Nuveen Core Equity Alpha Fund (JCE) Stock

The Nuveen Core Equity Alpha Fund is a closed-end fund that employs a covered call selling strategy. The fund is rated a Hold by most Seeking Alpha analysts, but I disagree with this view. JCE has delivered disappointing historical risk-adjusted performance relative to passive investment options.

Nuveen Core Equity Alpha Fund provides exposure to large-cap companies and uses a call-writing strategy to generate options premiums for distributions and potentially dampen volatility. The JCE closed-end fund's discount/premium seems to have somewhat stabilized, but it's around the longer-term average, making it appear fairly valued. The JCE fund offers a relatively high distribution rate, but the distribution is largely covered by capital gains, which can come under pressure in a down market.

Nuveen Core Equity Alpha Fund has underperformed the S&P 500 by almost 50% due to its option overlay strategy and low volatility levels. The low volatility environment has resulted in low option premiums, which do not adequately compensate JCE for market moves. Investing in the S&P 500 outright or choosing a different closed-end fund without an option overlay may be a better choice in the current low VIX environment.

Nuveen Core Equity Alpha Fund had a volatile discount/premium to finish off last year, and it still remains fairly expensive. First Trust Enhanced Equity Income Fund and Voya Global Advantage and Premium Opportunity Fund were suggested as alternatives, and we revisit to see how that played out today. This article helps highlight why valuations matter for CEFs, not only on an absolute but relative basis, as we saw things play out mostly as expected in the last year.