贝莱德CEF回购快速说明

BlackRock announces continuation of repurchase program.

However, no action required by members who own any of the funds.

Repurchases won\'t move the needle much, but still better than nothing.

BlackRock CEFs renew share repurchase programs

In this week's Weekly Closed-End Fund Roundup, we noted that BlackRock announced the renewal of share purchases in its closed-end fund line-up.

According to the press release:

A few members have asked me or in the chat that they received a notification of this press release and wasn't sure what it meant or what they had to do about it. In short: you don't have to do anything if you hold any of these funds.

Why are the funds doing this? It is definitely a shareholder-friendly move as, as stated in the press release, "purchasing Fund shares trading at a discount from their net asset value (“NAV”)... could result in incremental accretion to a Fund’s NAV". This accretion occurs because when the fund repurchases its shares, it is selling its assets at par, but repurchasing shares at a discount. In terms of mechanics, it is like the reverse of a dilutive rights offering.

As a simplified example, let's say that an unleveraged CEF has 10 million shares outstanding with a NAV of $10, for $100 million in assets. The fund is trading at $9, or a discount of -10%. For the fund to purchase 5% of its shares (0.5 million), it would need 0.5 million * $9 = $4.5 million, which it would obtain by selling off $4.5 million of its assets. The fund is now left with $95.5 million assets on 9.5 million shares, or a NAV of $10.0526 per share, or an overall accretion of 0.526%.

Of course, this does have the affect of reducing manager's AUM, so even with the acknowledgement that BlackRock is one of the better (albeit not particularly exciting) CEF fund sponsors out there, the cynical take would be that this program is just one of the defenses that BlackRock employs against activist investors - kind of a "don't target our funds, we're doing what's right for shareholders!" move.

Of course, BlackRock is currently embroiled in a fight with the activist firm, Saba Capital Management. Most recently, Saba issues an Open Letter to the Board of MNE, BQH and BTZ demanding that they release the results of recent shareholder votes calling for tender offers at the CEFs. This Wall Street Journal article "Boaz Weinstein Hedge Fund Spars With BlackRock and Neuberger" (subscription required) goes into more detail about the current drama!

In any case however, these repurchase programs really don't move the needle too much - except, perhaps, for providing the

that the discount is being supported by the program which I guess could be a benefit in and of itself.

The reason I say this is because the repurchase amounts are relatively small, only up to 5% of total outstanding shares. Even all of these shares were repurchased at a generous -10% discount, this still only adds +0.526% to the NAV/share of the fund, as our calculation above showed.

Moreover, remember that the program is just a permission to repurchase shares and not an obligation. Take BlackRock Enhanced Equity Dividend Trust (BDJ) for example, which we currently own in our Income Generator portfolio. BDJ repurchased a grand total of zero (0) shares last year under its repurchase program! The year before, it repurchased 1.4 million shares, which is decent but only a small fraction of the 187 million shares it still has outstanding. Even if purchased at an average discount of -10%, this would have added less than +0.1% to the NAV in terms of accretion. BDJ is also fairly very liquid at 400K shares traded daily, so these purchases aren't going to push up the market price of the fund higher, either.

(Source: BDJ annual report, 12/2018).

Still, better than nothing I suppose?

In summary: no action needed if you own any of the BlackRock funds mentioned in this press release.

I am/we are long THE PREMIUM PORTFOLIOS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.