Morningstar, Inc. Commentaries

The Indianapolis Colts arent alone in their angst over deflation.

Feb. 19, 2015 — Morningstar, Inc. — The Indianapolis Colts arent alone in their angst over deflation.

Oil, Cuba, and Russia, Oh My!

Jan. 15, 2015 — Morningstar, Inc. — A surprising December capped off a decent year for most CEFs.

Nearing the End of a Decent Year in CEFs

Dec. 18, 2014 — Morningstar, Inc. — Falling oil prices buffet some CEFs, but many have turned out strong returns so far this year.

Nov. 20, 2014 — Morningstar, Inc. — Oil prices continued their descent in October, leading some to question the future health of the countrys largest oil producers. Consumers of oil and gas, however, have benefited from this steady decline in prices. Airlines, for example, have fared extremely well this year, in part because of low fuel costs. Despite the hit that oil and gas firms and energy and related mutual funds took last month, the broader equity market did quite well. The S&P 500 Index gained 2.4% in October and was up nearly 11% for the year to date.

Nov. 10, 2014 — Morningstar, Inc. — The leaves arent the only things falling this month.

PIMCO CEFs Post-Gross

Nov. 04, 2014 — Morningstar, Inc. — Checking in on PIMCOs CEFs a month after Gross sudden departure.

Commodities CEFs Tank in September

Oct. 16, 2014 — Morningstar, Inc. — The unexpected departure of PIMCO founder and chief investment officer Bill Gross dominated the headlines at the end of September, but PIMCO investors were far from the most disappointed folks last month. Gold prices dropped 6% in September, continuing a months-long decline from its mid-March high of $1,391.77 per ounce. Since that high, gold prices have fallen more than 13% through the third quarter. The strengthening of the U.S. dollar and improving economy also put pressure on the prices of other precious metals and commodities like oil and gas.

Should PIMCO CEF Investors Jump Ship?

Oct. 01, 2014 — Morningstar, Inc. — The sudden departure of PIMCO founder and CIO Bill Gross on Friday, Sept. 26, rocked the investment world. As pundits mulled over who might be crowned the next Bond King, closed-end fund investors had concerns of their own. Because several PIMCO CEFs have historically traded at relatively high premiums, some CEF watchers predicted extreme share price declines, particularly for the five CEFs that Gross managed. Its also widely known that Gross owned a significant amount of shares of many PIMCO CEFs. Some wondered whether Gross would dump all of his shares, putting further downward pressure on share prices and premiums.

From the Mailbag: Rising Rates and CEFs

Sep. 26, 2014 — Morningstar, Inc. — Last week, the Federal Reserve announced that it will continue the unwinding of its bond-buying as planned in October. The Fed also noted that it would stop all of its asset purchases at the next meeting if economic indicators point to continued improvement in unemployment and GDP growth and if inflation remains within an acceptable range. With that in mind, readers may be concerned about the potential effects of rising interest rates on closed-end funds.

Sep. 23, 2014 — Morningstar, Inc. — Leverage Changes

Gabelli Health & Wellness (GRX ) announced that it recently completed the offering of 1.4 million 5.875% Series B Cumulative Preferred shares, raising a total of $35 million.

Sector Equity CEFs Excelled in August

Sep. 12, 2014 — Morningstar, Inc. — Despite continued turmoil overseas, the U.S. economy chugged along in August. In its July meeting minutes, released in late August, the Federal Reserve commented that inflation and labor market conditions had moved closer to its longer-run objectives and that it anticipated continued progress toward those goals. In that vein, the Fed kept rates unchanged and took another $10 billion out of its monthly asset purchases. But, the minutes also contained language that caused some hubbub among investors.

Are Discounts and Premiums Important When Selecting CEFs?

