3 Closed-End Fund Buys In February’s Volatile Market

The market’s tone hasn’t changed all that much from January to February now. In fact, it seems that more instability and uncertainty are happening due to the Russia-Ukraine conflict. Using the VIX, we are once again over the 30, which is around where we peaked towards the end of January.

Taking a look further back, the VIX hasn’t hit these levels since going back to 2020. At that time, people worldwide were grappling with the COVID pandemic and the lockdowns that it brought.

Only a short time, it seems that the world was coming together only to be divided once again due to Russia’s invasion of Ukraine. While the west is coming together in strong unity against these actions, other Russian neighbors in Russia are standing neutral. I’m not sure what that means for the future, and I’m not sure it is even calculable at this time.

With all this being said, that hasn’t deterred my long-term commitment – adding capital to my portfolio every single month and buying position. Some months it means I put more capital to work than others. As we have entered into correction territory in the broader indexes, I put a good deal of cash to work in January. I was overall less aggressive in February. I let some of my cash position grow back for further opportunities.

Eaton Vance Tax-Advantaged Global Dividend Income Fund (ETG)

Most of my readers that have been following me for a while will definitely recognize this name. I cover it frequently, and it was one of the longer-term buys I have held for quite a few years now. I consider it a more core type holding for me and am taking the opportunity to add to this solid name. In fact, I had posted an update quite recently, at the beginning of January.

The fund has recently dropped to around a 6% discount from the 1.65% discount it was at the start of the year. Unfortunately, I had picked up the position earlier in the month of February, when it was around a 3% discount only. In the last month, it peaked out at a discount of 7.27% – so that would have been an enticing valuation to enter a position as well. That being said, I’m not too disappointed because I would also factor in how much the fund and market have dropped overall.

On a YTD basis, the price is off over 14.5%. The NAV itself is holding up materially better, which has driven the discount to open up.

It might be a global fund, and given the circumstances right now might not seem the best position to be adding. However, as I said, it has been a long-term position for me, and I intend to continue to keep it as a long-term position. Buying today still means my income will rise, with the higher distribution that they boosted last year. Given that they just raised it, I suspect they won’t be too quick to adjust it downward. I suspect that they will withstand some of the volatility until we hopefully get a resolution.

While I had been more bullish on international positions, I believe that this trade will take longer to play out. The current events that are unfolding seem as though they would push investors back into just sticking with U.S. investments.

Cohen & Steers Quality Income Realty Fund (RQI)

After adding ETG, I ended up adding to my position in RQI. This is another solid long-term type position that I hold. I had only sold this position off previously to sidestep a rights offering. Then added it back shortly after that event.

I had also added to RQI in January too. This makes it an even more fairly significant part of my portfolio now. In fact, I hold RQI in two different accounts, and if it were combined, it would be my largest position. In my closed-end fund portfolio, it is the third-largest holding. It follows behind BlackRock Science and Technology Trust II (BSTZ) and John Hancock Tax-Advantaged Dividend Income Fund (HTD).

Real estate has been one of the worst-performing sectors for the year. As RQI leans towards a more growth-oriented portfolio, that has also hit the stock a bit. This has translated into RQI having poor YTD performance. Interestingly, it has held up better than ETG at this time – despite ETG’s NAV holding up better.

The discount itself hasn’t opened up too significantly. Similar to my reasoning to add ETG, the broader declines overall have also contributed to its attractiveness. At this time, we are at only a very slight 0.38% discount as of writing.

Over the last month, it had reached a low of -5.40% and a premium high of 0.18%. This is one where I did get lucky; I had purchased it on the 23rd of February. The discount at that time was 4.24% when it closed that day, but the 5.40% discount low was where it had closed the previous day.

Eaton Vance Tax-Advantaged Dividend Income Fund (EVT)

The third position I bought on the last day of the month was EVT. This is a CEF that has been rare to go to a discount. However, it has sunk there over the last month. The widest closing discount was on the 22nd; it closed at a discount of 4.28%. Over the last year, the fund has averaged a discount of just 0.41%. That puts the 1-year z-score for the fund at a fairly attractive -1.60.

It should come as no surprise that the fund is also down on a YTD basis. However, what is surprising is how well its NAV is holding up. It has only fallen just over 5% at this time. The share price has fallen over 12%, which is what has driven the fund to go to a discount from a premium.

Helping EVT withstand some of the downsides that other areas of the market are experiencing is the heavy financial exposure of the fund. Financials were one of the best performing sectors so far this year, but a fair bit behind the energy sector that has a strong lead. Despite financials holding up fairly well due to expected interest rate hikes, some of those gains are coming out on the last day of trading.

This is because of the SWIFT payment system sanctions that were slapped on Russia for its invasion of Ukraine. On top of that, due to global instability and market conditions, the number of interest rate hikes is coming under question. EVT will feel this hit to financial stocks due to its heavier exposure. The market is doing some of the tightening for the Fed, so it doesn’t have to. At the same time, inflation might only get worse given supply chain disruptions – which puts them in an even trickier situation.

Conclusion

Nothing in the future is guaranteed; however, I suspect that my income will continue to grow as I buy income-oriented investments. The uncertainty around the globe is putting additional pressure on stocks and adding to the volatility. No one can really know where this ends or what Russia might do next, but that comes with the territory of investing. No one really ever knows what will be the next black swan event; that’s what makes them black swan events. We don’t seem to be in an all-out market panic yet, in my opinion, but something could trigger one any day.