PIMCO's funds, for example, had some of the most terrible performance. Yet right now they are the ones that sell at a premium.
Kyros, according to the article below, at least some PIMCO funds are doing well, and their substantial yields deserve a premium:
Of course, whether those yields are sustainable or not--that I don't know. And some had lousy full year returns (though not all). One month returns, however spectacular doesn't make a good investment. But if people expect some sort of recovery in 2H09, then wouldn't lower grade corporate bonds be reasonable buys here? Is PHK a bad way to play that? Perhaps it is unnecessary to say from these questions that I am a complete novice w/r/t bonds.
Pimco Tops Closed-End Fund Rankings
Kevin Baker
01/08/09 - 08:54 AM EST
thestreet.com
The best-performing closed-end funds in December roared back into favor by generating quantities of income well in excess of risk-free rates. Compared to yields of less than 0.5% on U.S. Treasury bills, double-digit income yields of the top closed-end funds looked very attractive to investors last month.
None of the top-10-performing closed-end funds clawed back enough ground in December to end the full year with positive total returns.
The best-performing closed-end fund in December was the PIMCO High Income Fund(PHK Quote - Cramer on PHK - Stock Picks), returning 47.29%. Currently, the fund is yielding a huge 20.69% from its regularly generated monthly income from predominantly corporate high-yield debt instruments. The fund's leverage stood at 61.6% on Nov. 30. This is borrowed money used to buy higher-yielding securities in the upper tier of below-investment-grade debt.
The portfolio, managed by Mark Hudoff since 2004, has an average maturity of 6.63 years, with corporate debt holdings of Ford Motor Credit(F Quote - Cramer on F - Stock Picks), Sprint Capital(S Quote - Cramer on S - Stock Picks) and Citigroup(C Quote - Cramer on C - Stock Picks). For this fund, capital appreciation is secondary to locating securities paying high current income.
With half the current yield, at 10.48%, slightly longer average maturity, of 8.10 years, and almost as much leverage, at 49.69%, the PIMCO Corporate Income Fund(PCN Quote - Cramer on PCN - Stock Picks) returned 46.2% in December, securing second place on our list. This fund picks from the lowest investment-grade and highest non-investment-grade corporate debt obligations, targeting both income and capital appreciation. Debts of Bank of America(BAC Quote - Cramer on BAC - Stock Picks), Georgia-Pacific(GP Quote - Cramer on GP - Stock Picks) and Wells Fargo(WFC Quote - Cramer on WFC - Stock Picks) stand out in the portfolio.
Four of the 10-best closed-end performers target the real estate sector. If Jim Cramer's prediction of a bottom for real estate in the next six months comes true, these are the funds that could be leading the way back up. The best of these, Dividend Capital Realty Income Allocation Fund(DCA Quote - Cramer on DCA - Stock Picks) popped 43.4% in December on a portfolio of real estate investment trusts and preferred shares.
Best Performing Closed-End Funds in December
Fund (Ticker) Rating
Total Return 1 Month
Total Return 1 Year
Objective
PIMCO High Income Fund (PHK) D+
47.29%
-46.06%
Government/Corporate
PIMCO Corporate Income Fund (PCN) C+
46.17%
-0.78%
Corporate/Preferred
Dividend Capital Realty Income Allocation Fund (DCA) D+
43.36%
-69.42%
Sector Fund-Asset Allocation
Fiduciary/Claymore Dynamic Equity Fund (HCE) D+
41.91%
-72.52%
Growth
RMR Dividend Capture Fund (RCR) U
40.52%
-88.47%
Sector Fund-Real Estate
PIMCO Corporate Opportunity Fund (PTY) C+
40.07%
-13.15%
Corporate/Preferred
ING Clarion Real Estate Income Fund (IIA) D
36.21%
-63.27%
Sector Fund-Real Estate
Nuveen Real Estate Income Fund (JRS) D+
34.40%
-61.99%
Sector Fund-Real Estate
Nicholas-Applegate Convertible & Income Fund II (NCZ) C-
34.21%
-60.78%
Convertible
Van Kampen High Income Trust II (VLT) D+
32.61%
-44.68%
Government/Corporate
Source: Bloomberg
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