AllianceBernstein Closed-End Funds: Steady Distributions and Defensive Yield in a Volatile Rate Environment

As interest rates hover near historic peaks, income-seeking investors face a critical question: How to secure reliable payouts without exposing portfolios to undue risk? AllianceBernstein's Closed-End Funds (CEFs), particularly the AllianceBernstein Global High Income Fund (AWF) and the AllianceBernstein National Municipal Income Fund (AFB), offer a compelling solution. Their fixed distribution policies, coupled with structural resilience, position them as pillars of stability in 2025's uncertain landscape. Here's why these funds deserve a place in every defensive equity-income strategy.

Fixed Distributions: A Consistent Anchor in Volatile Markets

AllianceBernstein's CEFs have maintained unwavering discipline in their distribution policies. For Q2 2025, AWF continues its monthly payout of $0.0655 per share, translating to a 7.09% annualized yield on NAV as of August 2024. Meanwhile, AFB delivers $0.0396 monthly, offering a 4.68% distribution rate (tax-exempt for U.S. investors). Crucially, these rates have remained steady despite rising rates and market turbulence—a stark contrast to open-ended funds that often slash payouts during stress.

This reliability stems from strategic asset allocation and disciplined management. AWF's global high-yield portfolio, with 6.70% average coupon and minimal leverage (1.28% effective leverage), generates sufficient income to cover payouts without dipping into capital. AFB's 40.96% leverage, while higher, is offset by its long-duration municipal bonds (12.07-year average maturity) that benefit from a steep yield curve—a feature of the current rate environment.

NAV Stability: Outperforming Equity Volatility

While equities lurch between optimism and pessimism, AllianceBernstein's CEFs have demonstrated remarkable NAV resilience. AWF's NAV total return of 12.50% over 12 months (as of June 2024) underscores its ability to grow capital through diversified global exposures, including U.S., European, and emerging-market issuers. AFB, despite municipal bond headwinds in early 2025, has leveraged its barbell strategy—balancing short-term liquidity with long-term yield—to mitigate volatility.

The funds' structural advantages further bolster stability. AWF's 1,354 securities provide broad diversification, while AFB's geographic focus on high-credit-quality states (e.g., Texas, New York) reduces default risk. Both funds also avoid return-of-capital distributions, ensuring payouts derive entirely from income—a critical safeguard for capital preservation.

Yield Superiority: Outpacing Bonds and Providing Tax Efficiency

In a world where 10-year Treasuries yield 4.1% and investment-grade corporates offer 4.8%, AllianceBernstein's CEFs deliver superior income. AWF's 7.09% yield and AFB's tax-free 4.68% (equivalent to 7.1% for investors in the 32% tax bracket) make them compelling alternatives.

For AFB, the tax advantage is a game-changer. With 99.67% of assets in municipal bonds, it avoids federal taxes entirely, while its minimal AMT exposure (17.57%) keeps it accessible to most investors. In a year where Treasury yields remain elevated, tax-exempt income becomes a rare haven for high-income earners.

Capital Preservation: Navigating Rate Hikes and Policy Uncertainty

The funds' strategies are designed to thrive in the current Fed environment. While the central bank is expected to pause hikes initially in 2025, its data-dependent approach reduces the risk of abrupt tightening. AWF's short-duration portfolio (5.46 years average maturity) insulates it from interest rate sensitivity, while AFB's long-dated bonds benefit from a steep yield curve.

Leverage, a common CEF vulnerability, is carefully managed. AWF's 1.05% total expense ratio (including minimal interest costs) ensures affordability, while AFB's 3.99% expense ratio—though high—reflects the cost of its leveraged strategy, which is offset by its outsized yield.

Investors should also note the funds' dividend composition: both derive 100% from income, with no short-term gains or ROC, ensuring payouts remain sustainable even in flat NAV environments.

Risks and Considerations

No investment is without risk. AFB's high leverage amplifies volatility during rate spikes or credit downgrades, while AWF's global exposure introduces currency and geopolitical risks. Trade policy uncertainty and rising supply in the muni market also pose headwinds.

Yet these risks are mitigated by the funds' defensive positioning. AWF's portfolio holds fewer CCC-rated issuers than pre-pandemic levels, and AFB's geographic diversification reduces state-specific risks. For long-term investors, the income and yield advantages outweigh near-term noise.

Conclusion: A Strategic Imperative for 2025 Portfolios

In a year marked by Fed caution, trade tensions, and bond market volatility, AllianceBernstein's CEFs offer unmatched income resilience and capital stability. Their fixed distributions, NAV growth potential, and tax-advantaged yields make them indispensable tools for investors seeking to weather the storm while earning attractive returns.

For conservative portfolios, AWF provides a diversified, high-yield anchor, while AFB adds tax-free income and duration diversification. With distributions due June 20, 2025, now is the time to secure these payouts—and position your portfolio for defensive equity-income success in 2025.

Investors who act now can lock in these compelling yields before rates stabilize further—or worse, reverse. The writing is on the wall: in a world of fleeting income opportunities, AllianceBernstein's Closed-End Funds are a rare blend of reliability and reward.