Western Asset Global High Income Fund Maintains Narrow Discount Amid Shift Towards Lower-Quality Holdings

Western Asset Global High Income Fund (EHI) has maintained a relatively stable discount since a prior update. The fund was undergoing a rights offering that widened the discount. The discount remains narrow, and the fund has shifted towards lower-quality holdings.

Western Asset Global High Income Fund (NYSE:EHI) has maintained a relatively stable discount since the fund underwent a rights offering that widened the discount. As of the latest update, the fund's discount remains narrow, with a discount of -3.23% [2]. This stability is notable given the fund's leveraged nature and its focus on high-yield, fixed-income securities.

The fund, which invests in a diversified portfolio of income-generating securities, including corporate bonds and debt securities, has shifted towards lower-quality holdings. This strategic move allows the fund to seek higher yields while maintaining flexibility in its investment approach. The fund's global exposure, with around 56.6% of its portfolio allocated to the United States and the remainder spread across emerging markets, reflects this diversification [2].

Despite the shift to lower-quality holdings, EHI continues to deliver a high distribution rate, currently standing at 12.73% based on NAV [2]. However, this high yield comes with significant risks, including high expenses and credit risk. The fund's total leverage of 29.24% and expense ratio of 4.14% highlight the significant operating and leverage costs that investors should consider [1].

Comparing EHI with non-leveraged ETFs such as the iShares iBoxx High Yield Corporate Bond ETF (HYG) and the iShares iBoxx Investment Grade Corporate Bond ETF (LQD), EHI has delivered relatively muted returns. While EHI has outperformed HYG in the 3-year and 6-month total return comparisons, it has underperformed in the 5-year total return comparison [1]. However, EHI's 10-year total return remains higher than HYG's, indicating a strong long-term performance [1].

The fund's credit quality rating of BB suggests a moderate level of credit risk, which is a factor investors should consider. The fund's maturity breakdown reflects its long-term investment strategy, with an average maturity of 8.88 years [1]. While EHI offers a high yield and is trading at a discount to NAV, investors should be aware of its high expenses and credit risk, especially in an adverse economic scenario.

In conclusion, Western Asset Global High Income Fund (NYSE:EHI) is an income-oriented fund with medium to high risk, suitable for investors with an appetite for high yield and a willingness to accept volatility and credit risk. It is best suited as part of a diversified portfolio, rather than a core position.

References:
[1] https://www.ainvest.com/news/western-asset-global-high-income-fund-comprehensive-analysis-2508/
[2] https://seekingalpha.com/article/4814592-ehi-discount-remains-narrow-as-fund-shifts-toward-lower-quality-holdings