Saba Closed-End Funds ETF

CEFS

Market cap $422M

We review the CEF market valuation and performance through the fourth week of April and highlight recent market action. CEF markets faced renewed risk aversion, with sector discounts widening to historical averages and MLPs and Convertibles led to the upside. Western Asset CEFs' NII remained largely stable; key drivers include short-term rate direction, liability management, and overdistribution.

The market environment is challenging, to say the least. We discuss how one should invest in today's market. The article presents five different investment strategies, including a fixed-income strategy, high-income strategy, sleep-well-at-night strategy, growth-focused strategy, and the Near-Perfect Portfolio strategy. Selecting a strategy aligned with personal risk tolerance and sticking to it through cycles is critical for long-term success.

Redemptions are rising and managers are starting to limit withdrawals. Software-linked lending is flashing stress signals.

Saba Closed-End Funds ETF (CEFS) remains a 'Hold' due to current macro uncertainty and overextended market valuations. CEFS delivers a sustainable 7.6% distribution rate, robust long-term returns, and NAV stability through active management and diversified asset allocation. The ETF's flexibility to allocate to commodities, such as gold, has driven recent outperformance and positions it well for potential stagflation scenarios.

Dividend investing isn't just a defensive play or a retiree's game.

FOF is rated 'Buy' for income-oriented investors, but only after a technical correction from its overheated premium. Current FOF premium (8.72% P/NAV, Z-score 4.85) signals short-term overvaluation; optimal entry is at a 1.01x–1.03x P/NAV. FOF and CEFS are compared here as they represent the main rivals for capital within the specialized 'fund of funds' space.

Saba Closed-End Funds ETF is rated Buy for income-focused investors seeking reliable monthly distributions and long-term total return. CEFS offers an 8.2% TTM yield, monthly $0.14/share payments, and periodic special dividends, supported by Saba Capital's activist management expertise. The fund's highly diversified portfolio spans over 1,000 positions across equities, fixed income, and alternatives, trading near NAV with a 0.35% premium.

CEFS is an actively-managed fund investing in over a dozen income-producing CEFs. It yields 7.4% and has significantly outperformed its benchmark since inception. Although the fund continues to outperform, fundamentals have somewhat worsened across the board.

Saba Closed-End Funds ETF (CEFS) targets CEFs trading at discounts to NAV, aiming for income and capital appreciation through active management. CEFS currently offers a 7.3% yield, and charges a 1.1% management fee within a fund-of-funds structure, with total expenses of 4.3%. The portfolio has shifted to a more defensive stance, with increased cash holdings and a concentrated exposure in top holdings, primarily in the US.

Every month I share what closed-end funds I've been buying in the last month. For July, that included swapping out some holdings in favor of others and consolidating my portfolio a bit. In doing that, it also included swapping out of two CEFs in favor of ETF positions, one of which I already held a position in.