PFD: It’s a Mad Mad Mad World

The Flaherty And Crumrine Preferred Income Fund (PFD) has skyrocketed to a 29% premium – the second highest in the CEF space.

It’s just truly truly bizarre especially when there is basically an identical fund hanging around at a 4% premium.

Let’s have a look. PFD and PFO have a 100% NAV return correlation, the same 3Y NAV return, the same NAV yield, the same leverage. What this tells us is that the two funds have the pretty much the SAME portfolios.

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And yet PFD is trading at a 25% higher premium than PFO.

Suppose some people like being paid a 5.55% yield whereas they could as easily get a 6.55% yield, taking the same risk. If this doesn’t prove the insane inefficiencies of the CEF market, nothing will.

Thanks for reading.

Check out the rest of our daily market commentary, as well as our Income Portfolios and interactive Investor Tools at Systematic Income.

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