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re: OT- Cooking the Books
Posted on 8/8/16 at 7:38 pm to BeefDawg
Posted on 8/8/16 at 7:38 pm to BeefDawg
The CEF is just a weird vehicle - especially at distribution levels this high. I reviewed some of their docs and their distributions outpaced the return on their underlying assets pretty significantly....so they have to be selling assets (return of capital) to fund the distributions - but you say they also use new entrants $$ to fund these too?
What's the purpose behind this type of vehicle? Sounds like they're built for stable tax advantaged income streams (return of capital?) for folks that don't mind the underlying value being slowly eroded (i.e. 69 yr old retiree).
Glad I didn't run out a buy a bunch of shares!
What's the purpose behind this type of vehicle? Sounds like they're built for stable tax advantaged income streams (return of capital?) for folks that don't mind the underlying value being slowly eroded (i.e. 69 yr old retiree).
Glad I didn't run out a buy a bunch of shares!
1
Posted on 8/8/16 at 8:41 pm to SquatchDawg
As far as CEF's go, Voya's NRF is actually a very good one. They have zero leverage (no capital loans/money borrowed), which is rare, and a really big deal. It means there's no ancillary internal interest rate risk.
The only problem I see with it is the fact it's NAV has consistently under-performed it's share price. And this goes back to the 85% of distribution being ROC rather than P/E margins and internal gains. It signals that the distribution that high can't last. They are inflating it to make the fund look more attractive to new buyers. Once all the shares sell, the NAV will readjust and the distribution will slowly come down and level off. How much I don't know.
Also, oil and gas are way below price norms right now too. So once the oil companies in the portfolio start making better margins, the fund will get a nice boost and will likely reduce the ROC percentage, which is good.
The purpose of these is for both growth and income. They sacrifice ease of liquidity and are susceptible to big volatility to generate high distribution rates. They are best if started in a bear market and then held for a long while. They are susceptible to high volatility and potential big losses in a bull market. And they can get obliterated if the market tanks, much more so than the normal mutual fund or the rest of the market.
The only problem I see with it is the fact it's NAV has consistently under-performed it's share price. And this goes back to the 85% of distribution being ROC rather than P/E margins and internal gains. It signals that the distribution that high can't last. They are inflating it to make the fund look more attractive to new buyers. Once all the shares sell, the NAV will readjust and the distribution will slowly come down and level off. How much I don't know.
Also, oil and gas are way below price norms right now too. So once the oil companies in the portfolio start making better margins, the fund will get a nice boost and will likely reduce the ROC percentage, which is good.
The purpose of these is for both growth and income. They sacrifice ease of liquidity and are susceptible to big volatility to generate high distribution rates. They are best if started in a bear market and then held for a long while. They are susceptible to high volatility and potential big losses in a bull market. And they can get obliterated if the market tanks, much more so than the normal mutual fund or the rest of the market.
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