Invesco Term 2023 Trust Files Semi-Annual Report

We have written before and are owners of the Invesco High Income 2023 Target Term Trust (NYSE:IHIT).

Invesco recently filed the semi-annual report for the CEF and it appears that everything continues on track for the payment of the monthly 5 cent dividend.  This represents a current yield of around 6% which is a darned good yield for a CEF than holds mostly (80%) investment grade securities.  There are 57 different securities in the Trust–so a decent level of diversification.

The semi-annual report can be found here.

The objective of the trust is to return $9.835 to the investor on or about on 12/1/2023 while paying a reasonable dividend along the way.  The current NAV (net asset value) of the Trust is $9.97 while shares are now trading around $10.02.

We must point out that the Trust does use leverage to help generate incremental income.  The $80 million in leverage has a weighted cost of 3.38%.

The chart below shows the lack of volatility this issue has displayed SO FAR.

Maybe this security fits a need for your investment portfolio–and maybe not.

16 thoughts on “Invesco Term 2023 Trust Files Semi-Annual Report”

  1. Dave9
    After the 20007/2008 mortgage meltdown I am concerned regarding a CEF for commercial mortgages with opaque information on the underlying properties. Challenging to determine from the SEC filings if there are second mortgages, a breakdown on the type of properties, i.e apartments, office buildings, hotels, strip malls, etc, a geographic distribution of the mortgages, relative risk concentration or current information regarding any late payments or loans which are underwater. The bond ratings for the commercial mortgages come from a wide spectrum of rating companies. Invesco does not state who issued each bond rating in the fund. If a mortgage defaults in a mortgage pool, what rights does Invesco have to represent the shareholders in the fund?

    IMHO the risk premium over a utility QDI, on a YTC basis may not be sufficient to justify a purchase.

    Open to other opinions and thoughts.

    1. Hi Dave–I agree that the transparency of these things is not as good as it could be—they fall into the ‘trust me’ basket of securities out there–like level 3 assets in the BDC arena. I maintain modest positions on issues like these–whether the risk premium is adequate is a question for all investors.

      Thanks for commenting.

  2. looked at the semi annual report to find int expense cost.. .. the leverage of 80mil is priced at 1mLIBOR plus 1.5% .. so they are paying 3.8% now.. which is up .42% from 3.38%… another 336,000 of interest.. the 8/31/18 UNII report showed .045 excess undistributed net investment income “Padding” in the fund so dist appears covered even w higher int cost.. not sure how long this will continue.. the NAV has fallen from this summer as share price recovered..

    many of these CEF’s are going to be facing higher leverage costs as I stated above which has me on alert.. however yr end is usually a good time to grab a bargain during tax loss selling season and when funds distribute yr end extras etc.

    1. Historically, tax loss selling for CEFs peaks first 2 weeks of December. Be a boy scout and be prepared.

      There have been big losses in certain CEF categories this year so I have to think tax selling will be aggressive.

      1. Bob, I study individual issues not CEFs, as that research bores me too much. Generally , also, if I am the chef and the one held accountable, I am buying the ingredients myself. But that wont preclude me from trying to make a quick buck off someone elses brain…Are you monitoring any specifically to maybe purchase?

        1. Bob and Grid, the easy way to screen CEF’s is to set your parameters at this is a free site run by closed end fund giant Nuveen. I keep following (PCI) run by PIMCO and believe it’s run extremely well, but the internal fee of 2.07% and leverage fee of 2.1% for a total fee structure of 4.19%(!) has scared me away. I have limited my CEF expose to very small amounts because I like to invest after my own deep due diligence and not “trust” in others to run their high cost closed end or mutual funds. Wishing you profitable investing, Nomad

          1. Thank you Nomad, I book marked it. A 4.19% fee? Outrageous! But I appreciate some of that fee money going into a free screener for me.

