Castle Ruins, Northern Ireland
The Hawking portfolio is an “income” portfolio holding ~30 Closed-End-Funds (CEFs) with a target average annual return from distributions (primarily dividends) of greater than 8%. Current holdings are as shown in the screenshot below:
Performance of the portfolio since inception is beating the benchmark AOR fund quite comfortably (by ~7%):
The portfolio is intended to be close to a Buy-And-Hold portfolio with re-investment of dividends being the only frequent necessary adjustment. Occasionally, I will review current holdings and make adjustments if it looks as though a fund is over-priced (i.e. trading at a premium to Net Asset Value – NAV) and there may be better opportunities that are underpriced (i.e. trading at a discount to NAV). However, this is not a portfolio in which I will “rotate” funds on a defined (e.g. monthly) schedule. There may be other reasons for adjustments when there are “Rights” offerings or when funds are merged or dissolved.
At the present time I have ~$1,400 (from dividend distributions) available for re-investment and I will be adding 75 shares of NMAI – a global fund of diversified equity and bond assets. This fund is presently paying a dividend of ~8.5% and is trading at a discount of ~12% to NAV – i.e. we can buy $1 of NAV for 88 cents – so we have potential for “growth” in addition to “income”.
David
David,
Here is a question from Martin Kelly. For some reason, he has not been able to post this question.
Hello David,
Forgive me if this appears as a repeat posting (tried submitting these a few days ago — looks like the post did not work.)
Just curious as to how best with regard to the noted CEF equities, prioritization of CEFs, pouring rate of capital, and timing one should/could roll into such a portfolio at this time. Thank you.
-Martin
Martin,
Sorry for the delay in getting this response to you. 2 attempts to reply to the question on the site failed – seems like there is some sort of hex surrounding this question Emoji
With the pullback in share prices over the past couple of months, now is probably not a bad time to start building an income-generating portfolio constructed from CEFs. I would suggest breaking your available funds down into 5 or 6 packages (tranches) and invest in 5 or 6 CEFs each month over the next 5 or 6 months. For each package/tranche select CEFs covering different asset classes (equity funds/fixed income (bond) funds/real estate funds/muni’s/hybrid funds using derivatives…etc) to ensure diversity. Check https://www.cefconnect.com/ for info on fund objective, distribution rate and premium/discount. I use a very simple/naive method to rank CEFs based on distribution/discount as shown in https://www.dropbox.com/s/6jar6lj192cgsfa/Hawking%202022-02-05_08-56-24.png?dl=0 – but many other methods could be used. Ideally we want funds paying a sustainable dividend (generated from Net Investment Income – NII – rater than coming from capital invested) and potential for growth income from price movement towards NAV (ie. selling at a discount). I think a diversified portfolio of 20-30 CEFs should keep risks low and provide a portfolio with good performance from both dividends (income) and price movement (growth).
Seeking Alpha also provides useful information from contributors such as Steve Bavaria, Stanford Chemist and Nick Ackerman.
Hope this helps.
David
Martin,
I’ll add one comment to what David writes. Steve Bavaria has a book titled, “The Income Factory.” You might consider it as you make this decision.
Lowell
PS Try leaving a comment now that I deactivated a plugin that may have been causing a problem.
Comment box looks more familiar.
David
David,
Good. At least I’ve been able to identify the plugin that was causing the problem. I’ve lost some other capabilities, but GTMatrix indicates the blog is still fast, assuming one has a good Internet connection. It is still too slow for my taste. (g)
Lowell