S-Network Composite Closed-End Fund Index

Transcription

1 S-Network Composite Closed-End Fund Index June S-Network Global Indexes, 267 Fifth Avenue, New York, NY

2 Index Overview A Diversified Portfolio of 147 Closed-End Funds Targets Yield Investment Grade Fixed Income Funds High Yield Fixed Income Funds Option Income Funds All US-Registered Modified Net Assets-Weighted Multiple Qualitative Screens Discount Expense Ratio Screened for Liquidity Designed to Take Advantage of Inefficiencies in the Closed-End Fund Market CEFX Provides Diversified Exposure to a Broad Range of High Quality Closed-End Funds S-Network Global Indexes, 267 Fifth Avenue, New York, NY

3 Closed-End Fund Overview Key Features Diversification Professional Management Efficient Portfolio Management Periodic Distributions Pass Through Taxation Opportunity to Buy at a Discount Leverage Potential Lower Expense Ratios Closed-End Funds a $224 Billion Investment Class Offer Investors a Number of Key Benefits That Are Incorporated into CEFX S-Network Global Indexes, 267 Fifth Avenue, New York, NY

4 Index Composition Investment Grade Fixed Income Funds Hold government and corporate bonds, mortgage backed securities, and preferred stock Some funds may concentrate on one particular debt instrument, various forms of debt securities or international fixed-income securities in developed and emerging markets High Yield Fixed Income Funds Hold portfolios of corporate bonds with ratings below investment grade Bank loan funds hold senior bank loans of companies with bond ratings below investment grade Some funds have allocations to non-us gov t. and corporate issuers Option Income Funds Invest in portfolios of common stocks and write-call options on those stocks or comparable indexes Attractive to investors seeking higher income and lower volatility Actively managed to produce favorable taxation CEFX Includes Three Types of Closed-End Funds that Provide Diversification, Yield, Discount, and Some Tax Advantages S-Network Global Indexes, 267 Fifth Avenue, New York, NY

5 Index Rationale Diversification by Asset Class Diversification by Investment Strategy Diversification by Manager High Current Yield High Current Discount to NAV CEFX Substantially Diminishes the Risks Implied in Owning a Single Closed-End Fund, While Providing High Current Yields and Discounts S-Network Global Indexes, 267 Fifth Avenue, New York, NY

6 Historical Performance vs. Benchmarks 2,000 S-Network Composite Closed-End Fund Index vs. S-Network Composite Closed-End Fund Total Return Index (12/31/2005-6/30/2015) 1,800 1,600 1,400 1,200 1, CEFX CEFXTR Source: Bloomberg, as of 6/30/ S-Network Global Indexes, 267 Fifth Avenue, New York, NY

7 Index Rationale Diversified Assets S-Network Composite Closed-End Fund Index: Sector Distribution Option Income 25.92% High Yield Fixed Income 26.45% Investment Grade Fixed Income 47.63% Source: Bloomberg, as of 6/30/2015 CEFX Diversifies Risk by Including Closed-End Funds that Hold Differing Asset Classes and Employ Differing Investment Strategies S-Network Global Indexes, 267 Fifth Avenue, New York, NY

8 Index Rationale Diversified Strategies S-Network Composite Closed-End Fund Index: Manager Distribution John Hancock Advisers 2.83% Doubleline Capital 2.88% First Trust Advisors 2.88% Others 33.23% AllianceBernstein 3.91% BlackRock Advisors 17.86% Legg Mason Partners 4.70% Pacific Investment Management Co 6.22% Nuveen Fund Advisors 12.07% Eaton Vance Management 13.42% Source: Bloomberg, as of 6/30/2015 CEFX Also Diversifies Risk by Manager and Includes the Leading Fixed Income Managers in the US S-Network Global Indexes, 267 Fifth Avenue, New York, NY

