Top Performing Option Strategies Equity Closed End Funds 2011

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Introduction

Closed End Fund is similar but different from mutual fund. Like Mutual Funds, Closed-End Funds also has various classes such as taxable bond CEF, Municipal bond CEF, US Equity Funds, Non US Funds, etc. Unlike mutual funds, these closed end funds (CEFs) are traded like stocks or equities. The funds also can be traded at premium or discount from its net asset value (NAV). These all features may provide additional incentive to invest in these funds.

Top Performer Option Equity CEFs 2011
One of these equity classes is Equity Options or Options Arbitrage or Option Strategies Funds. These Equity funds are also known as covered call strategy funds. These funds usually invest in collections of stocks with call options selling on either individual stocks or stock indices. Some other funds may also purchase put options to protect the portfolio from significant drops in stock market due to market volatility.

These funds usually provide high income and return from stock dividends, premium from selling call options, as well as increase of stocks values. Most of the fund may have high distribution rate or dividend yield. Please not some of the distributions may also include Return of Capital (ROC). These type of funds may be destructive to investor or shareholder.

The following top performers list has been compiled from variety of closed end fund website such as CEFA, CEFconnect, and Morningstar.

The 15 Top Performing Option Strategies Equity Closed End Funds June 2011 are:
  1. Dow 30 Enhanced Premium & Income (DPO)
  2. PIMCO Global StocksPLUS & Income (PGP)
  3. Nuveen Core Equity Alpha (JCE)
  4. NFJ Dividend Interest & Premium (NFJ)
  5. ING International High Dividend Equity Income (IID)
  6. BlackRock International Growth & Income Trust (BGY)
  7. ING Global Equity Dividend & Premium Opportunity
  8. AGIC International & Premium Strategy
  9. BlackRock Global Opportunities
  10. EV Tax-Managed Global Fund
  11. NASDAQ Premium Income & Growth
  12. Dow 30 Premium & Dividend Income
  13. EV Tax-Managed Global Buy-Write Opportunities
  14. Columbia Seligman Premium Technology
  15. Cohen & Steers Global Income Builder
Funds details can be found on below table. The funds' information is updated on June 11th, 2011.

Investment risks include:
  • Derivatives strategy risk
  • Call option risks
  • Index call option risk
  • Market risk
1. Dow 30 Enhanced Premium & Income (DPO)

DPO fund details
As the Top rated fund, this Dow 30 Enhanced Premium & Income fund objective is to provide investors with a high level of premium and dividend income; and the potential for capital appreciation. This Nuveen fund is managed by James A. Colon, David A. Friar, and Keith B. Hembre. They are part of Nuveen HydePark Group llc.

As of June 2011, the fund total net assets are $309 million with 0% effective leverage. The fund annual expense ratio is 1.06%. The fund market price is traded at 5.02% premium from its fund’s Net Asset Value (NAV). Morningstar rates this Nuveen fund with 3 stars rating. This DPO fund also has a dividend yield of 8.7%. This dividend is paid quarterly. Some of this distribution is part of ROC.

The Top 10 issuers in this Dow 30 Enhanced Premium & Income fund as of May 2011 are International Business Machine (IBM), BNP Paribas: Counterparty Expos, Caterpillar Inc, Chevron Corp, 3M Company, United Technolgies, Exxon Mobil Corp, McDonalds Corp, and Coca Cola Co. The fund top 5 industries include IT Services, Aerospace & Defense, Oil / Gas & Consumable Fuels, Pharmaceuticals, and Industrial Conglomerates. The fund also has 64 holdings. Most of these holdings are 100% classified as large cap companies.

2. PIMCO Global StocksPLUS & Income (PGP)

While famous for its bond mutual fund, PIMCO also provides one option equity closed end fund. The PIMCO Global StocksPLUS & Income Fund seeks total return comprised of current income, current gains, and long term capital appreciation. The fund invests most of assets in equity index derivative instrument based on S&P 500 and MSCI EAFE indices. It may also use an option strategy. As part of Allianz Global Investors fund, this PIMCO fund’s manager is Daniel J Ivascyn. This fund also charges 2.88% annual expense ratio with 2.30% baseline expense and 0.57% interest expense.

