CEFS: Good Relative To Peers, But Lagging Inflation

seekingalpha03-04

Juanmonino/E+ via Getty Images CEFS strategy Saba Closed-End Funds ETF (BATS:CEFS) is an actively managed ETF of closed-end funds targeting income-seeking investors. It started investing operations ...

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It started investing operations ...</p>\n\n<a href=\"https://seekingalpha.com/article/4675637-cefs-good-relative-to-peers-but-lagging-inflation\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1670627923.USD","symbol_name":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4675637-cefs-good-relative-to-peers-but-lagging-inflation","article_id":"2416920981","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/155437849/image_155437849.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2416920981","pubTimestamp":1709540490,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Juanmonino/E+ via Getty Images  CEFS strategy  Saba Closed-End Funds ETF (BATS:CEFS) is an actively managed ETF of closed-end funds targeting income-seeking investors. It started investing operations ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1670627923.USD":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) ACC","BLK":"贝莱德","BK4535":"淡马锡持仓","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","BK4588":"碎股","BK4550":"红杉资本持仓","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU2505996681.GBP":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (GBPHDG) INC","LU2505996509.AUD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (AUDHDG) INC","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","LU1291159041.SGD":"CPR Invest - Global Silver Age A2 Acc SGD-H","LU1064131342.USD":"Fullerton Lux Funds - Global Absolute Alpha A Acc USD","LU1074936037.SGD":"JPMorgan Funds - US Value A (acc) SGD","BK4581":"高盛持仓","BK4135":"资产管理与托管银行","BK4504":"桥水持仓","LU0731783394.SGD":"Fidelity Global Dividend A-MINCOME(G)-SGD","CEFS":"Saba Closed-End Funds ETF","LU1201861249.SGD":"Natixis Harris Associates US Equity PA SGD-H","LU1599440770.SGD":"FIDELITY GLOBAL DIVIDEND \"A\" (SGDHDG) INC","LU0980610538.SGD":"Natixis Harris Associates US Equity RA SGD-H","LU1989771016.USD":"东方汇理环球老龄化投资基金 A2 Acc","PCEF":"Invesco CEF Income Composite ETF","LU2430703095.HKD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4\" (HKD) INC","YYY":"Amplify High Income ETF","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC","LU2430703178.SGD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (SGDHDG) INC","LU1670628061.USD":"M&G (LUX) NORTH AMERICAN DIVIDEND \"A\" (USD) INC","LU2430703251.USD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4\" (USD) INC","FDN":"First Trust Dow Jones Internet I","BK4567":"ESG概念","BK4534":"瑞士信贷持仓","BK4585":"ETF&股票定投概念","BK4533":"AQR资本管理(全球第二大对冲基金)","LU2592432038.USD":"WELLINGTON MULTI-ASSET HIGH INCOME \"A\" (USD) ACC"},"translate_title":"CEFS：相对于同行良好，但通胀滞后","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"YYY":1,"PCEF":1,"CEFS":1,"FDN":0.9,"BLK":0.79},"content_text":"Juanmonino/E+ via Getty Images  CEFS strategy  Saba Closed-End Funds ETF (BATS:CEFS) is an actively managed ETF of closed-end funds targeting income-seeking investors. It started investing operations on 03/21/2017, has a distribution rate of 8.53% and a portfolio of 98 CEFs. Like for all funds holding CEFs, the expense ratio is very high: 1.10% of management fee and 1.80% of held fund fees and other expenses, totaling 2.90%. As described by Saba Capital, the strategy is very flexible, like for most actively managed funds. On the downside, it lacks transparency. The investment process \"combines fundamental analysis, quantitative analysis and proprietary screening tools\" and may include equity and fixed income funds traded in US and non-US exchanges. Additionally, the fund may invest in funds subject to an activist campaign by a shareholder and may take an active part in such a campaign. There is no specific guideline about credit ratings, except that the fund is seeking high yields, and \"substantially all of the Underlying Funds' assets may be invested in lower rated securities\". Moreover, the fund may borrow for investing purposes and hold short positions in US Treasury securities derivatives to hedge interest rate risk. Finally \"the Fund also may take short positions in Underlying Funds by engaging in short sales or using derivatives.