Updated Leverage Ratios of Closed End Funds (CEF)

As most all of you know closed end funds (CEFs) offer some of the highest quality preferred stocks available. In fact this is our favorite “shopping” place–although in their current overvalued state there are not many bargains.

The safety of these preferreds is ensured by the requirement that these CEFs have an asset coverage ratio of 200% or GREATER. For us the more the merrier.

One of our favorite issues, the Tri-Continental 5% preferred (NYSE:TY-P) which was originally issued in 1963, has a coverage ratio of 4400%.

We have updated a good share (most) of the coverage ratios for the CEF preferreds outstanding. The leverage ratios are generally published twice a year by the CEFs in their semi-annual and annual reports.

The updated list can be found here.

These high quality, but modest coupon issues, mostly have great safety, BUT if interest rates spiked very high the share prices would take major hits.

Disclosure – we own numerous issues on this list–multiple Gabelli Issues, the Bancroft Fund issue, the Ellsworth Fund issue, the AllianzGI issues and the Tri-Continental issue.

7 thoughts on “Updated Leverage Ratios of Closed End Funds (CEF)”

  1. For some reason, the Gabelli CEF preferreds are rarely called, even when it looks like refinancing would greatly benefit the funds.

    At one time I owned all of the Gabelli CEF preferreds; I bought them just after the financial crisis circa 2009. I held them until 2016, when it looked like they would surely be called, but that turned out to be wrong. The interest rate call was correct; the 10 year treasury fell to 1.4% in 2016. But the refinancing I expected from the Gabelli funds didn’t happen. Not that they are never called, but often are not despite falling interest rates.

    Does anyone know why?

    1. donocash–I have no answer to you, but I concur with your observation. Some like Gut-A 5.625% have been redeemable since 2008 and surely they could refi it down around 5%–but it is a smaller issue of 1.2 million shares so maybe the savings are too meager to justify the expense.

  2. HFRO-PA looks like one of the few to pick even if their asset coverage ratio is not wonderful.

  3. Never paid much attention because of the low yield, but now they look better than all these IPOs paying 5%. Very low bankruptcy risk. But with interest rate risk on one side and call risk on the other side, you could lose value either way.
    Many of them go ex-div on Wednesday. Does dividend capture strategy work with these issues?

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