PIMCO PGP fund
This fund’s market price is 53.39% higher than the fund’s NAV. This is a significant premium compare to other Equity Option fund. This fund also receives 4 stars rating from Morningstar. As June 2011, the fund yield is 10.09% per year. This dividend is paid monthly. The fund market price has returned 23.33% over the past three years and 16.53% over the past 5 years. For YTD, the fund market price has returned 8.59%.

As of May 2011, the fund top 6 sectors are non captive consumer finance, banks, non captive diversified fiancé, insurance life, independent E&P, and airlines. Top 5 fixed income investment breakdowns include mortgage (85%), investment grade corporate (34%), high yield (31%), non US developed (9%), and emerging markets (5%). The fund average duration is 3.39 years.

3. Nuveen Core Equity Alpha (Ticker: JCE)

Nuveen Core Equity Alpha fund
As part of Nuveen fund, the Nuveen Core Equity Alpha fund objective is to provide an attractive level of total return, primarily through long term capital appreciation and secondarily through income and gains. The fund will invest in portfolio of common stocks selected from the S&P 500 index using mathematical process designed by INTECH and will employ innovative risk reduction techniques. This JCE fund usually will hold 150-450 stocks included in the S&P 500 index.

The fund managements are INTECH Investment Management and Nuveen Asset Management. The fund managers are Adrian Banner, E Robert Fernholz, Joseph Runnels, Keith Hembre, David Friar, and James Colon. This closed end fund current total net asset is $230 million. The annual expense ratio of this Nuveen fund is 1.11%. The fund market price is traded at 3.12% discount from its NAV. It also has 4 stars rating from Morningstar. This fund is not a leverage fund.

JCE Fund’s performance:
  • YTD: 8.42%
  • 1 Year: 27.38%
  • 3 Year: 6.84%
  • Inception: 1.17%
The fund top ten holdings are Apple Computer Inc, CME Group Inc: S&P 500 index future, Cognizant Technology, DirecTV Group Inc, Google Inc, AmerisourceBergen Co, TJX Companies Inc, Amazon.com Inc, Stanley Black & Decker, and American Tower Corp. The fund’s top 5 industries are computers & peripherals, health care providers & services, machinery, food products, and diversified financial services. The fund currently holds 295 holdings.

4. NFJ Dividend Interest & Premium Strategy Fund (NFJ)

The Fund seeks current income with long term capital appreciation. The fund usually invests in dividend paying common stocks, income producing convertible securities. It also will use a covered call and options strategy.

NFJ fund characteristics
This fund is part of Allianz Global Investors Fund. This NFJ fund has a distribution rate of 9.75% which is distributed quarterly. This fund is categorized as US Equity-Covered Call. The fund is managed by Benno J. Fischer and Douglas Forsyth. Both of them started managing this fund since its inception in February 2005. The fund market price is traded at 3.20% discount from its fund’s NAV. The fund has its total net assets of $1,802 million.

This NFJ fund has 0.98% annual expense ratio with management fees of 0.90%. This fund has a total year-to-date return of 8.13%. This fund also has a yearly return of 25.40% in 2010. The annualized total return since its inception is 3.14%.

As of May 2011, this NFJ fund has 134 holdings. The average coupon as of June 2011 is 4.80%. The top holdings as of April 2011 are Intel Corporation, Pfizer Inc, Glaxo Smith Kline PLC ADR, Total SA Adr, Conocophillips, Royal Dutch Shell PLC ADRA, Johnson & Johnson, Lincoln National Corp, Ameren Corporation and Chevron Corporation. The top sectors as of March 2011 are Financials (20.40%), Energy (20.17%), Health Care (15.20%), Consumer Staples (10.66%), Information Technology (9.74%), Industrials (8.20%), Utilities (5.16%), Telecommunication Services (4.27%), Consumer Discretionary (4.06%) and Materials (2.32%).
              
5. ING International High Dividend Equity Income (IID)

The ING International High Dividend Equity Income fund is seeking current income with long term capital appreciation by investment in dividend producing securities or derivatives and through utilizing an options strategy.

ING IID fund details
IID market price is currently traded at 7.54% premium from its fund’s Net Asset Value (NAV). The dividend yield of this ING fund is 9.44%. This yield is distributed in monthly basis. This fund is under the management of ING Investments LLC since its inception in September 2007. The inception share price is $20.0 with $19.06 of the NAV. As of June 2011, this fund has total net assets of $90.27 million which make this fund as one of the smallest fund in this list.

