EVV Disappoints - Early CEF Warning???

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capecod 05-03-2008, 8:44 AM | Post #2514247 | 4 Replies

CEF Guys....

As I started my weekend portfolio work, I noted that EVV not only reduced its distribution to 12 cents flat from 12.61, but also (in the press release):

1. warned some of the reduced distribution might be classified a return of capital; and

2. the distribution reduction was a consequence of some modest portfolio realignment but also the migration of most leverage from ARS to (pretty murky description) something else --- which they assure us will be cheaper than failing ARP over the long term.

Now EV has a pretty good reputation for transparency and performance, but I grow extremely suspicious about EV's and other CEF managers' migration to alternative leverage schemes. The anecdotal evidence (above) seems to support my current and previously voiced contention/fear that ARP replacements (bank loans, term debt, WHATEVER the poorly described replacements are?) may be unable to provide the relatively low leverage costs that JUSTIFY managers continuing to lever the CEFs. If the generally low-grade/highyield assets in EVV can't be carried profitably with EVV's "wonderful-beneficial" new ARP substitute, one more broadly wonders how much WE will be asked to pay for managers to maintain higher assets under management and hence management fees with new non-economic leverage schemes?

Ed, Chamois, others....am I missing something or overly concerned?

Dick

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Re: EVV Disappoints - Early CEF Warning???

chamois 05-03-2008, 11:13 AM | Post #2514295

Dick, EVV is one of my largest FI holdings, and I have been expecting the distribution to come down for some time...well in advance of the APS flap. A distribution rate over 8-9% (even higher post price decline) seemed unsustainable given the limited duration, but that's purely an amateur opinion.

I think most forward looking statements wrt future distribution rates contain some warnings about ROC and risks; maybe I have become blasé. This is a fixed income area where I am less concerned about the impact, if any, of alternatives to APS, but if I felt differently, I'd find another vehicle. There are enough things to worry about over which we have no control. Best wishes, Bill

Related Topics distributions risk Alternative holdings duration

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Re: Citigroup still likes E V V

shreinstein 05-04-2008, 1:42 PM | Post #2514591

Snipped a few brief paragraphs from Friday's research report....

Eaton Vance Limited Duration Income Fund (EVV)
Cuts Dividend, Yield Remains Above-Avg: Retain Outperform (1M)

* Outperform, Medium Risk (1M) Rating - We maintain an
Outperform, Medium Risk (1M) rating on Eaton Vance Limited
Duration Income Fund (EVV).

* Second Highest Yield - EVV announced a 4.8% dividend
reduction. However, even at this lower payout rate, the fund's
9.4% yield is the second highest in its peer group. EVV's yield
compares with the peer group's 7.9% average yield, giving EVV a
150 basis point (bps) yield advantage over the average fund.

* Better Risk / Reward Characteristics - EVV is a higher
quality, leveraged multi-sector fund that   allocates   its
portfolio among three primary asset classes: mortgage-backed
securities (MBS), floating-rate secured senior loans, and high
yield bonds. The fund seeks to maintain a weighted average
portfolio credit quality of investment grade, yet EVV has a
comparable yield and price return profile as a high yield bond
fund. Nonetheless, EVV exhibits less NAV and price volatility
than a high yield bond fund.

* Volatility to Continue - EVV invests roughly two-thirds of
its portfolio in sectors for which we currently have a negative
outlook (high yield and corporate loan). But, while EVV may
experience continued price volatility near term, longer-term we
expect it to outperform other higher quality, multi-sector bond
funds based on   its   relative   valuation   and   portfolio
composition.

Related Topics high yield Eaton Vance basis point high yield bond credit quality

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Re: Citigroup still likes E V V

oldowl 05-05-2008, 1:04 PM | Post #2514878

Dick-

Chamois has invested in EVV for some time and Steve generally thinks CITI reports are useful, so if CITI and Chamois concur, then perhaps you are over concerned. I happen to like the composition of the portfolio and, of course, find the yield very appealing. So far, it appears the annoucement has had little impact on the price, so I am sitting tight.

Best,

Related Topics portfolio yield CITI composition

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Re: Citigroup still likes E V V

capecod 05-10-2008, 3:53 PM | Post #2516543

Late reply due to biz travel, but after cogitating on everyone's helpful views, I ended up buying some more.

Thanks, Dick