Real Asset CEF Yields 8%, Pays Monthly, Big Discount To NAV

If you are an income-focused investor, and you believe in the power and safety of real assets, then this particular closed-end fund (CEF) may be worth considering. Especially from a contrarian standpoint, because its two largest sector exposures (equity REITs and Utilities) have recently underperformed the rest of the market, and the fund is currently trading at an attractive discount to its net asset value.

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Diversified Real Asset Income Fund (Ticker:DRA, Yield 8.3%)

The investment objective of Nuveen’s Diversified Real Asset Income Fund of Beneficial Interest (NYSE:DRA) is to provide a high level of current income and long-term capital appreciation. The fund invests across the capital structure mainly in common stocks, preferred stocks and corporate bonds, as shown in the following chart.

And the fund’s investment strategy is to focus on infrastructure and real estate securities, and that bears out in the fund’s top 5 industry exposures, as shown in the following table.

Additional fund characteristics worth considering are included in this next table.

From a diversification standpoint, the fund is well-diversified across 322 holdings, 37.9% of which are non-US. And the holdings are spread across large-, mid- and small-cap companies. As for the bond holdings, they have an average coupon of 6.3%, and they trade at roughly $0.79 on the dollar. The higher yield and discounted prices indicate that the fund’s management team believes the market is overly pessimistic about the bonds in the portfolio (i.e. management is not just buying them for the yield, they’re also likely expecting some capital appreciation too).