MIN: Attractive Low Volatility Bond Fund

MFS Intermediate Income Trust Fund (ticker:MIN) is a taxable investment grade closed end bond fund with about $790 million in net assets. The portfolio structure is global and widely diversified:

High Grade Corporates 44%
Non-US Sovereigns 30%
Mortgage Backed 11%
Emerging Markets Debt 8%
Other 7%

MIN has a low expense ratio and has been a very steady performer over the last decade. It has been up every year since 2000:

Annual Rates of Return (%):
 Year NAV (%) Mkt Price (%)
 2009   10.37   16.92
 2008   4.55   12.92
 2007   6.85   4.01
 2006   3.98   4.11
 2005   2.21   1.62
 2004   3.77   0.35
 2003   3.08   1.70
 2002   9.93   11.88
 2001   7.34   8.42
 2000   11.17   18.65

MIN uses a managed annual distribution plan based on paying out 8.5% of monthly net asset value. MIN is not a leveraged fund and relies on return of capital distributions to maintain this policy.

The MIN discount to NAV is slightly below the 52 week average discount of -1.71%. It sold at a premium over NAV for most of the last month, but recently dipped in price to provide a decent buying opportunity. MIN has a low 4 year duration, which means that if benchmark interest rates rise by 100 basis points or 1%, the NAV of the fund would fall by around 4%.

Ticker: MIN   MFS Intermediate Income Trust Fund.   pays monthly

  • Total Assets= 789MM
  • Annual Distribution (Market) Rate= 8.53%    Income Only Yield= 3.98%
  • Average Duration: 4.0 years
  • Average Bond Rating: A+
  • Fund Expense ratio= 0.78%              Discount to NAV= -2.36%
  • Portfolio Turnover rate= 50%
  • No leverage used

Full Disclosure: Long MIN in an IRA account.

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4 responses to “MIN: Attractive Low Volatility Bond Fund

  1. Closed-end_Trader

    I agree this is a well managed fund at an attractive discount compared to its peers,. However one of the activist hedge funds of closed-end funds, (KIM) Karpus Management, is actively selling this fund. 4/30/09 they owned 11.5%, 7/9/09 – 10.3%, 8/7/09 – 8.8%, 9/10/09,- 8/7/09 8.8%,, 9/10/09 – 7.5%, 10/09/09 -4.3%. Although I don’t know the reason for the sale, they are usually well informed. I would prefer to buy a fund starting at a larger discount which they are accumulating . I will put this on my watch list. Note: I have no position in this fund.

  2. Thanks for pointing out the Karpus sales last year.

    MIN is certainly not a home run here at only a 2% discount. More like a single or a walk. There are not too many great CEF opportunities available right now. I see it more as a good way to park some cash while waiting for better opportunities to surface.

  3. Closed-end_Trader

    On 3/16 you discussed MTS and on 3/22 the PIMCO premium. I noticed PIMCO now manages MTS. I went long only after reading your blog. Now if they can only change the name of the fund.

  4. quantinvestor

    MTS still trades at an 8% discount to NAV. Hopefully as more people learn that Pimco is managing the fund, the discount should shrink over time. But as you say, a name change would be a great catalyst.

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