BGIO: A Lower-Octane Choice

Given how extended valuations have gotten in the credit space many investors want to take some chips off the table, without moving into the open-end fund space.

A CEF that offers a lower-octane choice is the BlackRock 2022 Global Income Opportunity Trust (BGIO).

The fund has a number of attractive features in the current market environment.

First, its leverage is on the lower side at around 15%.

Secondly, its rating profile is relatively strong for a credit CEF with nearly 30% in investment-grade credits.

Thirdly, the fund’s effective duration is on the low side at 3.2 which means that it is less impacted by broad-based market sell-offs than funds with a longer duration footprint, all else equal.

Apart from these features, the fund is attractive on other fronts.

First, its fee of 0.60% on total assets is on the low side across credit CEFs.

And secondly, the fund’s term structure not only provides a measure of discount control but also adds a potential tailwind of around 3% at current levels into the Feb-2022 termination. This means that if the fund indeed terminates it should deliver a total yield of around 8.5% (portfolio YTW yield of about 5.5% plus discount amortization of around 3%). This figure is well above many higher-octane credit CEFs, meaning investors get a higher yield for taking less risk. What’s not to love?

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.