Avoiding Overvalued CEFs: Gabelli Utility Trust, PIMCO Strategic Income Fund, and Invesco Van Kampen Dynamic Credit Opportunities Fund.

Three closed-end funds (CEFs) with high premiums to net asset value (NAV) are identified as overvalued and recommended to be sold or avoided. The Gabelli Utility Trust (GUT) has an 89.6% premium, the PIMCO Strategic Income Fund (RCS) has a high premium due to its focus on non-sovereign debt, and the Main Street Capital Corporation (MAO) has a 30.4% premium. These funds are worth keeping on a watch list, but their prices are too high at present.

Investors are advised to exercise caution when considering closed-end funds (CEFs) with high premiums to net asset value (NAV). Three such funds, identified as overvalued, are recommended to be sold or avoided. These funds, while offering attractive yields, currently trade at prices significantly higher than their underlying asset values.

Gabelli Utility Trust (GUT)
Gabelli Utility Trust (GUT) currently has an 89.6% premium to its NAV, a level deemed excessive. This fund, which holds major US utility stocks like Duke Energy (DUK), NextEra Energy (NEE), and Wisconsin-based WEC Energy (WEC), has seen its premium narrow from a high of 96.2% in August 2025. However, the current premium remains elevated, suggesting potential risks for investors. Utilities, which are gaining attention for their role in AI's electricity demand, could experience softness if the AI story temporarily weakens. This could lead to a drop in the fund's premium, making GUT a high-risk investment at present [1].

PIMCO Strategic Income Fund (RCS)
The PIMCO Strategic Income Fund (RCS) has seen its premium soar, trading at a level more than double its 20% premium during the April selloff. This fund, which focuses on non-sovereign debt, has not widened its premium since June, suggesting a potential drop in its unrealized investor profits. Historically, RCS's premium has experienced significant fluctuations, with a notable drop at the start of 2025 wiping out months of profits. Investors are cautioned to avoid this fund due to its high premium and the risk of a similar premium drop [1].

Main Street Capital Corporation (MAO)
Main Street Capital Corporation (MAO) has a 30.4% premium to its NAV, making it another CEF to avoid. While the fund has experienced significant gains and losses, its current premium is cause for concern. The fund's high premium suggests that it is not priced correctly relative to its underlying assets. Investors should be wary of this fund due to the potential for a premium drop and the risks associated with its high valuation [2].

These CEFs are worth keeping on a watch list, as their underlying assets and strategies may offer long-term value. However, their current high premiums make them risky investments. Investors are advised to monitor these funds and consider their investment strategies carefully.

References:
[1] https://contrarianoutlook.com/3-big-dividends-about-to-crash-one-is-89-overvalued/
[2] https://www.ainvest.com/news/kohl-kss-deep-turnaround-play-retail-sector-weakness-2508/