FULL DISCLOSURE:
I am not a financial advisor. This post is to provide information and not provide financial product advice. I discuss why I personally chose to invest in a stock, ETF, CEF, REIT, investment fund or cryptocurrency (which I have held for over a week) and also share information that is public about the following stock, ETF, CEF, REIT, investment fund or cryptocurrency and they are based on my own personal opinion.
I will not blog about any positions of stocks, ETFs, CEFs or REITS and cryptocurrency which were initiated just within the last 72 hours of posting this blog article.
It is recommended that you should always consider visiting a financial advisor for independent financial advice before making investment decisions.
I do not work in the financial industry, so just because I write about it, doesn’t mean you should own it. So, consult with a financial advisor and do your due diligence, RESEARCH!
I am not receiving compensation by the company for this blog post.
I have no working relationship with any company whose stock, ETF, CEF, REIT or cryptocurrency mentioned in this blog post. Nor do I have a family member or friend who works with the company.
Today, I take a look at BlackRock’s CEF, BlackRock Science and Technology Trust (NYSE: BST).
This is the first CEF (Closed-end fund) that I am taking a quick look at. First, one should not think of a CEF like an ETF (Exchange-Traded Fund). They do not comprise of a basket full of a fraction of a stock and it’s not a traditional mutual fund.
What is a CEF?
A CEF is an investment structure (not an asset class) organized under the regulations of the Investment Company Act of 1940. And a CEF is a type of investment company whose shares are traded on the open market.
While a CEF invests in a portfolio of securities and is managed by an investment management firm, they are closed, so capital does not flow into them when investors buy shares and it does not flow out when investors sell shares.
And that’s just a little of it.
According to Fidelity, “CEFs are seen as a good structure for investing in illiquid securities, such as emerging-markets stocks, municipal bonds, etc. The higher risk involved with investing in illiquid securities could translate into higher returns to shareholders”.
Now, for those who are not familiar with BlackRock, the company is an American multinational investment management corporation based in New York City and founded in 1988 by Larry Fink, Bob Kapito, Susan Wagner, Barbara Novic, Ben Golub, Hugh Frater, Ralph Schlosstein and Keith Anderson. And in the beginning, received funding from the Blackstone Group. And the company would be known as The Blackstone Financial Management, which Blackstone had a 50% stake and.
Originally, the company was involved in risk management and was a fixed income institutional asset manager.
by 1992, the company would adopt the name BlackRock, but an internal dispute between Blackstone and BlackRock, between Larry Fink and Blackstone Group’s Stephen A. Schwarzman on employee compensation would lead a split between the companies.
BlackRock would go public in 1999 at $14 a share on the New York Stock Exchange and at the end of that year, were managing $165 billion in assets.
In 2008, the U.S. government contracted with BlackRock to help resolve the fallout of the financial meltdown of 2008. The Federal Reserve allowed BlackRock to superintend the $130 billion debt settlement of Bear Stearns and the American International Group (AIG).
In 2009, Black Rock became the #1 asset manager worldwide and the company acquired R3 Capital Management LLC and Barclays sold its Global Investors Unit (BGI) and its exchange traded fund business, iShares, to BlackRock for $13.5 billion.
Now the company is the world’s largest asset manager with $8.67 trillion in assets under management as of January 2021.
Which leads us to the CEF that I will be blogging about today.
According to BlackRock in regards to BST, “BlackRock Science and Technology Trust (BST), is a perpetual closed-end equity fund. BST commenced operations in October 2014 with the investment objectives of providing income and total return through a combination of current income, current gains and long-term capital appreciation. Under normal market conditions, the Trust will invest at least 80% of its total assets in equity securities issued by U.S. and non-U.S. science and technology companies in any market capitalization range, selected for their rapid and sustainable growth potential from the development, advancement and use of science and/or technology (high growth science and technology stocks), and/or potential to generate current income from advantageous dividend yields (cyclical science and technology stocks). As part of its investment strategy, the Trust intends to employ a strategy of writing (selling) covered call options on a portion of the common stocks in its portfolio.”
BlackRock Science and Technology Trust (NYSE: BST) has 360 holdings and its total assets is $1.3 billion. The CEF is actively managed and has an annual report gross expense ratio of 1.09%. Current outstanding shares are over 12 million. Premium discount is at 1.92%. Morningstar rates it as five stars.
The top holdings are Apple, Microsoft, Amazon, Alphabet, Mastercard, Square, PayPal Holdings Inc., Twilio Inc. and Lam Research Corp, to name a few.
The CEF pays dividends monthly and has averaged $0.2260 with a distribution rate of 4.57%.
BST currently is doing well at $59.40 (closing price as of June 11th) and the investment in Giant Cap is 49.94%, Large Cap is 29.93%, Mid Cap is 19.63% and .50% in Small Cap.
The BST Market Price since inception has went up by +25.02% and the BST NAV has went up to +24.39% since inception.
Source: Schwab.com
I did invest in the BlackRock Science and Technology Trust because of its yearly growth and consistent distributions.
For me, because my weakest sector in terms of my investment portfolio is the technology sector, I added the CEF as access to current leaders and emerging winners in the sector. Also, diversified global exposure and to reduce portfolio volatility as the CEF sells (writes) call options on underlying equity portfolio, potentially reducing the fund’s volatility.
It’s important to note that they operate differently from ETF’s and this is a close-ended fund that is actively managed and there is a annual report gross expense ration of 1.09%.
In addition, I am an observer to various forums dedicated to CEFs and noticed that with a lot of discussion in the past few months about volatility due to increases in interest rates has investors on edge.
My strategy has been the same of long-time hold and if prices fall, I’ll buy on the dip.
Perhaps its the Libra in me but I tend to go for balance and I don’t go too hard on positions. If anything, I work in trying to have position reach a certain level, because I find it important that my investments are diversified in all sectors.
Last but not least, I know many financial analysts are hardcore on NAV but my focus is on investing in higher yield, price and performance.
As always, perform your due diligence and do a lot of research before investing. Talk to a financial advisor and find out if BlackRock Science and Technology Trust (NYSE: BST). would be a perfect investment for you.
