The Western Asset Global Corporate Defined Opportunity Fund (GDO) has been on our radar for quite some time for a few reasons. First, it’s a 2/3 investment-grade fund which appeals to our higher-quality tilt. And secondly, it is a term fund which means that it provides a measure of discount visibility and control since its discount would move to zero on its termination date.
Apart from this, the fund has offered a number of tactical opportunities as well over the past few months. A key metric we look at is the fund’s Pull-to-NAV or PTN Yield which is simply the fund’s discount divided by the number of years from termination. Currently, the fund is trading at a 2% PTN Yield which should provide a 2% tailwind relative to the fund’s NAV into its termination – a very attractive figure.
Over the last few months the PTN Yield has moved between 1% and 2% creating great entry and exit points for more tactical investors. Some investors don’t like to approach investing from a tactical perspective, however, in our view there is another way to look at it. We look at it from a value-based perspective. At a 2% PTN Yield GDO presents a very attractive value proposition while below 1% it is much less compelling.
No doubt, the fund will continue offering some fat pitches in the months to come as well.
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