            1. Grid, PIMCO is Pacific Investment Management Company, LLC (commonly called PIMCO) and owned by Allianz (symbol AZSEY) they run just under $2 TRILLION dollar of investment assets. Think about getting just a 1% fee on the longer term asset base that continues to grow each decade. Buffett has spoken many times about lowering one’s fee structure as the largest factor in long term investing results. As a tip to everyone reading here Merrill Edge gives me 100 free trades each month (not even a handling, postage, insurance fee) and I’m sure makes their money on their sweep low interest money market and margin fees. I urge everyone to lower your brokerage fees because it’s just added money in your pocket and not the firms or most overpaid stock brokers. Time flies over us but leaves it’s shadow behind, Nomad

              1. Nomad, If these guys were such great investors they wouldnt need anyones money as they would make a fortune just with their money and ours wouldnt be needed….Oh wait, they are mediocre and they know the best way to have great reliable safe returns is to scrap fees off other peoples money whether they are successful or not…That is a better model…Hmm, I think that basic concept is at Seeking Alpha were fools subscribe to baffoons who recomend stocks that drop 30% and then crow about the dividend yield being higher now and that is good. Who cares about a 30% capital loss impairment….We got that dividend! Well until that is cut also, and the dumpster stock drops even more.

                1. Grid, you and I both know that Seeking Alpha and their “professional” writers will NEVER keep a data base of the exact buy, sell and hold recommendations and their REAL track record. They seem to be filled and have attracted these flim-flam carnival barkers that have no accountability, the need for integrity and lack care for their subscribers. When I emailed their management they basically said their “professional” writers newsletters they sell are caveat emptor and they didn’t feel then need to publish any track record(s) of these. Why would full truth and accountability be so difficult to ascertain… hmmmm

                  1. Speaking of accountability….ERA sent a very professional post in an article wanting clarification of Rida Morwas accounting certification in AZ, as he couldnt find it in state database…A stalling answer by small lapdog Pendy, was soon met later by an absolute pull of the post and response…Hmm, wonder why they would be scared of that simple fair post? Makes one wonder…..

              2. Speaking of low brokerage fees, Chase brokerage doesn’t charge any fees at all (there may be a requirement to have certain amount in any kind of assets in their accounts for that but I am not sure). It didn’t even charge me foreign transaction fees that Fidelity and others usually charge.

        2. I appreciate that you like to do your own cooking. In fixed income, so do I, most of the time. But then there are reasons to make exceptions.

          I own FPF and depending on what happens between now and year end may add heavily to it. My process for fund selection is quite different than the SA crowd. I start by looking for funds 1) whose portfolio construction and portfolio I like, 2) have shown a good total returns through the market cycle, and 3) have competent management.

          FPF gets me lots of things I can’t get on my own. 90% of the portfolio is institutional issues, i.e. foreign issue (including many US issuers), private placements, 144s, and issues that just don’t trade retail, even on a bond desk.

          If you dig, you will find that there are a great many issues that are SEC registered, have CUSIPs, but only trade in large blocks. You can see the trade data on FINRA but you can’t buy them. Quality companies whose names you know. Short duration. 85% F2F or otherwise variable. Very little true junk. Mostly QID. Internationally diversified. Industry diversified. Yes, it’s dominated by financial issues so if you want a utility portfolio it won’t work. But for me it does. But for me it does, and I’d be happy to own the individual ingredients.

          Only after looking at the fund do I look at valuation metrics. Simply, I look for good entry points. I am a follower of Howard marks where it comes to entry points. No point buying a great fund if you overpay.

          By any metric FPF is cheap now. The discount to NAV is about as wide as it ever gets. It’s cheap relative to other funds. Z-scores are all low. Divi is covered but I think they have one more divi cut coming in the next 6 months. UNII is positive. NO ROC. Yield on price is 8.5%. Higher than during the taper tantrum.

          I watching closely to see the price action until the end of the year. So, too, FFC and a few muni funds.

  3. wow the leverage cost is moving up, w LIBOR marching higher almost daily unless levered CEF’s start to get higher returns, I would anticipate more tweaks down in payouts.

  4. I have a small account which was devoted to several muni CEFs (MUJ among them) and was doing fine for years but the share price reacted very unfavorably in this rising rate environment ( understandable, but I thought the 15% discount to NAV was excessive). I sold off the vast majority of the muni funds and replaced them with a variety of issues of which IHIT is by far the biggest. IHIT’s 6% taxable isn’t as good as MUJ’s 5% tax-free but the steady share price more than makes up for it. Bottom line is you need to be able to sleep at night.

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