9 Index Rationale Yield Current Yields 10.00% 9.00% 8.87% 8.00% 7.00% 6.00% 5.00% 4.00% 3.28% 3.00% 2.00% 1.00% 0.28% 2.07% 2.35% 1.03% 2.20% 0.00% 1-Year US Treasury 7-Year US Treasury 10-Year US Treasury 2-Year Corporate AA 5-Year Corporate AA 10-Year Corporate AA CEFX Source: Bloomberg, as of 6/30/2015 With a Current Yield of 8.87%, CEFX Indicates a Higher Yield than Most Other Classes of Fixed Income Investments, Including Government and Corporate Bonds S-Network Global Indexes, 267 Fifth Avenue, New York, NY

10 Index Rationale Discount % % -8.00% -6.00% -4.00% -8.42% -3.66% -8.55% -5.91% S-Network Composite Closed-End Fund Index: Discount/Premium -9.73% -5.04% -4.35% -4.09% -3.88% -3.75% -6.47% -5.36% -5.13% -4.24% -8.18% -7.88% -7.58% -6.47% -8.12% -8.98% -8.08% % -2.00% -1.27% 0.00% 2.00% 1.20% Source: Bloomberg, as of 6/30/2015 CEFX s Current Market Value Trades at a Discount to Net Asset Value of %, Indicating Significant Undervaluation S-Network Global Indexes, 267 Fifth Avenue, New York, NY

11 Index Construction Eligibility A total universe of ~200 Fixed Income and Option Income Closed-End Funds Total universe 350 Must Be Registered in the United States Minimum Market Capitalization = $100 million Stock must be listed on regulated exchange (no pink sheets) Stocks representing 95% of index weight must have ADTV >$500,000 per day Must Have a Total Expense Ratio < 2% Funds Trading at Premiums > 20% Eliminated CEFX is Rules Based, Providing a Fair and Accurate Measure of the Yield-Oriented Closed-End Fund Sector S-Network Global Indexes, 267 Fifth Avenue, New York, NY

12 Index Construction - Weighting Weights Based on Net Assets Net Assets Adjusted for Premium/Discount Increases in Fund Net Assets for Funds Trading at a Discount* Discount > 6% = 30% Increase in Net Assets Discount > 3% and < 6% = 20% Increase in Net Assets Discount > 0% and < 3% = 10% Increase in Net Assets Decreases in Fund Net Assets for Funds Trading at a Premium* Premium > 6% = 30% Decrease in Net Assets Premium > 3% and < 6% = 20% Decrease in Net Assets Premium > 0% and < 3% = 10% Decrease Stocks Capped at 8% Index Weight Combined Weight of Stocks with Weights over 5% Capped at 45% CEFX s Unique Weighting Methodology Accords Higher Weights to Closed-End Funds that Trade at Discounts. *Discount/Premium +/- Average Discount/Premium of Indicated Funds S-Network Global Indexes, 267 Fifth Avenue, New York, NY

13 Top Ten Holdings Fund Name Ticker Sector Weight AUM PIMCO Dynamic Credit Income Fund PCI US Investment Grade Fixed Income 3.72% 2.77 Billion USD Eaton Vance Tax-Managed Global Diversified Equity Income Fund EXG US Option Income 2.97% 2.92 Billion USD DoubleLine Income Solutions Fund DSL US High Yield Fixed Income 2.62% 2.00 Billion USD AllianceBernstein Income Fund ACG US Investment Grade Fixed Income 2.38% 1.81 Billion USD Eaton Vance Tax-Managed Diversified Equity Income Fund ETY US Option Income 2.17% 1.70 Billion USD Eaton Vance Limited Duration Income Fund EVV US Investment Grade Fixed Income 2.14% 1.58 Billion USD BlackRock Corporate High Yield Fund HYT US High Yield Fixed Income 2.04% 1.37 Billion USD BlackRock Credit Allocation Income Trust BTZ US Investment Grade Fixed Income 2.02% 1.37 Billion USD BlackRock Enhanced Equity Dividend Trust BDJ US Option Income 2.00% 1.51 Billion USD Aberdeen Asia-Pacific Income Fund FAX US Investment Grade Fixed Income 1.96% 1.30 Billion USD Source: S-Network, as of 6/30/2015 CEFX Includes Many of the Largest Closed-End Funds on the Market Today S-Network Global Indexes, 267 Fifth Avenue, New York, NY