This fund expense ratio is 1.26% per year, consists of 0.85% management fee and 0.41% other expenses. The year-to-date return of this fund is 6.76% with the best performance in 2009 with 67.84% and its worst performance in 2008 with -39.68%. This IID fund has returned 20.51% over the past one year and 3.52% over the past 3-years.

As of April 2011, the top sectors of this fund are Financials (25.14%), Energy (10.58%), Industrials (10.20%), Materials (9.16%), Health Care (8.87%), Information Technology (8.51%), Consumer Staples (8.43%), Consumer Discretionary (6.36%), Utilities (6.27%) and Telecommunication Service (6.13%). The top holdings as of March 2011 are BHP Billiton Limited, Total SA, Royal Dutch Shell PLCB, Unilever PLC, Glaxo Smith Kline PLC, Rocher Holding AG, Novartis AG, Samsung Electronics Co, Imperial Tobacco Group, Sanofi and BNP Paribas. This fund has a total of 235 holdings with 55.00% of annual turnover.

6. BlackRock International Growth & Income Trust (BGY)

The Fund seeks current income and capital appreciation through investments in equity securities (up to half of its assets in emerging markets and up to a fifth in US) and through utilizing an options strategy.
BlackRock BGY fund details

Since its inception in May 2007, the fund has been managed by Thomas P. Callan. This BGY fund has total net assets of $1,129 million as of June 2011. The fund distributes a quarterly dividend of 13.03%. Currently, it is traded at 1.66% premium from its fund’s NAV. It has 1.13% annual expense ratio.

This BlackRock fund performance for the past 4 years:
  • 2008: -41.95%
  • 2009: 63.67%
  • 2010: 1.57%
  • YTD: 6.07%
It has recorded -2.21% annualized total returns since its inception. As of June 10th 2011, this BalckRock fund has 21.14% annual total return.

As of October 2010, BGY has a total of 181 holdings, and its top holdings are Blackrock Liquidity Funds, Tempfund, Cash & Cash Equivalents, Royal Dutch Shell PLC, Yara International ASA, Nestle SA, HSBC Holdings PLC, Imperial Tobacco Group PLC, Antofagasta PLC, Adaro Energy Tbk, Wpp Plc and Bumiputra-Commerce Holdings. The top country allocation of this fund as of March 2011 are Japan (14.20%), U.K. (14.00%), Germany (8.30%), Canada (6.40%), France (5.80%), Netherlands (5.20%), South Korea (4.60%), Switzerland (4.40%) and China (4.20%).

Disclosure: I am Long JCE as of June 10, 2011 (may buy or sell more in future date)

NoFund NameTickerYTD Rtn on PriceDistribution RatePremium / DiscountMarket Cap
1Dow 30 Enhanced Premium & IncomeDPO15.57%8.70%5.02%$325M
2PIMCO Global StocksPLUS & IncPGP8.59%10.09%53.39%$256M
3Nuveen Core Equity AlphaJCE8.42%7.74%-3.12%$224M
4NFJ Div Interest & PremiumNFJ8.13%9.75%-3.20%$1745M
5ING Intl High Div Equity IncIID6.81%9.44%7.54%$90M
6BlackRock International Grth & IncBGY6.08%13.03%1.66%1129M
7ING Glb Eqty Div & Prem OppsIGD6.04%10.91%0.73%$1071M
8AGIC Intl & Premium StrategyNAI3.83%11.24%3.04%$142M
9BlackRock Global OpportunitiesBOE3.82%12.68%0.56%$1239M
10EV Tax-Managed Global FundEXG3.23%11.03%-8.19%$3149M
11NASDAQ Premium Income & GrowthQQQX2.66%8.92%-1.32%$261M
12Dow 30 Premium & Dividend IncDPD2.47%8.48%0.14%$175M
13EV Tax-Managed Glb B-W OppsETW1.86%9.94%-8.77%$1302M
14Columbia Seligman Premium TechSTK1.62%9.95%-2.05%$278M
15Cohen & Steers Glb Inc BuilderINB1.27%10.12%-7.60%$255M
updated on June 11th, 2011

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