No. of Recommendations: 2
billjohn4,

You wrote, I have owned for a significant time period two closed end funds that invest primarily in junk - Eaton Vance Ltd Duration fund (EVV) and AGIC Convertible & Investment Fund (NVC).

I know I'm probably focus on something that's not your main topic, but I have to wonder why you characterize either of these funds holdings as primarily junk?

I'm a former shareholder of EVV. It was what I found in 3Q08 when screening for closed-end bond funds when I wanted to get my feet wet in this market. It was trading at a discount with a broad mix of holdings, including junk, MBS, corporates of various grades and agency bonds. The fund is very large for a CEF and seems to invest in a broad spectrum of fixed income securities, but the average credit rating was probably still investment grade.

EVV gets part of it's advantage through leverage; but it pays a price in management costs. During the height of the credit crisis, this potential difficulty with not being able to refinance the leverage (I think they had been selling short-term auction-rate securities) pushed EVV's share price down substantially. (If I recall correctly, at one point Eaton Vance bailed out one of its funds because it had a number of auction-rate securities maturing and had no way to refinance.) I road EVV up, then sold it to be more selective with my purchases around the end of 2009.

But I wouldn't at any time have characterized EVV as a junk bond fund - even though they held some, probably for yield or because the bond's credit quality had deteriorated. I just think their charter doesn't require them to invest in bonds of a particular quality, so they spread it across the entire spectrum.

As for NVC, I'm not sure how any muni fund could be characterized as junk. Even if they do primarily invest in California muni bonds, most of those bonds are probably still of reasonably high quality and are not at risk of default.

As for their differences in performance ... perhaps it's simply because they hold vastly different types of fixed income securities?

- Joel
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