14 Capitalization Profile S-Network Composite Closed-End Fund Index: Market Capitalization Profile Total Market Capitalization Billion USD Largest Market Capitalization 2.92 Billion USD Smallest Market Capitalization Million USD Average Market Capitalization Million USD Median Market Capitalization Million USD Source: S-Network, as of 6/30/2015 With an Average Market Capitalization of Approximately $563 Million, the CEFX Offers a Broad Spectrum of Fund Sizes S-Network Global Indexes, 267 Fifth Avenue, New York, NY

15 Summary Index Features and Benefits Feature Benefit Asset Diversification Strategy Diversification Manager Diversification High Current Yield High Current Discount Index constituents hold various types of assets, including government bonds, corporate bonds, emerging market bonds, high yield bonds, equities and options. Index constituents employ a wide range of trading strategies that diversify specific fund risk. Constituent closed-end funds employ over 35 different managers, including some of the leading fixed income managers in the world. At 8.87%, the CEFX offers yields substantially higher than most fixed income investments. At %, the CEFX currently trades at an historically low valuation exceeded only in times of severe market disruption. CEFX Offers Multiple Forms of Diversification that Help Diminish Specific Risks, while Providing High Current Yield and High Current Discount S-Network Global Indexes 267 Fifth Avenue, New York, NY

16 S-Network Indexes Company History S-Network Global Indexes S-Network Global Indexes, Inc. (SNGI) is a publisher and developer of proprietary and custom indexes. Founded in 2005, SNGI publishes over 200 indexes, which provide the foundations for ETFs and other financial products with approximately $4 billion in assets under management. Key clients in this capacity include some of the world s leading providers of ETFs, UIT, Structured Products and SMAs. SNGI is an industry leader in the development of smart beta indexes, which isolate key investment factors to produce indexes with unique performance characteristics. The firm is also a leader in sustainable and impact investing, its most recent accomplishment being the development and maintenance of the Thomson Reuters Corporate Responsibility Ratings and Indexes, which create new common denominators for environmental, social, and governance benchmarking. SNGI produces several important Impact Indexes, including the S-Network Global Water Indexes and the Ardour Global Alternative Energy Indexes, which have been continuously published longer than any other indexes of their type. Paul Mazzilli Paul most recently served as an Executive Director at Morgan Stanley, which he joined in From 1997 to 2008, Paul was Director of Morgan Stanley s ETF Research team covering index-linked ETFs and actively managed closed-end fund companies. Paul also spent five years in Equity Capital Markets Services. Paul s team was the first to provide research coverage on index-linked ETFs and won many awards, including the Most Useful ETF Research in the U.S. Every Year Since Inception in 2004 at the annual ETF Global Awards Conference and the Best Research Team for Exchange-Traded Funds in 2007 at the 7 th Annual Capital Link Forum on Closed-End Funds and ETFs in April CEFX Was Developed by S-Network, a Leading Provider of Thematic Indexes and Paul Mazzilli, One of America s Leading Closed-End Fund Analysts S-Network Global Indexes, 267 Fifth Avenue, New York, NY

17 Data Sources and Availability Rule Book Available at: Historic Data and Portfolio Snapshots at: and various data vendors Constituent Data Available at: and various data vendors Back Test Data from December 31, 2005 Live Data from October 29, 2009 Real Time Price Index Values in USD (TICKER: CEFX; RIC: SNETCEF) EOD Total Return Index Values in USD (TICKER: CEFXTR; RIC: SNETCEFTR) Extensive and Detailed Data Will be Available on CEFX to Support Analysis and Investment S-Network Global Indexes, 267 Fifth Avenue, New York, NY