\" The portfolio turnover rate was 71% in the most recent fiscal year.  CEFS portfolio As of writing, the fund holds long positions in closed-end funds for about 118% of asset value, meaning a leverage of 1.18 (this factor doesn't take into account that some holdings may be leveraged). The fund also holds short positions in 5-year and 10-year treasuries futures for an exposure of about 57% of asset value. The asset class breakdown of underlying funds is represented on the next chart, in percentage of their aggregate value in the portfolio (ignoring leverage and treasury derivatives). The portfolio is overweight in stocks (76%) and more than half of its value is invested in U.S. companies. A cautionary note: this breakdown may change over time; it is not typical of the strategy. Asset class breakdown (Chart: author; data source: Fidelity) The portfolio holds 98 funds and is very concentrated. The top 10 holdings, listed below, represent 71% of asset value, the heaviest position weighs 20% and about 40 holdings are negligible (with individual weights below 0.1%). The three largest holdings (ECAT, BIGZ, EMO) are mostly invested in equities (between 60% and 95%) and the top two are not leveraged.   TICKER NAME WEIGHT   ECAT BLACKROCK ESG CAP ALL TRM TR 20.11%   BIGZ BLACKROCK INNOV & GRW TRM TR 10.69%   EMO CLEARBRIDGE ENERGY MIDSTREAM 8.08%   NMAI NUVEEN MULTI-ASSET INCOME 5.62%   ADX ADAMS DIVERSIFIED EQUITY 5.26%   ASA ASA GOLD AND PRECIOUS METALS 4.42%   BCAT BLACKROCK CAPITAL ALLOC TR 4.40%   NBXG NBRGR BRMN NEX GEN CONNECT 4.38%   CTR CB ENERGY MLP TOT RET FUND INC 4.28%   BFZ BLACKROCK CALIFOR MUNI IN TR 3.95%   Click to enlarge Closed-end funds are often chosen by investors for their distribution yield. They also have a few metrics that are not applicable to stocks and ETFs. Two of them are more important than the yield:  Discount to NAV (higher is better); Relative discount = Discount to NAV minus its 12-month average (higher is better).  The latter is meaningful because the discount often shows a mean-reversion pattern. As an example, the top 3 holdings are priced between -8% and -12% below NAV, which looks good at first sight. However, all three are overpriced by about 4% relative to their 12-month average discounts. CEFS vs. Competitors The next table compares characteristics of CEFS and two popular ETFs of CEFs:  Invesco CEF Income Composite ETF (PCEF) Amplify High Income ETF (YYY)      CEFS PCEF YYY   Inception 3/20/2017 2/19/2010 6/12/2012   AUM $175.72M $749.40M $438.88M   Avg Daily Volume $1.34M $3.34M $2.57M   Yield TTM 8.82% 9.44% 12.12%   4 Year Avg Yield 10.09% 8.35% 10.81%   Div Growth 3 Yr (annualized) 1.28% 1.78% -2.63%   Div Growth 5 Yr (annualized) 0.80% 1.22% -1.59%   Click to enlarge Since inception, CEFS has outperformed its peers by a wide margin, as reported on the first chart below. Total return looks good (over 89%), but price return is flat (plotted on the second chart). In the same time, the cumulative inflation has been about 26% (based on the Consumer Price Index), resulting in a decay of inflation-adjusted capital for shareholders. CEFS vs YYY, PCEF total return since inception (Seeking Alpha) CEFS vs YYY, PCEF price return since inception (Seeking Alpha) Over the last 12 months, CEFS also is the best performer: CEFS vs peers, 12-month total return (Seeking Alpha) The annual sum of distributions has hardly increased from $1.72 per share in 2018 to $1.75 in 2023. The income stream has grown by 1.7% in 5 years, while the cumulative inflation has been about 22%. Once again, it looks good at first sight, but the inflation-adjusted income stream also went down. CEFS distribution history (Seeking Alpha) Takeaway  Saba Closed-End Funds ETF is an actively managed fund of funds with a very flexible strategy. Its investing universe includes US and international exchanged-traded closed end funds. The management team may borrow, buy, and short funds, and short treasuries to hedge interest rate risk. CEFS has significantly outperformed PCEF and YYY. The total return looks good, but price and distributions are flat since inception, resulting in a decay of over 20% in inflation-adjusted value for shareholders regarding both capital and income stream.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2416920981"}