A 10% Yielder

Entering The Market’s Sweet Spot Post-Election

Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.

With Donald Trump winning a second term in the White House, the Trump trade has gone into hyperspeed. In the weeks leading up to the election, momentum picked up, then faded a bit, and now is full steam ahead. It’s logical to try to pick out winners and losers from such a trade. Trump is generally considered a pro-business, anti-regulation person, so sectors and themes that would benefit from those would be particularly attractive. One of those sectors would be the banks. In the initial market reaction in Wednesday morning’s trading, financials were the best-performing sector. It’s easy to argue that few areas of the economy might benefit more from more liquidity and less regulation than this one.

One high yield CEF that stands to benefit is the First Trust Specialty Finance & Financial Opportunities Fund (FGB). As the name suggests, it doesn’t really hold traditional banks or financial services companies, but business development companies. It’s an interesting area to target because the emerging smaller companies targeted by BDCs could be especially well-positioned for these conditions. It’s a riskier play to be sure, but this could be a nice income-plus-growth play over the next 12 months or so.

Fund Background

FGB’s primary investment objective is to seek a high level of current income with total return as a secondary objective. The fund invests in a portfolio of securities of specialty finance and other financial companies that it believes offer attractive opportunities for income and capital appreciation. The fund also utilizes leverage in order to enhance yield and total return potential.'