Sep. 05, 2014 — Morningstar, Inc. — Early September is a great time of year. Kids are back in school, the football season is getting under way, and the weather is still great here in Chicago—at least for now. But September is not always very kind to investors portfolios. In fact, The Wall Street Journal recently reported that September is the only month that has experienced an average decline in the market during the past 20, 50, and 100 years.

Return-of-Capital Special Cases

Sep. 03, 2014 — Morningstar, Inc. — Last week, we tackled the issue of return of capital in closed-end funds. The ideas and calculations presented were appropriate for evaluating most CEFs but, importantly, not master limited partnerships.

A Rundown on Return of Capital

Aug. 27, 2014 — Morningstar, Inc. — Return of capital in closed-end funds is a hot-button issue for investors. On one side of this often-polarizing argument are investors who believe all return of capital is bad and who avoid any fund that has ever distributed return of capital. On the other side are investors who believe return of capital isnt that bad in light of a funds discount. The truth lies somewhere in the middle.

Why Do You Own High-Yield Bonds?

Aug. 20, 2014 — Morningstar, Inc. — The high-yield market was rattled last week causing a $6.5 billion outflow out of high-yield funds and exchange-traded funds for the week ended Aug. 6. This brought a four-week streak of net redemptions totaling $12.5 billion. The massive outflows followed months of commentary suggesting the high-yield market was showing signs of froth and highlighting the risks to this sector after a multiyear bull run. Itll be interesting to see whether these outflows continue or whether investors waiting on the sidelines will now jump back into the fray given slightly higher yields following the sell-off.

July Was a Mixed Bag for CEFs

Aug. 14, 2014 — Morningstar, Inc. — At the start of July, the markets were relatively calm despite escalating crises in Russia and the Middle East, though as the month wore on news from abroad began to weigh on the market. Despite largely positive economic news out of the United States near month-end, Argentinas pending default cast a shadow on the market. The S&P 500 Index plunged 2.4% in the last five trading days of July, closing the month down 1.4%.

The Z-Statistic Is No Silver Bullet

Aug. 01, 2014 — Morningstar, Inc. — Investing in a closed-end fund is more complicated than investing in a mutual fund thats run by an experienced manager with a consistent and repeatable process and that charges low fees. Investors must also carefully evaluate a CEFs distribution policy and consider its sustainability, as well as the amount and type of leverage, to understand the potential volatility of returns. The final piece is valuation.

How Safe Is Your CEFs Distribution?

Jul. 25, 2014 — Morningstar, Inc. — Its no secret that income-oriented investing has been all the rage for several years now. This makes a lot of sense, after investors were burned during the 2008 financial crisis. Many now view a bird in hand (income today) as worth more than two in the bush (capital gains at some point in the future).

CEF Update (7/23/14): News You Can Use

Jul. 22, 2014 — Morningstar, Inc. — It was a quiet week in closed-end fund news.

Rights Offerings and Tender Offers

Nuveen announced tender offers for four of its muni funds. Nuveen Dividend Advantage Municipal 3 (NZF ), Nuveen Dividend Advantage Municipal Income (NVG ), Nuveen Municipal Advantage (NMA ), and Nuveen Quality Income Municipal (NQU ) will purchase up to 10% of outstanding common shares for 98% of net asset value on the purchase date. The offer will commence after the funds 2014 annual shareholder meetings. In conjunction with the tender offer, activist investor Karpus Management agreed to vote their shares in accordance with the recommendations of the board and has agreed to be bound by standstill covenants until Sept. 30, 2017.

In 2014s First Half, MLPs Reign King

Jul. 18, 2014 — Morningstar, Inc. — While bond investors spent much of 2014 fretting over what the improving economic outlook means for interest rates, U.S. equity investors earned decent returns in the first half of the year. Investors expecting a repeat of 2013s surging equity markets in 2014, though, were disappointed. The S&P 500 Index, for example, dropped sharply in January and put up gains of less than 100 basis points during March and April, netting a respectable, but not amazing, 7% return for the first six months of the year.