Bluebird box and male.
Followers of the Kepler will note major changes in the portfolio makeup. The latest asset allocation is income driven as I am using a number of Closed-End-Funds (CEFs) to augment VOO and SCHD. For more information on CEFs check out the latest Hawking portfolio and this blog post.
Kepler Security Holdings
Below, readers will find the latest list of securities that make up the Kepler portfolio. A number of CEFs are under-weighted as noted later. The goal is to keep each CEF around 4% of the total portfolio. When fully populated the portfolio should throw off between 9% and 10% in dividends.
Kepler Rebalancing Recommendations
Limit orders are in place to bring each asset class or security into balance. Limit orders were set very close (within pennies) to the current price as I want the portfolio to be in balance so the second quarter dividends are paid in full.
The CEFs were selected based on income percentage and premium discount. When the Kepler comes up for review I will go through each CEF to see if it continues to meet these two primary criteria.
Kepler Performance Data
Since 12/31/2021 the Kepler has fallen behind every benchmark tracked – and the gap is not even close. Fortunately, this is not a large portfolio.
Kepler Risk Ratios
The Sortino Ratio is back to even for the first time since last July.
The best news coming out of the Risk Ratios is the positive slope of the Jensen Alpha. The May Jensen value is a disappointment and may be somewhat related to the dramatic changes in the asset allocation model.
Buffett Indicator & Shiller PE Ratio
The Buffett and Shiller Ratios have not changed all that much so I am still taking a cautious position going into the summer months.
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Hi Lowell,
Does the rate of return include the dividends? If it does then I would think that the net asset value of the CEFs would be down about 9% if the average distributions are about 9%. Am I missing something?
Thank you,
Bill
Bill,
Yes, the rate of return includes dividends. You are correct that the NAV will decrease when dividends are declared. This is something to watch for and will be evident each time the Investment Account Manager (IAM) data is updated.
Hedgehunter uses his own IRR tracking software with the Hawking whereas I use the commercial software, IAM. What I will be looking for is the overall increase or decrease in the value of the portfolio.
Lowell
Lowell,
Quick update, my copy of Steven Babaria’s “The Income Factory” arrived this evening. Thanks for the recommendation.
– Lee
.
Lee,
I hope you enjoy reading the Babaria book. If you decide to use CEFs, my recommendation is to dip in slowly to gain a better understanding as to whether or not they meet your investment requirements.
Lowell