Another High-Yielding Income Play At A Discount

Premium Flagship Update

Yesterday, we added a 10.5%-yielding closed-end fund trading at a discount to its holdings to the Income Portfolio. Today we’re adding the second piece of the puzzle - another discounted, high-yielding play, but on a completely different part of the banking industry.

The thesis yesterday was built around a niche that most investors walk right past: the subordinated debt and preferred stock issued by community banks. Small institutions, obscure instruments, thin secondary markets, and yields that compensate generously for the complexity and illiquidity baked into the paper.

Yesterday’s management has spent years building the relationships and the analytical infrastructure to navigate that market, and their closed-end fund gives the individual income investor access to it through a publicly traded vehicle.

Today’s addition focuses almost entirely on something called a regulatory capital relief security, issued primarily by the largest global money center banks on earth. Citibank. Deutsche Bank. Institutions with balance sheets larger than the GDP of most nations.

The two funds share a common thread: both invest in financial sector instruments that most individuals never encounter, both are managed by teams with genuine specialized expertise in their respective niches, and both generate income well above what you can collect from a Treasury bill or an investment-grade bond fund. Together they give the Income Portfolio a diversified exposure to the most sophisticated corners of bank capital markets accessible through publicly traded closed-end vehicles. That is a combination worth owning.