BlackRock Capital Allocation Trust (BCAT) Stock

BCAT delivers a sizeable distribution yield thanks to its 20% managed distribution policy, which seemed to have helped the fund's discount narrow since our prior update. This policy, along with a discount management program, was implemented due to activist pressure from Saba Capital Management, but Saba has recently reduced its stake. Due to recent market volatility, the fund's share price has fallen along with its underlying portfolio; further, its discount has also widened once again, making it a more interesting choice.

BlackRock Capital Allocation Term Trust offers a balanced mix of 55% equity and 45% fixed income, with a big dividend yield. BCAT's monthly payout increased significantly in June 2024, resulting in a high yield. BCAT is currently trading at a 7.79% discount to NAV.

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BlackRock's Capital Allocation Term Trust offers a high yield of 21% with monthly distributions, providing a steady income stream for investors. BCAT's portfolio strategy includes a diverse mix of equities and fixed income securities. Part of BCAT's strategy includes a covered call strategy that implements out-of-the-money approach, which allows for greater capital appreciation.

Closed-end funds have unique features that make them very attractive investment vehicles for the right asset classes and investors who understand them. Especially for complex and/or less liquid asset classes, like corporate senior loans, high-yield bonds, collateralized loan obligations, and the more recently discovered (by retail investors) "private credit" Activist and institutional investors are worth watching, so we can piggyback onto their efforts in the closed-end fund world.

BCAT: Rising Pressure from Activist Investors and Appealing Discounts

The BlackRock Capital Allocation Term Trust offers investors exposure to private credit and private equity assets. The fund has delivered poor historical performance but is now trading at a substantial discount to NAV.

BlackRock Capital Allocation Term Trust provides exposure to an actively managed portfolio split between equities and fixed-income. The fund continues to operate without leveraging up from borrowings, which I view as a positive in the current environment. BCAT's performance has been respectable, with the potential for further discount narrowing, and improved results could come from discount contraction from activist pressure.

The BlackRock Capital Allocation Term Trust is an interesting term closed-end fund that liquidates in 2032. The fund invests in both stocks and bonds, which is unusual for a term fund, but it could actually work out to the benefit of investors. The fund employs next to no leverage to boost its effective yield, so it is not especially volatile relative to other funds.