Pimco Tops Closed-End Fund Rankings

The best-performing closed-end funds in December roared back into favor by generating quantities of income well in excess of risk-free rates. Compared to yields of less than 0.5% on U.S. Treasury bills, double-digit income yields of the top closed-end funds looked very attractive to investors last month.

None of the top-10-performing closed-end funds clawed back enough ground in December to end the full year with positive total returns.

The best-performing closed-end fund in December was the PIMCO High Income Fund(PHK), returning 47.29%. Currently, the fund is yielding a huge 20.69% from its regularly generated monthly income from predominantly corporate high-yield debt instruments. The fund's leverage stood at 61.6% on Nov. 30. This is borrowed money used to buy higher-yielding securities in the upper tier of below-investment-grade debt.

The portfolio, managed by Mark Hudoff since 2004, has an average maturity of 6.63 years, with corporate debt holdings of Ford Motor Credit(F), Sprint Capital(S) and Citigroup(C). For this fund, capital appreciation is secondary to locating securities paying high current income.

With half the current yield, at 10.48%, slightly longer average maturity, of 8.10 years, and almost as much leverage, at 49.69%, the PIMCO Corporate Income Fund(PCN) returned 46.2% in December, securing second place on our list. This fund picks from the lowest investment-grade and highest non-investment-grade corporate debt obligations, targeting both income and capital appreciation. Debts of Bank of America(BAC), Georgia-Pacific(GP) and Wells Fargo(WFC) stand out in the portfolio.

Four of the 10-best closed-end performers target the real estate sector. If Jim Cramer's prediction of a bottom for real estate in the next six months comes true, these are the funds that could be leading the way back up. The best of these, Dividend Capital Realty Income Allocation Fund(DCA) popped 43.4% in December on a portfolio of real estate investment trusts and preferred shares.