mutual Funds 2012
Rated with 3 stars by Morningstar, it has returned 36.81% over the past 3 year, and 14.71% over the past 5 year. The top 3 bond sectors are multi-class CMOs (55.4%), Real Estate ABS (20.67%), and Corporate bond (16.85%).
2. First Trust Mortgage Income (FMY)
First Trust Mortgage Income fund invests mainly in investment grade bonds especially mortgage backed securities. Managed by Anthony Breaks since 2011, it has 9.81% dividend yield which is paid monthly. The market price is trading 11.89% premium to its net asset value (NAV). The total assets are $91 million.
This mortgage bond closed end fund has 1.94% expense ratio. It has an average duration of 0.60 years and an average maturity of 4.21 years. The fund has a 5-year average return of 13.41%.
3. BlackRock Income Trust (BKT)
The investment aim of BlackRock Income Trust fund is to provide high current income and capital preservation. It uses its assets to buy mortgage backed securities (MBS). With $674 million of assets, it has 1.05% expense ratio. It also has an effective leverage of 23.95%. If you are interested in best closed end funds, you can check my previous article.
This mortgage bond fund has a YTD return of 8.21%. It has returned 11.20% over the past 5 year, and 7% over the past decade. The top 5 bond sectors are agency bond (95.33%), U.S. treasuries (19.34%), short term debt (3.15%), mortgage backed securities (2.67%), and asset backed securities (1.57%).
4. American Strategic Income I (ASP)
American Strategic Income I fund is seeking to provide high income and capital growth for its investors by investing in mortgage related bonds. The fund managers are Russ Kappenman and Chris Neuharth. Sponsored by FAF Advisors Inc, it has distribution rate of 8.18%. The baseline expense ratio is 1.41%.
Previous: Top Performer Taxable Bond Closed End Funds July 2012
As of June 2012, it has average UNII per share of $0.0113. The worst 1 year total return was occurred in 2008 with -11.01%. The top 3 sectors are commercial loans, preferred stocks, and commercial mortgage-backed securities. The annual portfolio turnover rate is 13%.
5. American Income Fund (MRF)
The American Income Fund invests in fixed income and mortgage backed securities. The annual expense ratio is 1.18%. The current dividend yield is 7.4% per year. The fund average maturity is 7.11 years. This fund has 13.09% effective leverage.
Disclosure: No Position
Fund Information
| No | Fund Desciption (Ticker) | 5 Year Return | Lippper Rank | Preimum / Discount | Expense Ratio | Yield |
|---|---|---|---|---|---|---|
| 1 | PCM Fund (PCM) | 15.30% | 10 | 10.85% | 2.44% | 9.53% |
| 2 | First Trust Mtge Inc (FMY) | 13.61% | 20 | 11.98% | 2.23% | 10.25% |
| 3 | BlackRock Income Trust (BKT) | 10.80% | 30 | -5.01% | 1.05% | 6.23% |
| 4 | American Strat Inc (ASP) | 9.60% | 40 | -9.45% | 2.43% | 8.20% |
| 5 | American Income Fund (MRF) | 9.25% | 50 | -5.23% | 1.17% | 7.86% |
| 6 | American Select Port (SLA) | 6.36% | 60 | -12.41% | 2.73% | 8.43% |
| 7 | Helios Total Return (HTR) | 4.20% | 70 | 5.68% | 1.71% | 9.12% |
| 8 | American Strat Inc II (BSP) | 4.15% | 80 | -14.45% | 2.68% | 8.00% |
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