Summary
BIGZ is a riskier position in the CEF space, and we see that play out with the latest moves.
In fact, the fund has struggled since it launched earlier this year by going mostly sideways but recently has entered into a meltdown.
We have to remember as investors, CEFs are merely wrappers for positions, and the overall moves in a sector play a significant role in a CEF’s performance.
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Klaus Vedfelt/DigitalVision via Getty Images Written by Nick Ackerman, co-produced by Stanford Chemist
BlackRock Innovation and Growth Trust ( BIGZ ) is due for some notes as I have been covering the fund since its launch. No other time seems more appropriate for an update than when the fund is in full-on meltdown mode. In the last month alone, the price is down 24.03%, and the net asset value has declined 15.01%. Data by YCharts Going back to the fund’s inception just earlier this year, on March 26th, 2021, the fund is down even further on a price basis. However, the NAV decline has held up only marginally better. It points to the fact that the NAV had been doing okay since the fund’s launch. It was more of the latest market declines that have brought the fund down. Data by YCharts Finally, to be fair, closed-end funds will provide most of their returns in the way of their distribution. So to come up with a more accurate performance figure, we have to look at the total returns the fund has delivered. Data by YCharts In this case, we see that the fund’s total NAV return is even better yet. Its NAV is in correction mode while its share price is in full bear mode!
I highlighted this point more in my previous article . I also went more in-depth with the fund’s basics, its term structure, etc. This update is more focused on what has been going on recently, taking a deeper dive into its holdings to see if it’s time to bail or if it’s time to start averaging down.
I also wanted to reiterate my conclusion in the previous article. In particular, I wanted to highlight the volatile nature of the fund once again. This is exactly what we are seeing at play, as it is a much riskier position. Despite an attractive distribution, that doesn’t change the underlying holdings’ volatility. BIGZ might have been a bit of a disappointment so far, but this is a long-term investment, in my opinion. It will take a good 5 to 10 years’ worth to see if this investment pans out or not. In the meantime, investors can receive the monthly distributions. At this time, it seems that the fund has mostly covered its distribution. However, it has only been a shorter time since we’ve last updated on the fund. The simplest way to tell if BIGZ’s distribution is covered on an ongoing basis would be to monitor its NAV continually. Until recently, the fund’s NAV had sunk quite a bit from the launch. That would have indicated a shortfall in coverage. It will be a more volatile fund as they focus on small and mid-sized companies. So it didn’t take long at all for the NAV to snap up higher towards its NAV price once again. Going to the point that this NAV has been holding up relatively well compared to its share price that is in bear mode. I think the most basic point becomes pretty important here for CEFs, and that is a discount/premium mechanic at play. The performance of this fund has driven out the discount to the deepest depths this fund has had since it launched. While we have a short history since its launch, this is still worth mentioning. If it is set to continue, the panic selling will likely only drive this even further. Data by YCharts Management Investing Exactly How They Should Be
It is an important reminder to closed-end fund investors that CEFs are what they hold. They are essentially wrappers to hold underlying securities. The overall innovation and tech meltdown are in full swing bringing this fund down.
Some investors might suggest that since it is BlackRock ( BLK ), the largest asset manager in the world, they are supposed to avoid this. Well, that just isn’t really how it works in a lot of CEFs. These […]
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