The Blackstone Strategic Credit 2027 Term Fund was previously rated 'Buy' due to its wide discount to NAV, which has since narrowed significantly. BGB's robust performance over the past year is largely due to the discount narrowing, with 40% of the total return attributed to this factor. Despite strong performance, a significant portion of BGB's gains stem from valuation normalization rather than fundamental cash flow improvements.
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The Blackstone Strategic Credit 2027 Term Fund has continued to perform strongly and is now experiencing smaller discounts. BGB is benefiting from higher inflation and a strong economy, reducing the likelihood of rate cuts by the Fed. With a distribution yield of around 9.5% and a diverse portfolio of senior secured loan securities, the Fund remains an appealing option.
The Blackstone Strategic Credit 2027 Term Fund offers a current distribution yield of 11.08%, comparable to other fixed-income funds. The fund has outperformed the broader bond market, with a 3.37% increase in shares compared to a 1.47% decline in the Bloomberg US Aggregate Bond Index. The fund primarily invests in floating-rate senior loans and high-yield junk bonds, which provide stability and potential income growth in a rising interest rate environment.
We review CEF market valuation and performance through the third week of September and highlight recent market action. Most sectors saw NAV gains, but discounts widened, particularly in the Covered Call and Equity sectors. Invesco trimmed distributions on many CEFs including IHIT, potentially indicating a termination of this CMBS 2023 term fund.
The Blackstone Strategic Credit 2027 Term Fund has benefited from higher interest rates through distribution increases due to its portfolio of senior secured loans. BGB has a deep discount and is a term fund, offering potential alpha relative to other senior loan funds that aren't term structured. The fund's discount should be realized as it liquidates near the end of 2027, making it an attractive investment option.