Had a look at those two REITS: interesting, especially the one with the 19% return on equity.
Hey, but what do you think about Annaly? What happens to them if we get another sharp liquidity contraction? (How strong are they relative to other mortgage REITS?)
Found another interesting wrinkle on the income hunt. The Liberty All Star Fund (USA) is now yielding something like 10.88. Right now, it is selling at larger-than-usual discount to its NAV. But, get this: a 10% payout is a matter of policy. If they don't make it for the year on NAV, they pay as a "return of capital," reducing your cost basis in the shares.
I looked through a report from late last year. They have a good portfolio, similar to the S&P but not cap weighted. So, its probably overvalued but not so grossly as the index.
Kind of an interesting idea--a way to take part in all this common stock craziness, while "hedged" by an above-average yield.
I believe that the five-year total return has been around 19%. They periodically offer "warrants" for discounted share purchase that have given quite a kick to that average if exercised.
Have you looked at Pilgrim Prime Rate Trust (PPR)? It's a closed end fund that holds a portfolio of senior secured corporate loan participations.
Currently yields a bit over 8% at present price which is a slight premium to net asset value. It pays a monthly cash dividend. Have owned this fund for about four years now and price is fairly stable except for last fall during the credit crunch when price was hammered (due to guilt by association, I guess)and dropped as low as 8 1/2. Bought some then that now yields about 10%. Risk of the fund is credit risk of the individual companies and general economic risk. However, the loans are senior secured instruments which mitigates some of the risks involved. Also, fund holds about 120 loans which allows for fair diversification. Cash dividends are declared and paid monthly - which is nice. Worth a look in the hunt for yield.
Do you know what Pilgrim's average discount or premium to NAV is?
Had a look for income investments, offering high yield with good security for principal, for some of the older members of the family.
Things being what they are, I'm inclined to favor some of the "retail" hedged stock funds. (One takes the distribution and sells some or all of the annual capital appreciation.)
Our large holding is this area is COAGX, which has a five year average return of about 18% with an extraordinarily high Sharpe Ratio, (risk-adjusted return.) Unfortunately, its now closed to new investors.
I've been keeping an eye on Barr Rosenberg's two "market neutral" funds. Since they took these partnerships "public," they've had problems; but I believe that they will get it right in time.
The nine-year pro-forma for US Market Neutral showed an annual return of around 15% with a standard deviation of about 7--extremely good security for principal.
Pooled hedges have long been utilized by the very rich, primarily in the form of investment partnerships available only to accredited investors, (millionaires.)
Since the tax laws governing short sales in mutual funds changed in 1997, they have started becoming available to the general public.
I'm expecting this kind of risk-adjusted investing to gain in popularity, given the aging of the investing population and the extreme character of the financial markets.
Another fund with a long history of successful hedging is PADEX, (Analytic Optioned Equity.)
As a class, these funds should show low to middling correlation with either stocks or bonds, standard deviation and return characteristics somewhere between stocks and bonds, and superior to inverse performance in bear markets.